The thunder rolls down under, while the UK continues to boom

Overnight data out of China was mildly softer, while the RBA left rates unchanged as it did the overall rhetoric in its accompanying statement. They remain uncomfortable with the currency’s strength but failed to jawbone it significantly lower on the night. Retail sales in the land of Oz were better, while the balance of payments painted a slightly widening trade deficit. Having come close (again) to the 0.9050 barrier in the little battler, the pair took a decent about face from lows and this morning has been the target of decent buying interest in the brokers here in London. A short squeeze may be imminent, with the likes of JP Morgan looking for the 0.9180/0.9200 area to get set for fresh shorts. In my mind the simple fact that they’re looking at that area rather than closer in, say 0.9130/50, says all it needs to, which is that stops in that area (0.9135/45/50) are the lowest hanging fruit available for picking.

Elsewhere the stronger Nikkei, weaker JPY correlation is still in full flight and with option barriers in USDJPY falling like flies, and EURJPY printing fresh highs the theme looks set to continue. There is a large (massive) digital option expiring on Thursday which sees the owner needing the spot price to be above 103.00 at expiry to collect a $20mio payout. Not bad if you can get it, and I’m guessing they’ll be doing all they can to steer it in the right direction.

UK Construction PMI just printed as I type and produced a number that’s the best its looked since 2007. I have thus far failed to truly believe that London is indeed the UK, but it’s undeniable how much sway the town really has over the broader economic picture here.

Data for the remainder of the day remains light for the most part with only the EUR PPI to follow this morning and rather insignificant US vehicle sales this afternoon.

In terms of the broader picture, the market remains somewhat undecided and with natural risk event on the slab for the tail end of this week, I doubt many would be too keen to get involved. Overall, USD sales will dominate I feel, even if only until the NFP print on Friday. For now everyone seems to have forgotten about the impending US government shut down that will hit news wires again fresh in the new year and you know what they say, those that forget history are bound to repeat it.

With regard the crosses on the day;

EURUSD: A raft of stops reside into the 1.3625/35/40 area, but solid offers ahead of that may well keep us at bay for the time being with no real impetus for punters too get too heavily involved just yet. On the downside, besides expiries that could draw some magnetic interest all the way around 1.3550/40/30/25 (yes there’s that many of them today) there is little else by way of fresh information.

GBPUSD: The market is already short and sellers for now (until we get higher) are going to be few and far between, why ruin your own average. With data prints like the one this morning, the path can only be higher and so we go for now. Look for some Asian names to hit bids around 1.6430 looking to lose some, with no real mention of stops above. On the downside 1.6370 is your first port of call, small stops below and more buying interest into 1.6350.

AUDUSD: The Little Battler (as espoused about above) looks set for a test higher in the short/near term. Stops above 0.9135/40 are now close and could prove very tempting for a decent drive by. Sellers once again likely to join the fray into 0.9170/80. Anyone that wanted to get long the cross however, is now done and sitting waiting. Then again they’ll likely toss longs if the battler struggles around that 0.9150 area.

Helmets on and good luck out there.