Summary of our Traders’ Strategies:
EUR: I retain an overall bearish preference towards EURUSD but am happy to be flat and flexible at the moment. Resistance should emerge in the 1.2725/40 zone and this should represent a decent level to initiate a short, with support at the Asian 1.2673 low and further out at last week’s 1.2614 low.
JPY: Whilst we retain an overall bullish dollar bias I am happy to stay nimble and trade the range. Support expected towards 107.60 with resistance again at the Asian (108.38) high.
GBP: Outlook in Cable here less than clear and we await the Fed to reinitiate USD length and sense market looking to do the same towards 1.6200. Levels to watch: support at o/n lows of 1.6083 followed by lows on Friday of 1.6018, topside 1.6131 and 1.6200.
AUD/NZD: We continue to favour playing AUDNZD from the long side with the Kiwi leg offering the key drivers on the week ahead. We will look to building on our long AUDNZD position ahead of the RBNZ statement – 1.1140/60 is the new buy zone with 1.1090 the preferred level for a trailed stop.
EUR
An interesting week in prospect but a tricky one to call. FOMC should be the main event but after last Thursday’s better German manufacturing PMI today’s IFO should garner added interest to see whether it can also paint a more positive picture. After the pain of month to date trading positioning in FX is lighter but the market still retains a short exposure to EURUSD. The AQR outcome whilst more positive does not seem likely to have an enduring currency impact. I retain an overall bearish preference towards EURUSD but am happy to be flat and flexible at the moment. Resistance should emerge in the 1.2725/40 zone and this should represent a decent level to initiate a short, with support at the Asian 1.2673 low and further out at last week’s 1.2614 low.
JPY
Trading today is likely to be muted as we await the FOMC on Wednesday and the BOJ meeting at the end of the week. After an initial print higher to 108.38, just above last week’s high, we have subsequently relapsed lower. I suspect the early part of this week will revolve around position shuffling albeit that speculative risk after the choppiness of October is pretty light. Whilst we retain an overall bullish dollar bias I am happy to stay nimble and trade the range. Support expected towards 107.60 with resistance again at the Asian (108.38) high.
GBP
Recovers a significant portion of last week’s sell off with Cable trading above 1.6100 overnight as stress test results provide some reprieve for European ccys. Growth data on Friday was largely in line with expectations and a timely reminder of the comparative strength of UK growth relative to the rest of Europe. On that note Mccafferty still sounding hawkish in weekends press and argues slack in economy is falling – interpretation that still get dissent in November vote. Domestically there’s not a huge amount to focus on this week with FOMC and the broader USD likely to drive price action in Sterling. Outlook in Cable here less than clear and we await the Fed to reinitiate USD length and sense market looking to do the same towards 1.6200. Levels to watch: support at o/n lows of 1.6083 followed by lows on Friday of 1.6018, topside 1.6131 and 1.6200.
AUD/NZD
With AUDUSD anchored around 0.88 for the last couple of weeks, participation levels certainly appear to have slipped. We continue to favour playing AUDNZD from the long side with the Kiwi leg offering the key drivers on the week ahead. Wednesday evening we are due the RBNZ statement (no MPR) where there is a risk that Wheeler changes some key wording. The two possible alterations that standout from September’s could be focussed on the lines “CPI inflation is moderate” and “we expect some further policy tightening will be necessary to keep future average inflation near the 2 percent target mid-point”. Both in our view are vulnerable to adjustment, and we will look to building on our long AUDNZD position ahead of the event – 1.1140/60 is the new buy zone with 1.1090 the preferred level for a trailed stop. Additionally we are due Septembers RBNZ intervention figures that same evening, and whilst we will be looking for another NZ$300-500+mm intervention figure to keep the market engaged, perhaps Octobers retracement in spot lends itself to a larger figure in a month’s time. In straight NZDUSD 0.7890/0.7910 area will be sticky – support well-defined 0.7775/95.
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