EUR – Eur continues to be under pressure with bounces limited yesterday to 1.3185/90 and no different in asia o/n. The focus remains the 1.3130/50 area which contains the 200 (1.3145) and 100 (1.3137) m.a’s and the and also the dxy which has the 100 day at 82.40 which we are sitting right on and again should be eur driven. Bias remains to fade moves to 1.3200/20 or sell a break of this 1.3130 area as feels that with the strong US data we should see a retest of 1.3085 and 1.30 again. Service Pmis today the data focus in the morning with expectations for strong prints – ultimately we look to adp tomorrow and payrols friday as the key data points for the week.
GBPUSD – Contained within 1.5522 – 1.5605 for the time being, as the generally better performance of the USD is countered by weakness in EURGBP. I see these dual forces remaining at play in the weeks ahead, and do not have a strong view in GBPUSD as a result – that said, I do not want to be short. In the interim, I am happy to fade extremes, with a bias for buying weakness into the 1.5500-20 band. Client flows have been skewed towards demand in the last 24h, with Leveraged and Corporate clients having been active.
EURGBP – Making hard work of this .8440 – 65 band of support, but our client flows and recent newsflow on the UK side do suggest a steady decline towards .8400. I have a core short position, and will willingly add, on any upward correction to .8500 and then .8525. Only a close back above .8530 will suggest to me immediate risks to the downside have passed. Thus far this week, we have noted European Real Money supply of EURGBP, though European Corporates do seem to have been steadily buying on the way down (away from us), hence the grinding conditions. *UK Services PMI will be released at 09.28 Ldn, consensus expectation is 59.7.
JPY – Opening against key resistance here at 99.90-100.10 area – With exporter offers at this lvl it could take strong data points from adp/payrols to see us break into the higher range. That said demand has been constant the last 48 hrs from lev and rm a/cs and this was backed up o/n with Japanese demand off the 99.40 area from Japanese investors. Support sits at 99.15 (yest ldn lows) then 98.70 – Other points to note an interesting article from the asahi newspaper suggesting further boj easing if the gvmt get to work and increase the consumption tax – Right now squared longs against 100 area happy to buy dips to 99.40 99.15 in short term.
CHF – Usdchf ,a few syria headlines aside, remains supported with eurchf grinding up to initial targets at 1.2385 supportive of usdchf attempting to clear this 0.9390/0.9400 area – A few early corp sellers yest helped to cap the move early morning but the stronger ISM has provided further demand. Right now support 0.9330 then 0.9290 – topside targets for longs 0.9420 then 0.9490/0.9500 – Still room to further appreciate to the top of this 0.92/95 range before taking a breather. Eurchf 1.2385 then 1.2415 targets topside support 1.2300 then the 200 day at 1.2280
AUD/NZD – AUD continues to claw back ground, especially via the EUR and JPY. A marginally stronger GDP print in Oz o/n was the excuse the market was looking for to buy again. AUD/JPY as highlighted yesterday is my favourite way to play long AUD. We closed above the 55 DMA yesterday at 89.95 and 90.15 tech resistance with the maps now pointing for a journey north to 93.00. The only issue with AUD/JPY longs are the Syria missile headlines. It’s probably the most sensitive pair as we saw yesterday when we gave up 50 pips in a hurry on the headline. Anyway, dodge those and we look in good shape. Levels to risk below are 89.95, 89.40 and 89.00. EUR/AUD has already had a big move from above 1.5000 to 1.4435 in the last 6 sessions. Big tech support though at 1.4415 and 1.4342 should dampen enthusiasm for a continuation at the same pace. For AUD/USD itself, the techs are radar locked onto 0.9220/33 initial resistance, with 0.9330 the first big level to above there to watch. Support now at 0.9100, 0.9075 and 0.9010. If we breach the later, all bets are off. NZD/USD, playing catch up with AUD but 1.1600 in the cross is now support and the bird should lag the next leg higher in AUD. Stops through 0.7840 were triggered this morning with next resistance at 0.7875. Support 0.7800 and 0.7780.
CAD – BoC rate decision at 15:00LDN – rates universally expected to remain on hold. More profit-taking in USD/CAD yesterday 1.0540-60 kept that level of resistance intact but pressure remains to the topside as good demand builds 1.05-1.0510 from RM names. With the USD well supported as speculation again builds on US tapering expectations, I think the Bank of Canada will be reluctant to try and change the trend of CAD weakness as they themselves have outlined a growth plan led by exports and for now it seems the US are doing the hard work for them. 1.0470 remains the first level of support to downside where stops remain in place with 1.0440/50 the broader level of support which was the top of the previous range, before we broke up into the higher 1.0480-1.0560 range. I remain long USD/CAD and will continue to add on dips for now looking to trade the much tighter 1.0510-1.0550 intraday range. With US political support building for action in Syria, oil prices remain well supported which will bring some CAD benefit and my concern is now that Obama may get pulled into more powerful action over and above the “limited” action first proposed. Despite the market getting very bullish AUD/USD on the back of strong data and a short squeeze, being short AUD/CAD 0.97-0.9750 with a stop through 0.98 doesn’t look like bad risk reward.
Scandies – Soft services PMI from Sweden 53.7 vs. cf. 54.2 to start the day off and once again top of the range at 8.75 in EUR/SEK looks under pressure. EUR/NOK managed to clear stops down through 8.00 but the price action was underwhelming and there was good RM demand 7.99-7.9950 lying in wait which supported the pair. This was followed by some NOK/SEK RM supply 1.0880-1.09 and given this it seems that it will take some external catalyst to break-out from 7.98 support in EUR/NOK and 8.75 in EUR/SEK. I’m holding on to my EUR/NOK long with a stop through 7.98 but happy to have a go at fading EUR/SEK risking 8.75 as US action over Syria looks likely and with the should come some demand for US fixed income. Riksbank tomorrow will be well watched but following an upward surprise in inflation, lower unemployment and strong IP since the July meeting, and concerns still in place over household indebtness, I think risks are for some hawkish rhetoric from the MPC.
Barclays