Early September is often about positioning, with the big hedge fund trading teams now fully complete after a holiday period and looking for the next trend to jump on. Overnight reports from Prime Brokers show that the professional market is starting to bet on a lower USD, lower AUD and higher EUR. Positioning is at a relatively early stage so we can expect those EUR/AUD dips to remain well supported from the well-heeled side of town.
EUR/USD topped out again near 1.2630 and the sell orders towards 1.2650 were reportedly large enough to encourage a round of profit taking. There is short-term technical support (see chart) at 1.2555 and again at the secondary trendline near 1.2520, and I prefer to wait for the second level before trying an intraday long. Bad news is never too far away from the EUR so I think we still need to be careful with entry levels.
EUR/AUD has run into a 50% retracement level at 1.2315 and may be about to enter a consolidation phase. The short-term charts look a bit overbought to me (see chart) and I’m looking to sell near 1.2310 on the day with a tight stop above yesterday’s highs. I will add below 1.2255 looking for 1.2130.
AUD/USD has fallen back towards support points near 1.0220 and even though sentiment is still very bearish, the pair has already fallen 400 pips off recent highs and now is not the time to be getting overly bearish in my opinion. Interbank reports show very solid buying interest near 1.0200 and if this holds and forms a double bottom, then we will see a sharp short-covering rally. If you’re bearish, I’d suggest waiting for a 1.0200 confirmatory break, and then revert to sell-rally mode. The big players are universally bearish it would seem and will probably look to add to existing shorts on breaks and/or rallies. Australian GDP numbers out today, with the market expecting around 3.7% QoQ.
USD/JPY remains in neutral mode but I still favour a test of semi-official bids at 78.00, with large stop-loss sell orders waiting just below 77.90. If these stops go off, there might well be a good buying opportunity near 77.50 for a quick intraday spike. It seems pointless to run USD/JPY positioning at the moment, it’s a case of waiting for opportunities.
Cable topped out again at 1.5910 and may be ripe for a correction. Risk-reward would seem to favour selling intraday rallies with a tight stop above technical resistance.
Good luck today.