Beware a leaky boat in Cable on a sea of whispers
The RBA overnight failed to move on rates as widely expected to be the case, however less expected was the dovish tone employed which drew specifically on the currency’s strength as a reason for potentially retarded growth etc in the land down under. Interesting how when the AUD was trading above 0.9700 odd at the last meeting there was no mention of the currency, but now over 3 figures lower and… Does the RBA need to pay up for their Bloomberg subscriptions to take the off delayed price feeds…
Elsewhere Chinese data was once again on the mend, with PMI printing marginally better than consensus. In other Asian markets however the overall mood was subdued with only the Nikkei showing some signs of weakness, leading in turn to a slight strengthening of the JPY, mainly against the USD and to a lesser degree the EUR and GBP.
Interestingly also, Goldman’s’ chief guru put out a note overnight stating that the FED is likely to lower their 6.5% unemployment threshold to 6% as the hurdle for when rates in the US may be raised. Of course there’s the small issue of what to do with the 85bn they’re buying every month first… meh, details…
This morning saw the UK Services PMI released coming significantly better than median expectation, and yet entirely in line with the leaked whisper that did the rounds in the market an entire HOUR earlier than the scheduled release… Has someone got Fama’s number, I’d like to ask a few questions about his EMH… The print was the best seen on the island nation since 1997 and of course gave the Cable a boost. Driving the price action even further in Betty was the move in EURGBP which gathered momentum as model funds piled into fresh shorts on the break of 0.8430. The cross printed a low of 0.8403, unable to probe any lower. The bounce back has since been less than convincing, but the cross still looks marginally heavy for the time being. Surprisingly, no mention of options barriers at the round number just yet.
This afternoon sees a tour de force (farce?) of all manner of ECB speakers and the market will likely be jittery watching headline feeds when the talking heads start jawboning. Outside of this we’ve only got US services PMI later to steer the price action ship. Remember folks, good news is bad, unless it’s good, in which case, it’s not as bad as when it’s good…
With regard levels, I still think EURUSD has a look at mounting stops into 1.3525/30 (untouched yesterday) and once cleared (if) we should stall into 1.3560/80 if we can even manage a thrust that far. Once again, all will depend on the jawboning we hear.
In the Cable, Fibonacci levels of 1.5910/19 have thus far held and bounces seen as a result of data (as per this morning) have been healthy without being overly exuberant. With the BoE on tap on Thursday and the overall USD story hanging in the balance at the moment, I can’t see too many getting carried away with long Cable positions. I also hear some Asian supranationals are trying to fade rallies which helps keep the lid on the upside for now. I think 1.6080 contains the move for today and be assured there are some stops above.
In the AUDNZD, the ascending trend line on the daily chart has been met and test at 1.1403/05 and a quick bounce back witnesses. Only a 4 hourly close above the 1.1440/60 area will work as confirmation of further upside for the pair on the day.
Helmets on and good luck out there folks.