Before I get stuck into what the day may hold in store for us, I just wanted to note the amazing and ever increasing amount of noise present in the market at the moment. It’s always been critical to keep an eye on all global macroeconomic and political events as they unfold as they invariably always have a direct impact on currency markets (perhaps more so than any other market), however in recent times and certainly since the beginning of this year the amount of headlines, news, events etc has been bewildering to say the least. I, for one, am nearly at a loss as to what to pay attention to with regard to potential impact on the currencies I trade. In simple terms, there is just too much going on and it’s getting harder to decipher meaningful information from white noise…
Clear as mud?
Thought as much. Getting back to what lies ahead today: on the data front there is little to keep an eye on. Most will be interested in the first Merkozy meeting scheduled for 12.30GMT. My impression is that the gist of the meeting will be more about how their respective holidays were, what plans they have for re-election later in the year, and how best they can walk away from this mess and still save some face. The real kicker will be next week when we have our first Euro summit for the new year and the S&P finally (maybe) delivers its summary report on the state of the 17 Euro economies.
Price action overnight was again ugly, as the USD maintained its strengthening bias, the EURUSD hit fresh lows, the AUDUSD followed in smalls as local retail sales data came in flat against slightly positive expectations raising once again chatter of a continued Reserve Bank of Australia softening bias (but it’s far too early to be discussing this). Last week’s Non-Farm Payrolls’ kicker looks like it’s giving some pundits out there false hope that the market may now actually start respecting economic fundamentals in that a positive data print should reflect equally positively on the related currency… Too hard to read at the moment, if I’m honest.
Levels on only a few crosses… AUDUSD still has the potential for another bounce out of 1.0130 (more or less happening now) into that 1.0270/80 area before taking a small break to see what the rest of the market is doing.
The EURUSD is still clearly bound lower (with CFTC data showing that historic shorts have once again been increased), and the target for now looks to be that 1.2500/30 area before it has a bounce out on most likely a headline (keep an eye on Spanish and Italian auctions on Thursday and Friday this week). I am avoiding this cross for the time being.
The Cable is tracking the EURUSD, however not as violently and a lot has to do with the cross rather than anything else. The broader 1.5350/1.5680 range is still in play and until this week is over it’s perhaps best not to get involved.
Somewhat disjointed today, I know, however as you might have guessed, I’m still finding it tough to get a clean read on what’s actually happening in this market.
Helmets on and good luck folks.
Ken Veksler
SAXO BANK