Risk sentiment is quite positive in the market and we are seeing increased inflows into Asia, putting upward pressure on currencies like the HKD, SGD and KRW and forcing central banks to intervene to slow the rise. The majors are in stop-loss-hunting mode with little or no direction to any of the pairs although AUD/JPY has made solid gains on the back of increased risk appetite.
European PMIs were generally weaker overnight and with Asian PMIs starting to increase again, it’s no surprise to see capital start to flow into this region again. The EUR was also weakened by Greek press reports that some members of the ruling PASOK party will vote against next week’s budgetary measures.
EUR/USD was corralled overnight by Sovereign orders at 1.2920 and 1.2980 and all the movement in between was driven by stop-loss hunts in the majors. The main culprit was EUR/GBP especially in early London as dealers went chasing stop-loss orders below .8020 and again below .8000. As usual once the stops were done the market bounced. EUR/USD still looks technically bullish to me, as I think we are in a bullish consolidation between 1.2875/1.3125 roughly (see chart).
Cable was also in stop-hunting mode but the market got some retribution here as dealers failed to trigger large stops above 1.6180 and were forced to retreat. Some were left holding sizeable long positions near the daily top but they get no sympathy from me!
AUD/USD had to do some heavy lifting to get through 1.0400 but it stalled once again at 1.0410. There has been no major pullback yet so stops above 1.0415 are looking vulnerable for the Asian session. AUD/JPY is also approaching important technical resistance at 83.55 and could find fresh momentum on a break above there.
USD/JPY has drifted slowly higher but stalled at reportedly solid offers near 80.20.
USD/AXY (Asian currencies except Yen) should also be an important focal point today. Asian central banks have been actively buying USD (at least $1 billion yesterday that we know of) and these purchases are then recycled into EUR, AUD etc in order to keep reserve ratios balanced. This phenomenon is being confirmed in the market with ACBs buying dips in both EUR/USD and AUD/USD.
Good luck today and TGIF.