Currencies tumble set against the backdrop of the Iran deal

For the most part a quiet weekend devoid of any real market moving headlines saw Asia open last night at levels roughly in line with Friday’s close. On the geopolitical side of things however there was of course the Iran nuclear agreement signed in Geneva over the weekend and while many are quoting this as the reason to this week own USD etc. I’m not sure of the correlation but of course can understand why oil has come off in recent trade as the threat of instability seems to recede a little on the back of this agreement. Commodity currencies seem to be the only deer trapped in headlights at the moment and some have even been hit by that truck they failed to see already (AUD and the NZD to a small degree as well as the CAD).

Data on the day is light and in truth much of the same is in store for the remainder of the week. With the US out on Thanksgiving holiday on Thursday and in all likelihood taking the Friday off too, it’s set to be an overall quiet week and worst of all getting thinner of liquidity. Jawboning out of various corners of officialdom will make for erratic moves again, so of course there’s that to look forward to also…

On the currency front the AUD was the worst performer in the G10 world battling for top spot with the JPY which had a softer tone over the weekend as the Nikkei closed in above that 15,600 area. Elsewhere the DXY looks like it’s struggling to definitively make up its mind but is doing enough to confuse the bears and bulls out there conclusively.

On the day, to be honest it’s a tough one today (not unlike most Mondays) but here goes;

EURUSD: I see room for the cross lower but not significantly from current levels, somewhere into 1.3500/1.3490 should find support and willing buyers. Having said that though those same buyers will be happy to unload longs if they get to see the 1.3570 area. No real mention of stops or orders or real note otherwise at the stage.

AUDUSD: Confusion reigns supreme and with most thinking “too far, too fast” the scene is set for either a significant short squeeze to extend into 0.9200 or more lacerations as that falling knife is sought to be caught. I’m in the laceration camp right now and think that we look for 0.9050 in the little battler, albeit no today. Some loose talk of stops above 0.9150, but it is as I said loose…

GBPUSD: Some buyers noted into 1.6180, but equally so stops just below (not of any real size mind you). More buyers are seen into 1.6150 and for me, that offers a better risk/reward play looking for 1.6230/50 etc.

USDJPY: 102.00 Barriers are the natural draw for the pair right now and all energy will be focused on the attack and defence of that near term level. Stops are said to be seen sub 101.45, however buyers are said to be lined up directly behind. The topside has the 102 defence in play however above there 102.30 is the only next point of reference.

Not beyond admitting that it’s getting a little tougher now as we run into the year end, liquidity vanishes and moves become even more erratic, but stay nimble and stick strictly to good risk management principles and you should be ok.

Helmets on.