EUR – While short eur worked well initially yesterday as we traded to a low of 1.2911 the lack of follow through an subsequent nasty squeeze all the way back above 1.3030 has ensure i cut shorts for now. On the day as the mkt licks its wounds looking at 1.2990/1.30 again as the support and room for a further squeeze towards 1.3080/1.3100 again as the decks cleaned full of stops 1.3055/85.
GBPUSD – Now 2pcnt higher than the weeks low, with short-covering continuing to dominate trading for now. I am square here for the time being, awaiting an opportunity to reinstate shorts. My base case is now that GBP stays underpinned until Tuesday, at which point the risks are going to shift to the downside again over the UK Budget. On the day, 1.5155 forms some initial resistance (last Wed high), with 1.5200 – 20 offering a major band of resistance. Support will be apparent between 1.5063 and 1.5100. Our flows in GBPUSD this week (and most notably in the last 24h) have been hugely skewed towards buying, with HF and Real Money accounts active.
EURGBP – Continues to slide, as all popular positions in G10FX come under pressure. The losses in EURGBP this week have surprised me and I’m inclined to stand aside here for the time being. We have been slightly better sellers in recent sessions for Spec accounts cutting longs, but client flows have been far more focused on outright GBPUSD. .8589 marks the low from last week, and I would expect some support between there and .8600. Meanwhile, selling interest will be likely on any retrace towards the 10dma at .8673, and I do note offers building over the next .5pcnt in my order book.
JPY – continues to whip about no where, not even the confirmation of the BOJ nominees overnight could see it rally. We topped out round that 96.27 level which is proving quite sticky whilst we remain stuck in this 95.45-96.70 range. First look at the book this morning and we see a decent amount of pain below, through the 95.45 level and it gets ugly. I am biased to see us test this today, but as with every sell off in USDJPY this week we seem to meet a wall of demand on dips so be cognisant of such should we test the bottom of this range today. Topside quite thin, we see some offers ahead of range highs round 96.50/60 for now. Watch 2.07 level in US 10s yields – has proved quite sticky and a break of this could give legs to USDJPY topside.
AUD & NZD – Dull price action again after the double re-price of Wednesday night tells me that market position is slight. Shorts in NZD/USD anticipating a more dovish Wheeler have already taken the chips off the table. AUD/USD should trade a higher range and with support at 1.0350, we should grind through 1.0400 and eventually 1.0443. NZD/USD, fails to close below its 200 dma (0.8191) but shouldn’t retake pre RBNZ levels at 0.8275. I look to fade a move back into 0.8250. Not very exciting though and market attention is still on GBP, JPY and EUR in G10 space.
CAD – USD/CAD not at the front of people’s minds yesterday but wasn’t exempt from yesterday afternoon’s squeeze on long USD positions. 1.0210 ultimately acting as good support on the day after leverage bailed on positions. On open in LDN we had a go to break the figure but for now holds as good support, but there are good sized stops starting to build from 1.02-1.0180. If we can clear these stops next support should come in around 1.0150/60 where we have some demand in the orderbook. On the topside 1.0280 remains good resistance with strong offers for a range of accounts.
Scandies – Norwegian trade balance at 9:00. Scandinavian currencies remain back footed as the market digests a lower rate path in Norway and market position starts to look exposed in SEK. Yesterdays GBP led squeeze highlighted other popular positions, with a bout of JPY buying and SEK selling as traders scaled back. I still like the SEK on a more medium term horizon but I expect stops to be lurking 8.40-8.42. I’d be happy to lose EUR/SEK if they get tripped. 8.5000 should cap any over excitement on the top side. EUR/NOK though should stay in a higher range above 7.4880. 7.5650 is my next tech level above but I wouldn’t be surprised in the NOK continues to feel the heat. Price action at the start of next week will be key.
Barcalys