FX markets fail to react to yet another failed summit…
With turkey-stuffed bellies and another disappointing round of negotiations from Brussels, the market has been left rather listless and wanting of directionality.
A thin week has become even thinner and aside from various sound bites from both Japan and Europe, little has gone on in recent days and certainly overnight.
The initial shock (well… not really) of a failure to agree on Greece saw the EURUSD plumb fresh depths to then quickly reverse and continue higher on its current path of mean reversion. Other crosses attempted to follow suit but ran into far stronger headwinds than did the single currency. Outperformance was perhaps most notable in the JPY crosses as Shinzo Abe, who is favourite to win the Japanese election, made it clear that direct FX intervention was not going to be the way forward for a weaker JPY, but rather definitive and consistent policy out of the central bank instead. The veiled attempt at central bank independence is certainly losing its lustre as the electioneering reaches full steam. This was enough to send a reversal shiver across the JPY pairs and last minute JPY shorts have now to a degree been washed out. The path higher for the USDJPY is still the one of least resistance, however, even this is slowly losing some of its puff.
EU budget talks overnight in Brussels have stalled once more and now (along with a decision on Greece) we await Monday for some more clarity, but as has been proven all year, holding your breath in expectation of a firm resolution, will only likely leave you breathless…
With regard levels on the day, well simply put, I’m not playing and nor should you…
EURUSD will have a tough time above 1.2930 on first attempt and I would not anticipate a weekly close above here, with 1.2850 a more likely closing level for the week. As such, nothing to be done in this pair today.
The cable still looks mildly constructive and as long as we can close the week above or at best around 1.5900/30 then next week should continue to see upside.
The AUDUSD is firmly in mid range and 1.0350 on the downside and 1.0430 on the topside should contain us.
As it’s Friday and the Yanks are on another half day, all the more reason not to ruin your weekend with a cheap punt.
Helmets on and good luck.