Ladies and Gentlemen, may I present Janet Yellen
I present you, Janet Yellen! The crowd goes nuts and the USD goes boom. That, was the net result last night at the New York close and Asian transitional open. An early release of prepared remarks due at her testimonial later this afternoon was enough to send the market into wild throws of excitement as the dovishness hoped for by so many became so clearly evident as the news hit the wires. The overall message, is steady as she goes and sadly where she goes, ain’t that pretty. What Ms. Yellen so interestingly stated above all else was that the surest path to a normalisation of monetary policy was to support the overall “recovery” in the US. She considers (as we all do) the jobless rate to be too high presently and that while the goal of financial stability is a key consideration, the FED has got a lot more work to do. What all that sounds like to me, is the eternal question of which came first, the chicken or the egg? Caught in a deteriorating death spiral of easy money, not even Goose can help Maverick pull out of this terminal nosedive (Top Gun reference in case you were wondering).
The natural reaction upon release of these comments was for the USD to go bye bye and a multitude of stops to get taken out in the AUDUSD, EURUSD and Cable. Helped along by the time of day all this occurred, the situation became even more exacerbated as more and more USD bulls threw the towel in once again. Some will now today point to levels where the ramp petered out and tell you that these now mark natural resistance/support etc. Ok, yeah, maybe. But honestly I don’t believe the USD bull story no matter how its spun and if you read this piece yesterday you’ll note the last 2 lines wherein I mentioned selling USD… Say no more.
On the day with UK retail sales data (worse) out of the way, we await weekly claims this afternoon and more importantly the ACTUAL appearance of Ms. Yellen for her testimony. The market is placing a lot and I do mean a lot of importance on this appearance today and not unlike the whole Summers nomination debacle, I think it’s overdone. The FED will remain dovish and persists with easy money. It’s simple and they have no choice. How they paint the obvious picture and how the like of Mr. Hilsenrath interpret is the only thing that will give the market any undue volatility.
On the levels front:
EURUSD: Stops now sit firmly above that 1.3500 level, as however does a 1 yard options expiry rolling of that level this afternoon (coincidentally the same time Yellen speaks). So net/net expect price action to be magnetic and for sellers to rejoin the party into 1.3530. Bids are few and far between on the downside, but 1.3380 is the obvious level.
GBPUSD: Quite the merry go round Betty has been on in the last 24 hours, however with USD sales featuring prominently and Carney showing that he is 10ft tall and bullet proof not afraid to raise rates ahead of an election if need be, the Cable remains mildly bullish. The range downside has once again been defined at 1.5900 and sellers are now wearing some pain. Fresh offers are heard at 1.6080 but… I think they too will wear pain. Bids on shorts for take profit are seen into 1.5980.
AUDUSD: Hmmm, I was fortunate enough to get out of my longs on the spike last night but the little battler is once again drawn sub the 0.9300 handle with touted option expiries at 0.9250 and 0.9270 in real size. The 100DMA is at 0.9267 but looks vulnerable for the time being. Fresh offers are once again seen at 0.9330/50.
USDJPY: It’s cracked the 100.00 mark again and only a 1.5 yard expiry at 99.50 might draw it back in the near term. Stops of real note and size are mentioned above 100.30 but it’s early days yet. Bids come in fresh at 99.30 down to the figure.
That about covers it for now folks, in the interim helmets on and good luck out there.