Risk Appetite May Not Come Back Soon

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AUD/JPY: Risk Appetite May Not Come Back Soon

• China’s yuan fell to its lowest since the opening of its offshore market in 2010, extending a slide that has unnerved global financial markets and sent currency investors rushing for the security of Japan’s yen. After the People's Bank of China again fixed its onshore rates for the yuan lower, less-regulated offshore rates for the currency fell more than 1% against the dollar to a record low of 6.7250 in London trade.

• The Australian and New Zealand dollars, among those most sensitive to Chinese growth and markets, both sank more than 1% on the back of the yuan move.

• The AUD/JPY is a good gauge of risk appetite. Markets needed clearer evidence of solid growth, particularly in the United States, to change the mood. If the upcoming US job data (on Friday) disappoints investors, risk appetite will not come back for a while.

• The AUD/JPY broke below the support level at 85.35 (61.8% fibo of September-December rise) and is targeting full retracement to 82.02 low on September 7. We have placed our sell order at 85.30.

Buy USD/CAD, EUR/CAD

• The Canadian dollar hit its weakest point against its US counterpart since mid-2003 on Tuesday, as oil prices fell and investors fretted about the pace of growth in China and awaited word from the Bank of Canada on monetary policy divergence.

• The loonie lost 16% of its value in 2015 as the Bank of Canada twice cut rates to offset the negative impact of low prices for oil, a major Canadian export.

• The Federal Reserve, in contrast, raised rates last month for the first time in almost a decade and has signaled more hikes to come.

• The Canadian central bank's governor, Stephen Poloz, is to speak on the topic of "Life After Lift-off" on Thursday, with market players bracing for an updated outlook ahead of the Canadian central bank's interest rate announcement and monetary policy report on January 20.

• Investor relief at intervention by China to steady its markets quickly evaporated, while oil traders brushed off rising tensions between Saudi Arabia and Iran to push oil toward an 11-year low.

• Canadian producer prices unexpectedly fell 0.2% in November from October, data from Statistics Canada showed. It was the fourth consecutive monthly decline.

• Canada is scheduled to release trade data for November on Wednesday, its December employment report on Friday and a business outlook survey next Monday.

• Our USD/CAD trading strategy is to buy this pair just above 10-day exponential moving average.

• We are also looking to buy the EUR/CAD. This strategy should be profitable in case of weaker US non-farm payrolls report on Friday as this would mean simultaneously higher risk aversion and stronger EUR/USD.

MAJOR PAIRS:

MAJOR CROSSES:

How to read these tables?

1. Support/Resistance - three closest important support/resistance levels

2. Position/Trading Idea:
   BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
   LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.

3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.

4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)

5. Position Size - position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD / USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!

6. Profit/Loss on recently closed position - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.