Walk tall, speak softly and carry a big stick, Mario
Today is the day Super Mario walks tall and speaks softly, carrying what he thinks is a big stick, but what the rest of us know is nothing more than a toothpick.
The entire market (although I think in recent days this may have eased off a bit) now expects Mario to, if not cut rates, than certainly to be on the dovish side of the fence and at the very least either speak to the matter at hand which is ever falling inflation and the risk of a Japanification or better still, introduce another nonsensical, non functioning, entirely irrelevant acronym by way of appearing to mend the completely broken transmission mechanism.
Well folks, I think he pulls another FOMC meeting out of his hat and while staying entirely quiet on all matters mentioned above, fails to deliver the dovish tone that the market so keenly awaits, thus leaving punters little choice but to interpret matters as hawkish, thus… EURUSD higher. That’s not to say that in the lead up and or beginning of his press conference we won’t see the market attempt to take out mounting stops below 1.3460/50, but given the amount of take profit orders seen by supranationals into 1.3475/85 we may not even get there. There isn’t an innate desire to get long there from these names but there is enough volume on the profit taking to keep the puppy supported… Personally I would look to use the opportunity of dips to get strategically long with the absolute downside being well defined by now, sitting into 1.3430, below there and you’re wrong. Deep pockets, if you have them, should allow you to sit tight into 1.3380 where any undue downside exuberance comes to a complete halt and once again higher we go. I know these numbers sound far away and perhaps not entirely palatable, but the upside on longs has so much scope. My initial target is 1.3630 (stops at 1.3580 will be easy targets) and beyond that while perhaps a struggle I look for 1.3680/1.3730. If we manage to get as high as that last point, sell your EURUSD, sell your mother, sell your best friend, but not your dog!
In the Cable, I don’t expect too much out of the BoE and if anything look for that sideshow to be completely subdued. If anything look for action in the cross, which as the market sits short and happy (for now) below that 0.8430 area, can only (and does) mean that stops now feature above the 0.8435/40 area and if the EURUSD does what I think it should, well… receiving Sterling pips is far more attractive to the p/l than are US pips… Am I right? Yeah I’m right. Should these stops get done, look for 0.8460/70 to cap the move at an extreme as Sterling buyers join the party.
On the USDJPY (Bill and Ben) today it should remain somewhat sidelined in view of the NFP tomorrow which should be of greater relevance to it. The EURJPY on the other hand, well that’s where the action should be as far as JPY crosses. Again I look for growth here and if 133.80 can be successfully broken the road to 134.50 is wide open and sellers will perhaps re-emerge only into 135.00.
The AUDUSD too will likely not get a whole lot of air time today as all the action was overnight with softer employment data and a large swing from the full time to part time sectors, the little battler has already worn all its pain. With good names already long from 0.9520/30, they’re feeling some pain, but won’t lose hope unless we’re below 0.9430/40 where yet again good buying interest comes in.
Keep it light and be spritely today folks and as always helmets on.