Easy money is like a piece of string, you can pull it, but never push it
The FOMC minutes last night left even the best paid of pundits (referring to the roughly $5mio CNBC anchors get paid) completely and utterly confused. Can’t really fault them, because how do you get Pandora back in the box once it’s been opened. Screaming at the top of their lungs and trying to get across the message that the FED itself is struggling to have heard is that tapering is not tightening. Really? Thanks for the heads up, now if only the market would react in according fashion rather than like a patient having his knee hit with a hammer to test his reflexes. In short however, nothing overtly new was to be garnered from the minutes nor did the market react in such a way as to believe that the taper was any closer to hitting screens than it was at this time yesterday.
Further out the Chinese data overnight was soft and enough to get USD bulls back in the game and excited about owning the Greenback (even if it’s temporarily), not to be left out and taking the brunt of the news was the Little Battler (AUDUSD) which took it on both cheeks (softer China and stronger USD). And adding salt and copious amounts of pressure to the wound was the RBA’s Steven’s this morning talking down (again) the currency stating all manner of reasons for why it’s just such terrible news to have it trading at current levels. Job done (again I think temporarily) with the AUDUSD testing and now trading around its 100DMA at 0.9265/70.
European PMI’s were a mixed bag this morning, however all point to softer growth (can we even call it that anymore) with the French being the standout for poor performance. Numbers can dance to any tune you sing them however, it’s fairly undeniable that those snail eaters are heading for another recession (in truth I think they’re already there), which can only do but one thing, and that is further anger Ze Germans.
Outside of Steven’s jawboning this morning we’ve seen and are currently seeing a plethora of European counterparts doing likewise, with Merkel just finishing and Draghi about to step up to the plate. Can he talk about negative rates, or is that exclusively someone else’s domain? And, when do we get to hear from Weidmann telling us that the ECB members are clearly on LSD if they think Germany will let it happen.
Data on the day has us looking for US weekly claims, PPI and flash manufacturing PMI and Philly FED manufacturing prints, while from Europe we’ll see consumer confidence data released.
I have alluded to smash and grab trading recently especially as we roll into the year end. I can’t imagine that today will prove to be any different. Yesterdays headline on negative ECB rates could’ve easily gone the other way (depending on who was doing the talking) and we’d be 1.3600 in the EURUSD. So, just be mindful.
As far as levels on the day;
EURUSD: The 1.3400 level has held well overnight and while not far from there currently, left to its own devices the cross seems to drift higher. Sellers are noted into 1.3440/50, while there are stops just above, more (sizeable) sellers join the party into 1.3480 and that is where I think the risk/reward is far better. With Draghi to hit the wires later careful how you tread. On the downside 1.3380 and 1.3330 are the levels to keep an eye on.
GBPUSD: Having not followed suit (ala EURUSD) and buoyed by the EURGBP demise, Betty has traded narrowly, and in light of other events looks set to play catch up on the downside to all those around it. I genuinely see 1.5980 as a price where we could see it in 12 hours. On the topside sellers are line up once again in size into 1.6130/50 and thus far no mention of stops anywhere.
AUDUSD: Still has room to head lower I think, but with Stevens now done jawboning and enjoying his wine 0.9250 should prove to hold up ok for the short term and option expiry there could well prove magnetic given how close we are. Overall despite all that’s been working against it, I think we’re now simply bottom end of recent rage and look for recovery (albeit not today) back into the 0.9350/0.9400 area soon(ish).
USDJPY: While it’s got everyone excited, massive strikes rolling off in the options market (think more than 3bio) at 100.00 over the next 2 days could be enough to draw it back to Earth. No real mention of levels here other the usual barrier chatter at 101.00, stops above and sellers into 101.30.
Helmets on and good luck out there.