From the FXWW Chatroom: Market Update: I cannot remember such a highly anticipated NFP in quite some time. It is actually quite amazing to think that the FED would make a decision on just one highly volatile number but that seems to be the way today. After yesterdays weak ISM and the price action that followed it shows just how skittish this market is. It wants to believe the FED wants to go in September and take the usd along with it, but already being twice burned in this scenario causes weak hands and violent swings. So what do I think and how best to trade it. I believe the FED and the market are prepared to go in September (even though FF need to still adjust to bring more probability into the meeting of a hike).
That said if we get any number within the market’s expectations of 150 to 200 this will signal Sept is live and FF will adjust and the usd will move higher. Best plays there long usdyen, long usdsgd, long usdcad. I would be very weary of chasing stg and euro in the hole. EM will try to sell of and some are better than others so be selective. The equities will try to sell off but again im not sure how long that will last. It appears the market is ok with a hike.
The biggest move would be sub 100 and this market readjusts back to hold. From yesterdays price action and an outside day in usdchf that would be one of the better plays along with stg and euro longs. They both feel like beach balls. USDYEN will get hit but I would not get short in the hole with the Japanese talking more action at their sept meeting. I would think gold longs from these levels would be a good play as well.
Above 200 and the usd really takes off as the market prices in a possible two hikes this year with sept and December. USD as a whole takes off even the euro plays along. I would think equities get a bigger hit and aud and kiwi are good shorts as we get a usd rally along with a risk off move.
100 to 150 and small disappointment but enjoy the long holiday weekend.
EUR: Short-term uptrend broke on Friday, now view it as a range-play with a bias to the downside (support comes in at the 200day ma at 1.1116, while Friday’s high of 1.1342 should cap any rallies). Euro should remain supported on the crosses (particularly agst the commodity currencies). CFTC data on Friday showed a good amount of short-covering by specs last week.
GBP: Positioning is more balanced in GBP after the last two weeks of short covering. That being said, the market still holds a large short position and a squeeze above 1.3300 could force bears’ hands. I prefer to scale into shorts towards 1.3300 as the lower GBP theme should persist heading into year end.
JPY: USD/JPY supported by the broad-based USD rally and weak industrial production numbers overnight have catalyzed and sustained the USD cross on a 103 handle. Impressive px action with risk assets on the back foot. Initial Trend-line resistance comes in at 103.55 and a breach opens us to 104.50.
AUD,NZD,CAD: Commodity currencies continue to trade heavy after posting key reversals on Friday. AUD/USD targets a move to 0.7380 (200day ma). USD/CAD is an interesting play given we get GDP numbers on Wednesday. Look for it to move to 1.3250-1.3300 level.
CHF: 0.9730 broke on Friday and now we see more room to the upside. We are partisan to dip buying between 0.9640/50 off the retracement lines from the august lows to the highs on Friday. From a state of recent consolidation, we could see legs on the USD cross with a near term target of the august highs of 0.9844 and a possible test of 0.9950 after.
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