Euro

There is little point in trying to analyse the US jobs data in order to explain FX market moves, it’s all about positioning and the main move last week was a reduction in EUR shorts and a move out of AUD longs. The RBA rate cut, and their bearish take on the Chinese economy, has been the main driver out of AUD whilst ‘no news is good news’ for the EUR.

The AUD/USD market took advantage of illiquid Friday afternoon trading conditions to trigger quite large stops below 1.0165. Large sell orders from global macro hedge funds ensured that the pair couldn’t rise after the positive US data and what can’t go up usually goes down. It will be a fairly quiet week for Australian economic data but with China returning from a week-long holiday and with the RBA Chief set to speak before a parliamentary committee today, we should not be lacking in flows and headlines. Next technical support of note is at 1.0100, where a 50% retracement and prior daily low converge, (SEE CHART). Latest IMM data showed that AUD longs fell from 89k to 64k in the week ending last Tuesday and will have undoubtedly been reduced even more since then.
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EUR/USD took out large stops above 1.3030 after the US data but was unable to break back through the double-top neckline at 1.3080 (SEE CHART) and this level becomes the key to topside movements. Weekend headlines suggest that Greece-Troika talks are making suitable progress ahead of the EZ FinMin meeting. The EUR also got a boost from a big fall in Portugese bond yields after positive comments from Draghi. The EUR had a big week last week against the AUD and made strong gains against all the other crosses but it will probably take some good news to break the EUR/USD up out of its technical range.
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EUR/AUD has a technical target at 1.3030 but could easily run another 400 pips before it starts to get ‘overbought’ (SEE CHART).
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USD/JPY rallied after the US jobs data but heavy sell orders above 78.80 kept momentum in check. EUR/JPY gains were somewhat balanced out by AUD/JPY losses, leaving USD/JPY stuck in neutral yet again. The next target for EUR/JPY is previous highs 103.60/80.

Cable fell quite heavily late in US trade, after solid Sovereign offers between 1.6210/20 kept a cap in place. EUR/GBP buying of course added to the negative GBP sentiment.

Good luck today.