EUR – Strong month end in general for the usd and eur no exception with another attempt at 1.2990 area (daily cloud top) – This lvl becoming increasingly important support now as we go into European PMI’s today but more importantly ECB meeting thursday – Mkt i think expecting a dovish outcome in some form thursday so room for disappointment there, while US data this week , starting with ISM today and ending with payrols friday, will be important in terms of mkt expectations for tapering. Small short eur currently want to leave room to add at 1.3080/1.3100 lvl with a stop at 1.3150. Downside a break at 1.2990 (and close below) opens up a run towards 1.2850 for me.
GBPUSD – Continues its downdrift, with Leveraged supply being noted on rallies. From here, I would advocate selling on any correction into the 1.5280 – 1.5300 band, and I would not expect the 1.5350 mark to be recovered on a closing basis without any GBP positive newsflow. Client flows have been GBPUSD negative on the whole, though volumes are still rather subdued. 1.5165 marks Fridays low and will offer some support, with 1.5009 marking the lower end of the range.
EURGBP – Failed at the upper end of the range on Friday, and should have room to drift lower. Any close above .8599 would change that picture, and suggest GBP can genuinely begin to underperform again. I am square in this cross, and will simply operate within recent ranges until the chance of something more directional is confirmed. Clients have shown a preference for selling EURGBP in the recent past, though my feeling is that pattern would change above .8600.
JPY – Strong close Friday above 99.00 again has seen us back to new highs at 99.57 this morning in LDN, supported by a stronger tankan o/n and demand from model a/cs. Important week for usdjpy with ISM data later in states, ADP wed and ending with payrolls Friday – We saw last week that stronger US data led usdjpy higher so positivity this week should be seized on to test this 100./100.30 resistance – downside support in short term 98.70 then 98.30 – I bought some upside usdjpy in 1 and 3 month last week as think as things stabilise that usdjpy can run back to the old highs at 103.70.
CHF – Usdchf capped for now against these range highs at 0.9480/0.9510 area – seen some corp and lev supply in short term – While rm bids have supported us on dips 0.9380/0.9350 zone – Focus has always been usd rather than chf side so US data important this week to see if we can breakinto that higher 0.95-0.98 range – if we start to clear 0.9530 i think should suck in further model demand. I bought some 3 month upside as i think we will grind higher into year end.
AUD & NZD – AUD/USD bounces after the USD buying of month end on Friday, after setting a new low of 0.9110 post China PMI. RBA tomorrow morning is the next major event for the Oz but with only a token 5 bp’s priced in, I expect the board to announce an unchanged policy rate. Domestic focus will then switch to CPI data later in the month. I expect risk reward plays to go on if AUD/USD gets perky on the topside though, with 0.9215 and 0.9260 immediate levels of interest. Downside price action levels are 0.9164/0.9148 and 0.9110. NZD/USD floats back away from 0.7700 support and should range with 0.7810/20 and 0.7860 resistance.
CAD – USD buying into month-end saw USD/CAD re-test resistance from earlier in the week 1.0555/60 and despite some consolidation overnight price action remains constructive, still looking to target 2011 high at 1.0658. Expect to see some stops through 1.0560 but to be honest I don’t think too many people trying to fade this move just yet. Corp bids now being raised 1.0400-1.0440 but once again expect tight ranges in run up to payrolls (Canadian and US) on Friday. Our research team put out a note last week on the Keystone XL pipeline, with focus once again on Obama will he/won’t he and would expect to see some CAD strength on any positive announcement which in the longer term will go some way to reducing the WCS discount to WTI crude.
Scandies – Stronger Swedish PMI to start off the week (53.5 vs cf. 52.3) but counteracted by some RM demand for the pair 8.69-71. With the Riksbank on Wednesday, the recent bout of strong data (unemployment, retail sales, now PMI) all adding strength to the ‘no cut’ argument, but there still remains a 25-50% rate cut priced in. I think EUR/SEK remains well supported into Wednesday, with profit taking likely on any dips down to 8.65 as the USD also remains well supported following the good month end demand seen on Friday. I remain bearish on EUR/SEK but expect tight ranges in the run-up to Riksbank and will keep positioning light into Wednesday, as to me there still seems a lot of room for surprise from the Riksbank. The 8.50/55 band still remains the big level of support to the downside, which has acted as range lows for Q2 and trendline support now comes in 8.5600/25. Saw good supply of EUR/NOK from RM throughout Friday as longer-term accounts look to re-initiate long NOK trades and continue to see the same sector on the bid in NOK/SEK 1.0990-1.1050.
Barclays