EUR – Draghi time has arrived and with little fanfare it must be said, ADP data yesterday set the tone with the greenback rallying across the board with the headline pair trading 1.2965 in NYC and there is little bounce overnight. The Italian election sting still fresh in the memory and with the PMIs still very disappointing feels like people expecting a dovish tone to this afternoons proceeding. Will certainly be stops through 1.2950 and equally good offers building 1.3080/1.31, struggling to see what can be said that would really kick us on higher beyond general positioning in EURUSD at the moment, if Draghi does play this with a straight bat then I suspect people will still look to fade ahead of 1.31 and certainly 1.3150 which is also the game plan here.
GBP – Under renewed pressure, in light of the possibility of the Bank of England’s remit being adapted at the March budget. The fact that this theme has resurfaced right now, has further changed the dynamics for trading around today’s MPC meeting. To my mind – even with spot one percent lower – the risks into this event are still asymmetric to the downside. In the event of an ‘unchanged’ outcome, the market will choose to focus on the possibility of additional powers being made available to the B of E, whilst any easing would trigger violent losses. I am holding a short position into the event, and will add aggressively should further QE be announced. Should the verdict be ‘unchanged’ I will reduce a little, but maintain a core position. Only gains above the weeks highs of 1.5200 neutralise the immediate risks to the downside. Meanwhile targets below are now formed at 1.4874 (1.7.10), 1.4803 (23.6.10 low) and a deeper target of 1.4687 (22.6.10) low.
JPY – no surprises from the BOJ overnight, this still remains a buy on dips for now. US data certainly supportive, the real test will come tomorrow though with payrolls the determinant. Today I envisage a tight range, though ECB will be the focus and as such EURJPY will come into play. I think 94.50 should cap it topside, below a few stops creeping in below yesterday’s breakout level @ 93.70 but I don’t think these get tested ahead of ECB. EURJPY pain both sides of the spot, I am biased to see this lower today though it will be a wild ride so keep position sizes manageable. Trade data and Jobless Claims out at 1.30PM LDN time.
CAD – BoC had their say yesterday and on the whole as expected, the price action more reflective of people’s thoughts on CAD with funds rallying quickly from 1.0290 up to 1.0330. We saw a variety of leverage names buying on this move higher with a few people it would seem highlighting 1% rate ‘appropriate for a period of time’ perhaps more elongated than ‘less imminent’ (the catchphrase from the previous BoC). A nice band of resistance forming around 1.0340/50 now with yesterdays high 1.0337 just shy of where we reached last pre GDP, we actually saw better RM sellers of USDCAD after the dust settled which took us back to 1.0300. More of USD focus now for next 24 hours, and with ADP a lot stronger feels like people are gearing themselves for a monster payrolls. Could be the perfect storm for tomorrow with CA employment as well, I think there is still value being long funds will add back to 1.0280/70 will be stops either side of 1.0250/1.0350, if we breach 1.0350 then 1.0430/50 becomes the target. Jobless claims and CA Building permits this afternoon. Support: 1.0240 1.0215 1.0180. Resistance: 1.0340 1.0350 1.0400.
AUD & NZD – Oz trade balance data disappointed o/n but no reaction from the AUD. 1.0300-50 seems to be the area to fade as the market sits in range trading mode. 1.0200 and 1.0150 the bottom of the range for now. NZD/USD failed the reclaim 0.8354 yesterday as its 24 hour bid tone post milk powder auction starts to curdle. I think the market looks tired here and look to play from the short side. Through 0.8260 opens up 0.8224 and then the 200 dma at 0.8172. Flows have been a little mixed, (and light) in both pairs but we have been a net seller of NZD o/n in Asia.
Scandies – Lots of two way in EURSEK around 8.31/32 yesterday but I will be honest we were not seeing it! Feels like short term base is in place now for EURSEK, most people including myself would love to see a rally back to 8.36/38 to resell. Might be worth selling a break of 8.30 if we see it and focus back to safe haven type interest this afternoon with the ECB. Bit of Norway focus this morning with IP at 9:00am, think its worth being long into this ahead of 7.40 support NOKSEK feels like there is more room lower if we can get below 1.1150. Selling rallies in EURSEK still the main conviction. EURSEK support: 8.31 8.20 8.10 resistance: 8.35 8.42 8.48. EURNOK support: 7.42 7.38 7.34 resistance: 7.54 7.60 7.65.
Barclays