Australian jobs data is main risk event today: JPY and CHF remain most volatile currencies

Euro

The Yen was again the biggest mover during Asian trade, with profit-taking on Yen shorts brought on by more official comments re the rate of the Yen fall. The CHF then took over in early Europe with some large GBP/CHF selling going through the market. This is all just usual cut-and-thrust during consolidation phases and the markets focus remains firmly on the JPY and the CHF.

The AUD has been on the sidelines over the last few days with the market’s focus elsewhere. AUD/USD has traded in pretty tight 50 pip ranges but that might change today when we get the jobs data. There is very large selling interest near 1.0600 and stops immediately above 1.0605, so these levels are certain to keep dealers nervous.

EUR/JPY looks like it wants to test a 61.8% retracement level at 116.05 (see chart) and that is the bears most immediate target. With an interim top in place at 120.00, any rallies towards that level will attract plenty of profit takers. I’d play as close to the edges of this range as possible, with a bullish bias in line with the recent dominant trend.

USD/JPY is also in consolidation mode and it may well be that we fit into an extended 85/90 range just as the Japanese officials are calling for. The 4-hour chart is still overbought (see chart) but starting to ease and I prefer a period of range trading here, possibly 88.00/89.50 in the short-term.

EUR/USD is being totally dominated by flows in the crosses, falling yesterday when EUR/JPY profit-taking emerged but then bouncing when EUR/GBP and EUR/CHF dip-buyers emerged. I very much expect this trend to continue for the next few sessions. Sovereign and real-money buyers are reported at 1.3250/60 with plenty of trailing stops now below 1.3240.

Cable fell in early European trade on heavy GBP/CHF flows and there is talk of large orders on the 1.59 handle, with buyers at 1.5930/45 and stops below 1.5900.

EUR/CHF is still being magnetically drawn towards massive optionality at 1.2500 in my opinion.

Good luck today.

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