EUR – Similar story to yesterday in that the lvls 1.3030-1.3150 remain key in the short term. Yesterday we managed to hold in well ahead of 1.3070 and again that was the Asia low o/n, however offers started 1.3130 and again a few on books there today. Downside still dominated by bids between 1.3050-1.2980 with some stops mixed in 1.3030-00 – topside offers 1.3130/50 with a few stops appearing above 1.3165. German IP data the only data of note today, industrial orders managed to produce a 40 pip move yest so we look for that at 11am.
GBPUSD – Wrong-footed the market on Tuesday, with longer-term supply triggering a breach of the ‘post NFP’ low at 1.5481. The series of failures between 1.5591 and 1.5606 last week, suggests to me we are now creating a platform for lower levels, though I do not expect the downside to be impulsive just yet. A drift lower is my central scenario, and if/when some negative dataflow emerges, momentum should increase. In the short-term, expect some resistance around Mondays low of 1.5521, with 1.5591 – 1.5606 forming a major band of resistance thereafter. To the downside, 1.5419 (26.4 low) should offer some key support, and any close below that level should open the way to 1.5265.
EURGBP – Once again, held the .8398 – .8410 support band to great effect on Tuesday. Range-trading remains the order of the day, with some firm resistance expected between .8482 and .8497. I advocate operating within recent ranges flexibly for the time being, with the break of the lower end of the range that I had expected now seemingly off the table for the time being. Client flows have been mixed in the recent past, with Corporate selling above .8450 and Range Player demand sub .8420 the general themes.
JPY – another day whipping about 99 figure, nothing of note to report from overnight. Should we continue to oscillate sideways for the next week, no one will have the cash on and its then that I think we are really susceptible to a move above 100. We still have offers 99.50-90, stops are steadily starting to increase above 100 figure though. Downside quite thin, better sellers though on a move through 98.70 with stops fairly consistent from here down to 98.20. I am remaining on the sidelines for now, I really have little inspiration to get involved in the cash when we continue to chop about on a 99 handle.
AUD & NZD – Wheeler’s comments the big news overnight as he steps up his rhetoric regarding his concerns over a strong NZD. His comments at the previous RBNZ meeting had limited impact, so this time he has stepped it up. Finance ministers past comments regarding intervention have included ‘Intervening in foreign exchange market on a large scale like being ‘out in a war zone with a pea-shooter’’. Talk of physical intervention was from the relatively small amount the RBNZ sold at the end of last year. I think we will get a similar reaction to the last comments and longer term flows will continue to frustrate new shorts. Support at 0.8354 is strong, shorter term support now at 0.8379 and if we push back onto a 0.84 handle we could see 0.8450 again quite quickly. The AUD market is also running short post RBA. Stronger China data o/n and again corp and longer term flows make those shorts nervous. For me 1.0210-20 is key and stops will be waiting through there. Demand again ahead of 1.0150 is expected with 1.0115 strong support below there. AUD/NZD traded just shy of strong support at 1.1934 and has bounced 200 points since yesterday morning. 1.2222 resistance there.
CAD – supply of AUD/CAD through 1.03, following the RBA’s decision to cut rates, was the catalyst yesterday as we triggered medium-term RM stops on the break of 1.0050 in USD/CAD, making new lows of 1.0036. The new low will form the first level of support followed by parity and the 200dma at 0.9989. There was some AUD/CAD profit taking overnight on the back of strong China data, ahead of 1.02 and would expect the pair to remain supported in the short term unless the RBA respond somehow to RBNZ comments overnight about currency intervention. I remain long USD/CAD with a stop through 1.0030 but a bit like trying to catch a falling knife at the moment and happy to flip into EUR/CAD for some enrichment if we see EUR/USD test range support against 1.3040/1.3030. Canada house starts at 13:15GMT worth keeping an eye on after strong building permits data on Monday.
Scandies – Norway IP at 9:00. More verbal intervention as Borg this time tries to talk his currency down, following hot on the heels of Wheeler in the NZD. May the currency wars continue. Limited impact though in EUR/SEK as we just look at the top of the recent mini range. 8.5000-8.5800 still the levels to trade. EUR/NOK of more interest as the NOK weakens heading into today’s Norges bank at 1:00. This maybe partly due to bond redemptions next week though. The market is split on weather they will deliver a cut or not. It’s finely balanced for sure. I’m going to stand a side and try and play the reaction. Levels to watch in EUR/NOK, 7.6770 and 7.7020 topside with 7.6300, 7.6100 and 7.5770 support.
Barclays