GBP: Bearish, Bearish, Bearish. GBP/USD inches towards the 2015 low of 1.4566 and it appears that the range has now opened up to a possible 1.40/1.50. 1.45 will be a decent line in the sand and as such paring back core shorts towards last year’s low is prudent. A test of 1.40 is likely this year but it appears the market has the cart ahead of the horse a little so trading core shorts actively is best.
JPY: Last year was all about USD/JPY hitting 130 but now 110 looks even closer! The market has initiated JPY longs against EM and commodity bloc as equity and currency hedges to begin 2016. All client sectors have been active and the risk aversion strengthens the case. Do note that USD/JPY has not closed below 118 since Feb 5 2015 despite numerous chances so adding to core shorts sub 118 is advised. JPY longs seem under-owned so selling rallies best.
AUD,NZD,CAD: Commodity bloc under extreme pressure in 2016 with Yuan depreciation. The China fix is most actively traded and comm bloc is getting its cue therein. AUD/USD has broken key support at .7130 and could now target .6980. Flows have been mostly from leveraged and macro community but AUD shorts are firmly underweight. NZD shorts have broken the market’s back the past few months but the break of 50 DMA at .6675 should accelerate the downside to .6590 and below. Lastly, USD/CAD has been one of the best trending currencies of the past few months and the break of 1.40 completed a bullish flag formation and 1.42 – 1.44 resistance is now targeted.
SEK: Riksbank rhetoric and intervention preparation have soured SEK longs. We stand aside for now.
EM: CNH, what can we say! USD/AXJ will trade with CNH and it appears that 7.00 is the target. (DB)