It was a reasonably quiet day yesterday with the USD retracing after recent strong gains and the crosses readjusting slightly, as usual after a big NFP Friday afternoon move. Today’s main risk event will be the Chinese CPI data and if that is much different to expectations, it may well cause another round of positional-adjustments.
We should also keep in mind that we are nearing the traditional holiday periods in Europe and the US; positions will generally be reduced during this time.
There is an important weekly trend-line in the EUR/USD near 1.2800. That level continues to attract buyers but the bounce overnight hasn’t been overly impressive. EUR/AUD selling from macro funds remains one of the main drags on the EUR.
On the plus side of the ledger for the single currency, European hedge funds were again reportedly buying EUR/CHF during the European session.
The best that can be said about USD/JPY is that it is choppy. The recent up-trend recovery is still reasonably strong but if/when risk suddenly turns off, we could easily see some sharp sell-offs. Buying really big dips is still the obvious play here. 100.00/101.50 are the main levels to watch.
AUD/USD is threatening to form an interim base at .9035/40 but it will run into heavy resistance at .9180 and again at .9250. Only a break of this latter level is likely to set off the big macro fund trailing-stop orders. Bids above .9000 were reportedly very heavy yesterday.
AUD/JPY is nearing important technical resistance at 92.50 and if this level breaks, it will greatly strengthen the argument that an interim base is in place at 89.50. The market may well be comfortable being short AUD/USD but is it comfortable being short AUD/JPY?
Trend lows in the cable at 1.4830 remain untested but they are still the main level to watch.
Good luck today.
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