Major risk events loom for the week ahead: Yen shorts still increasing


Starting today, we will have plenty of risk events to keep the market on its toes. Today we have HSBC Chinese manufacturing PMI and Australian retail sales during Asian trade and that’s just the beginning of a busy week of central bank decisions culminating in the US jobs data on Friday. Latest IMM data shows that Yen shorts increased significantly in the week to last Tuesday.

EUR/JPY saw two impulsive surges during Asian trade on Friday, the first of which began near 106.50. I would consider this to be the important level to watch early in the week with resistance levels starting at 107.65 (see chart). The sharp increase in Yen shorts will become an issue as the December 16th election date nears, as we can expect profit taking to start as the event gets closer.

USD/JPY remains in an up-trend and bears will need to re-take levels below 81.70 in order to slow momentum down. Initial resistance is firm at 82.80 (see chart).

EUR/USD is being dominated by events in the crosses, with EUR/JPY obviously the main driver. Range trading is still dominating but the risk would still seem to be to the topside; the market is still sitting short but lack of EZ debt-related headlines is bound to affect the sentiment. Nevertheless, stick to the technical levels for now, the bearish trendline capping and the 200-day MA providing support again (see chart).

The AUD is due for a big week, starting today with retail sales, then the RBA tomorrow, jobs data on Thursday and the US NFP on Friday. The market is now pricing in an 80%+ chance of a rate cut tomorrow but the AUD is still having trouble breaking lower. AUD/JPY buying is of course playing a significant role.

Cable is still stuck around 1.6000 (which is roughly where it was trading when I joined the market 26 years ago!) and whilst the big players are ‘range-trading’ this pair, this is no point in us trying to pick a break.

Good luck today.
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