EURUSD: Support – 1.3450/60 Resistance – 1.3610, 1.3630, 1.3710
In summary, the minutes proved to be a little more on the hawkish side but the impact was limited overall with the focus now very much back on Washington. The dollar is slightly stronger following the minutes and that is the most likely continued path assuming we get a resolution to the debt ceiling next week. That move would be underpinned with a fix on the government shutdown aswell. EURUSD still feels rangebound and its important to respect the 1.3450/60 support area. On the day will look to be long leaning against that level.
AUD/NZD : Support – 1.1320 Resistance – 1.1500
Nothing directional in Aussie employment figures, but the subsequent reaction is instructive. That is, after an initial re-test of the high 0.94s, AUD reversed quite aggressively, reflecting a fairly decent bid in the dollar. I don’t think the market is necessarily done with the squeeze, but perhaps it’s better to play on the crosses from here. AUD/NZD the best one as it bounced back immediately and is set to break through the 1.1400-20 level. For AUD/USD, the next move will likely come from the US side of things, where an apparent debt ceiling band-aid is keeping pressure on global bond markets. For the day, look for the stops under 0.9380 to be triggered, followed by another lackluster range session. I still maintain my long bias in AUD/NZD, trailing stop is now 1.1320.
JPY : Support – 97.00 Resistance – 97.90
Still fairly directionless here in USD/JPY, washing around with every 0.5% move in S&Ps. The flow data from last week not exactly constructive, but that has limited predictive power anyway. I am cognizant of the fact that the longer-term players are unfazed by the political brinkmanship and I am looking for an excuse to reignite longs. With a short-term debt deal in sight, good claims data today would be a nice trigger.
EURSEK: Support – 8.7050, 8.6850 Resistance – 8.7500, 8.7800
EURNOK: Support – 8.10, 8.08 Resistance – 8.1500, 8.1720
Important day today in Scandinavia with CPI out of Sweden at 8:30am and Norway at 9:00am London time. Given the low level of inflation in Sweden at present, this print is important to determine whether the Riksbank’s rhetoric is playing out, namely Swedish inflation beginning to pick up as global outlook/demand improves. If inflation remains low and close to zero, it puts further strain on the Riksbank in managing high household debt and extremely low inflation simultaneously. I have been running long EURSEK the past few sessions given SEK’s high sensitivity to risk and in particular equity performance but have taken profit on this position and will re-assess post CPI. Couple of key levels to bear in mind for EURSEK; 8.7650 is a technical trendline starting from middle of June and 8.7800 is the triple-top that has held each time over the past 3 months. In Norway, the market is already well aware of how significant CPI prints can be. After the extensive pain caused by EURNOK over the past month I think that any surprise to the upside or downside could see EURNOK react aggressively as I think market makers will price defensively and liquidity will be very thin. I maintain that the topside in EURNOK remains the weaker side and I think a downside miss in underlying CPI would make last month’s print look like a one-off blip. 8.20-22 is a very important level for EURNOK, 8.05 the level to bear in mind to the downside. See you on the other side.
Morgan Stanley