China makes waves in an otherwise quiet FX ocean

While the overnight session was once again quiet save for the release of the RBA minutes which did little to really sway the market, it has been this morning that’s proven to be a little more exciting as headlines from China have hit the major news wires. In short, the Chinese have pledged to cease their regular FX intervention and more to the point have widened the band in which the CNH trades. The main recipients of the joy that this news brought were the anitpodean crosses with the AUDUSD taking a fully fledged leap higher, helped along by stops getting hit around the 0.9410/15 area. Trading into a high of 0.9446 this morning on the news we’ve retreated somewhat since but still trade with a healthy bid tone. The other side of the equation was a general USD weakness brought on by the news, in what I can only assume the market interpreted as “risk on” (if that even still exists).

The timing of the release of the news also helped sway matters as it was very early doors in London and thus not many were at their desks.
On the day we’re mere minutes away from the main economic release of the German ZEW Index which will no doubt have a short term effect on the next 25/30 points in the EURUSD, with a disappointing number likely to see stops taken out sub the 1.3480 area, but then again it will need to be really disappointing.
EURGBP is one to watch today as I think there is a real risk of a topside surprise in the cross, but an 0.8400 option expiry this afternoon in decent size could keep the pair pinned into the New York morning.

I am now a little more resolute in my USD bearishness as we look to finish the year and can see the like of the AUDUSD, EURUSD and USDCHF being the main beneficiaries. The Cable is a slightly different story and one that waits for the BoE minutes etc tomorrow. It’s not a popular view, but I’m not in this to win popularity contests after all.

Tight range trading prevails for the time being though and as such I would suggest picking strategic levels at which to sell USD incrementally.

Helmets on and good luck out there.