European Open – 12/08/2014

Good morning

Asian stock markets are mixed today, with the Nikkei up 0.20 % and ASX gaining 1.30 %, but Shanghai Comp and Hang Seng both down 0.30 % on the day. Geopolitical tensions are still worrying traders and investors as NATO said that an Russian invasion into Ukraine seems likely. Commodities are lower across the board this morning; Gold is down 0.10 % while Silver and Crude Oil futures declined 0.30 % so far.

In FX, the Aussie rallied after better than expected Housing Data which took the pair to a high of 0.9268. The $A continues to trade with an offered tone though, given broad USD strength and the current risk-off bias. I think we will see a test of the 0.92 level soon, but would expect to see good buying interest should that dip occur. The time will come for USD bulls and they’ll get their big $ bull run, but for now, it looks like most major pairs will continue to consolidate.

GBP/USD has been under pressure during the Asian session and it broke below the 1.6760 level. I’d expect to see that move retraced at the London open and maybe even a quick stop hunt above 1.68. The focus remains on the BoE Inflation Report tomorrow and the following speech by Governor Carney.

USD/CAD has bounced off 1.0920 support and dealers have reported good demand from Asian reserve names overnight. Techs are looking very bullish and the fundamentals are supporting the long trade + positioning is less crowded than before. The only worrying sign I see is many banks getting very bullish and putting out trade recommendations. Anyway, any dips towards 1.0880 or even 1.0850 would be very well bid and definitely worth buying into. The barrier option 1.10 should slow upside momentum for a bit, but it won’t hold for very long.

Looking ahead, we have Italian CPI at 0900 BST and Euro Zone/German ZEW Econ Sentiment data at 1000 BST.

Good luck!

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