EURUSD – Nasty squeeze yesterday as mkt makers and spec guys reduced their positioning in anticipation of a deal/resolution in Cyprus. Corp demand is again dominating on dips and has continued to frustrate the shorts. That said despite the nasty squeeze yesterday towards 1.2980 we have still failed to follow through topside above 1.3000/20. This morning we have PMI’s in next hr and then more news on Cyprus votes this afternoon. I feel the need to be flexible but prefer a short position until proved wrong above 1.3010 – if the PMI’s disappoint and we start to go back below 1.2920 I think with decks cleaner of shorts that we could see further downside pressure. 1.2880/1.2840 downside lvls 1.2980/1.3010 key topside.
GBP – Neutral. The sum of yesterdays information flow, suggests to me the risks of a very direct down-move in the short-term have passed. Whilst the broader picture remains in place, it seems the likelihood of further QE in the upcoming MPC meetings has been notably reduced. On the flip side, our internal measures suggest GBP positioning amongst the HF community is now close to neutral. In the event close above 1.5220 was achieved in GBPUSD in the sessions ahead, then I would expect a deeper retracement towards 1.5425. In the meantime, I would expect very good buying interest to be evident in the 1.5000 – 1.5050 band. UK Retail Sales will be released at 9.30 LDN, where Barclays Economics expect a small beat vs. consensus. This is notoriously volatile time series, but if strong, could prompt a test of the pivotal 1.5200/20 band.
JPY – The long usdjpy from the London open worked yesterday but it took all day to follow through towards 96.00. With the decks wiped clear of stops topside and seeing fresh selling from lev a/cs o/n I have reduced longs as we await Kuroda’s press conf at 9am LDN. Support today is 95.60 then 95.20 downside – topside 96.30/96.70 key. Kuroda needs to be seen as wanting to deliver from this press conf or the mkt may again be disappointed.
CHF – EUR/CHF continues to be well supported around 1.22/1.2185 but feel that CHF could be in demand into the weekend if there is no solution in Cyprus until next week now. USD/CHF tested support yesterday around 0.9420 and would expect to see stops through 0.9383 which was the previous low for the month. Swiss watch exports fell 2.5% in Feb (approx. 10% of total Swiss exports) which reflects a dip in demand in Asia.
AUD & NZD – New Zealand GDP printed way above consensus at +1.5% QoQ, (cons +0.9%), which saw NZD/USD re-price back to pre RBNZ levels at 0.8270-80. Although a big number, the market knows just how volatile this data point can be and I don’t expect further gains for now. What is has done though is take out some recent shorts, including my own. I’ll see how we trade today but still favour playing NZD from the short side overall. AUD/USD still tightly range bound but I’m slightly skewed for a move higher. Bids 1.0340-60, stops above 1.0410.
CAD – Retail sales at 12:30GMT and the Canadian budget at 20:00GMT should be of interest given the poor manufacturing sales print on Tuesday and Flaherty’s pledge to include “specific measures to help manufacturing” in the budget. In USD/CAD 1.0280/85 remains good resistance where supply continues to build, again testing these levels yesterday to trade highs of 1.0275 (Asia) and 1.0269 (London). On the downside stops have been raised slightly and should come into play through Monday’s lows at 1.0203.
Scandies – A little in no mans land for now, EUR/SEK sits in the middle of its broad 8.30-8.40 range, whilst EUR/NOK gets comfortable above 7.50. I’d sooner fade EUR/SEK into 8.4000 but concerned that NOK can continue to weaken. Medium term longs in NOK/SEK could be in trouble and expect stops to kick in sub 1.1000. So far today I’ve seen Asian accounts buying USD/NOK and range players shorting EUR/SEK on the open. Order books are light.
Barclays