A tired FX market searches for direction

Australian consumer sentiment data was stronger than expected last night, while the New Zealanders were out again attempting (and succeeding) to talk down their currency. Elsewhere ranges and price action in the major pairs were subdued in the Asian session with only equities drifting a little lower on local bourses. Walking in this morning it’s beginning to become obvious that the market and more poignantly its participants are growing weary after what has been a long and arduous year. Flows are drying up and the whiplash that we’ve seen the entire year has clearly taken its toll. Perhaps of most frustration is that after all the to and fro this year, in many respects we’re back where we started…

On the day, we’ve seen a stronger employment print out of the UK and subsequently wait for Carney and his band of merry men to deliver the quarterly inflation report. Outside of the obvious discussion regarding how inflation targets have been missed once again, the market is anticipating some sort of discussion at the least and even possible revision to self imposed forward guidance hurdles. Overall, I like the Cable higher and while my resting bids from the beginning of the week have been filled and I’m out of those longs I still see a run in the cross into touted stops at 1.5970, admittedly it will need to get through large offers at 1.5950 first, but I think that’s a plausible scenario.

As far as the EURUSD is concerned, well I think my opening paragraph pretty much told you everything you need to know. Everyone wants it lower (as always) but it’s just not really going. Even after a rate cut by the ECB… well you can see exactly where we are and what it’s done. There is very little I’m hearing regarding order and position flow in the single currency and much of this has to do with the FX market being so strongly probed by that big FSA stick.

On other crosses, well it’s swings and roundabouts at the moment and overall I still hold firm the view that the DXY has done its dash with mean reversion complete and consolidation also likely almost complete, getting us ready for another tumble in the greenback.

So, in short look to sell USD strategically and pick your crosses carefully.

Helmets on and good luck out there.

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