Bear traps in Betty gives catch and release a whole new meaning
A hectic morning has meant that this piece is quite obviously delayed, however as you’ve all no doubt seen the happenings in Cable thus far today, there has been enough to be kept busy with. While we’re on the topic of Betty, the data itself was actually in line with expectations and no real revisions were to be seen, in fact the exports component was actually worse. Nonetheless the bear trap was set and while the market was long into the print, profit takers soon emerged when the number was released and short sellers attempted to enter the fray. Bear trap set. With the pair unable to clear 1.6210 just after the initial decline, the market very quickly turned the other way and went after stops that had previously been left untroubled. Yes, all the way into 1.6250 then 80 and finally being so close it would’ve been rude not to take out the 1.6300 barrier, above which we trade presently. The year’s high in the pair was 1.6381 and as far as reference points go, everyone is obviously now looking at this one. Adding fuel to the fire are month end flows which not only right now favour USD sales, but also GBP purchases. All this makes for one very fiery combination. Having said that though I do believe there is value in fading strength higher from present levels as when the dust settles and December begins, a nice orderly retreat back into 1.6210/1.6150 is not unreasonable to expect.
Elsewhere the JPY has continued to weaken and the bulk of the damage is being done by the EUR and GBP in the cross space. With the former moving to fresh 4 year highs and the latter not lagging either, 102 in the USDJPY is now magnetic for several reasons and at this point, not at all far away.
The AUDUSD is left meandering but most definitely has a negative bias to its directional trading. With offers cited and filled into 0.9130 and more above into 0.9150, the little battler resumes its path lower for now. As mentioned previously I look for 0.9050 to be the point of exhaustion on this particular move.
The EURUSD looks at this point to be more of a passenger to general month end USD sales which in turn means that 1.3630 followed by 1.3680 are the levels you need to take note of.
On the day (what’s left of it) we still have US Weekly claims as well durable goods orders and Chicago PMI. That last one… Well, just be careful as the last time that particular release printed it was at 30+ year highs, so I can only imagine we may be in for some serious revisions when it prints again this afternoon.
With Thanksgiving almost upon us as well as the above mentioned month end flows, waters are only going to get muddier in FX for the remainder of the week. Volumes will certainly continue to dry up significantly and swings will likely be even more erratic and pronounced. Careful out there.