A day for tie colour guessing rather than bazooka buckshots
Another quiet night in Asia as the Japanese this morning have approved another (insert huge number here) economic expansion package this morning. Australian data was smalls softer and the street’s dislike for the Little Battler seems to run deep, even still. The EURAUD having taken out the 1.5000 level looks set for further lift off and trades firm. We’re on the cusp of hearing how amazingly well the UK economy is currently doing as George Osborne delivers his autumn statement. All in all looking for further strength in the Sterling and perhaps the best way to express this is via the EURGBP cross rather than direct in the USD leg. Offers abound in the cross into 0.8320/25 with noted stops just above 0.8330 and 0.8340 marking the top end of a strong channel on a 4 hourly and daily basis.
The day ahead obviously holds the BoE and ECB in store for us with the former not likely to do or say anything too market moving, while the latter, well as always is going to cause the usual volatility. Tough to hazard a guess as to which way Mario will lean or what colour tie he’ll be wearing for that matter but with spot prices here (above where they were when they cut last month) any unease on the topic will surely be displayed. Nonetheless for a man that has shot his bazooka, cut rates, spoken of negative rates and even hinted via “sources” at being technically ready for some form of QE, he is genuinely struggling and truly stuck between a rock and a Buba (German central bank).
With regard how the cross itself may trade… Well simply I think we take 1.3640/45 stops (yes more up there even after this morning’s raid) and natural sellers will re-enter the fray around the 1.3680 area and continue in that vein up to 1.3730. Unless Mario not only corrects last month’s cut, but also actually raises rates, there is no solid reason for the cross to get too much higher than aforementioned levels. On the downside 1.3450/30 at an extreme. No buyers otherwise to be noted.
In the Cable, well I continue to think the road higher is the one of least resistance but much will ride on the chancellors speech and market reaction to it. On the downside 1.6330 holds the near term key, with more buyers about into the 1.6280 area if we get that far. Topside I hear of good names (that aren’t as convinced anymore) looking to sell Betty into 1.6430 and 1.6480, but as I said they seem to be lacking outright conviction in the trade for now.
The AUDUSD wants to tackle that round number at the 0.9000 handle again and having gotten a taste of it last night, the street wants more. I’m being told that a rather sizeable bid sits around there and so far this morning has done the job. On the topside 0.9050 marks resistance with some stops above but 0.9080 should hold it.
And finally on the USDJPY and JPY in general… With the Nikkei off over 1.5% overnight the JPY has strengthened however, there is still more than enough interest to see it weaken once again. Not least of which due to the digital option expiry today where payout runs at $20mio if spot trades above 103.00 at the cut.
Helmets on and good luck out there today.