Deflationary scares in the UK while the EURUSD struggles to move lower

Another UK number, another leak ahead of the release. The consistency with which this happens simply beggars belief. And yet everyone and everything other than the ONS is getting probed. Explain that to me. The overnight session was a quiet one for the most part with only AUD data coming in on the softer side with the NAB business confidence printing lower and being responsible for a rather sharp(ish) sell off in the little battler. My resting bids in both the AUDUSD and Cable have now been filled, so I simply wait.

On that UK number, well in truth it just falls in line with what is going on practically everywhere else in the world, namely deflation. With recent prints in recent days across many countries, the common thread seems to be that no matter how much cash is being pumped into respective economies, it’s ultimately doing little, if anything, to boost actual demand and subsequent growth. So, the panacea of lower rates for longer… I’m not sure, as ultimately if it’s done so little thus far, how long does the piece of string need to be for a positive change?

On the day with the UK data out of the way, we’re pretty much done as far as more notable data releases are concerned and flow activity will take over the steering as far as this market is concerned. Overall I remain USD bearish (light) to neutral and am positioned accordingly. It seems to me that the mean reversion which I’ve spoke about for a while now is not only complete, but the consolidation required to hammer the final nail into the coffin of this move is also on the verge of completion. The EURUSD wants to go lower and there are plenty out there, willing it on, however as always it’s proving stubborn going on that particular road.

As far as levels;

EURUSD: 1.3330/10 should prove supportive on first attempts, while the topside (complete lack of mention of stops) will find willing sellers once again into 1.3420/30 and more above 1.3450.

GBPUSD: Those that got the nod early as well as model funds who are short have now moved their trailing stops to 1.5910 and a sizeable string of options expiries above and into 1.5920/30 may prove magnetic on the day, coupled with a possible stop hunt in thin and quiet market conditions (I swear I’m not talking my own book…). On the downside, short players look to take partial/full profit into 1.5830/10 which could also prove to be smalls supportive.

EURGBP: Having moved on the UK data and taken out 0.8425/30 stops and resistance, the road for now is open to 0.8450, however noted sellers are seen into this area and should be able to keep a lid on proceedings.

AUDUSD: There is a touted option barrier at 0.9300 and bids ahead of it are noted by way of protection. A 0.9350 and then 0.9380 series of option expiries this afternoon may provide the little battler with some lift heading into the London mid afternoon. However the road above 0.9350/70 is going to prove tough going in the first instance.

In the interim folks, helmets on and good luck out there

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