from Goldman Sachs via our FXWW chat-room:
Summary of our Traders’ Strategies:
EUR: We retain a core EUR/USD short and depending on how events unfold today will look to add around 1.3450/70 with a stop edged down to 1.3510.
JPY: For further confirmation of a break higher following yesterday’s close above 102.10 (200dma), we would like to see a move through the July post NFP highs at 102.27.
GBP: We are neutral at current levels but looking to buy lower leaning against 1.6854 (100dma).
CAD: We maintain our longs rolling a stop up through 1.0790 with 1.09 and 1.0960 the immediate targets on the horizon.
AUD/NZD: In Kiwi we remain short with a rolled stop through the 0.8600 level that we couldn’t break back above the morning after the RBNZ. Initial target remains 0.8480.
EUR
An interesting day in prospect with German HICP, US GDP and finally the FOMC . EZ inflation is less relevant for now ,US GDP I think will be hard to interpret and of most note will be the FOMC . The dollar has caught a broad bid tone and it seems that the market is positioning itself early for the anticipated post summer move .Whilst positioning has grown price action suggests many are not fully engaged and have unsuccessfully been hoping for a retracement to increase position size (myself included) . With this in mind , I think the bigger risk today is for further dollar strength , with either firmer German HICP or a weaker GDP release likely to see investors try and use a dollar correction as an opportunity to add . Regarding the FOMC , if Yellen does not acknowledge the improvement in the labour market then the dollar will be marked lower , but I think buyers will emerge with the view that ultimately data will dictate . If on the other hand she did weaken forward guidance by indicating that they would be responsive to better data then I think the market is in the mood to aggressively buy dollars. I retain a core EUR/USD short and depending on how events unfold today will look to add around 1.3450/70 with a stop edged down to 1.3510 . We seem to be finding some initial support at 1.3400 , I would cover some of my short in the welcome but unlikely event that we reached 1.3360 prior to the FOMC but think further out we have potential for 1.3250.
JPY
Very significant buying of USD/JPY yesterday during the London session as we broke some significant technical lvls on the topside. This followed on from very decent demand sub 102.00 from local Trust Banks, evident in the inter-bank market. Technically we just squeezed a close above the 200 dma which came in at 102.10 yesterday, however for further confirmation of a break higher, we would like to see a move through the July post NFP highs at 102.27. Another piece of post consumption tax hike data out of Japan overnight and yet another weak outcome, with IP declining -3.3% v’s -1.2% consensus. Although it appears the only real concern of the BOJ is inflation, it will be interesting to see just how long Governor Kuroda’s optimism can last, particularly with even increasing political pressure. We hear from the Governor on Friday, as he speaks at the Research Institute of Japan.
GBP
Technical break lower through the 55dma spurs position reduction as USD gains ground into key US events. Real money and leveraged supply helped take Cable through the level which had held successfully for the past few weeks as positioning continues to reduce. US data series today key to see if the broader USD rally can continue but seems fairly binary at this stage into payrolls but technically looking attractive. Remaining bulls will now likely be leaning against the 100dma 1.6854 below which hasn’t been breached since last summer and held on around four occasions this year. Hard to see if this USD rally is the real deal or just another round of USD buying on hopes “this time it’s different” –hawkish tone from Fed the key differentiating factor so watch tonight for any signs. We are neutral at current levels but looking to buy lower leaning against 100dma.Levels: Support at yesterday’s lows of 1.6933 followed by 100dma at 1.6854, resistance now at 1.6960/80. EURGBP 0.7874 below with 0.7940 then 0.7990 above.
CAD
The US$ continues to perform after the impressive consumer confidence numbers out of the US yesterday afternoon. USDCAD ultimately takes out the 200 DMA (1.0835) and manages a close above with RM names active buyers on the break. We maintain our longs rolling a stop up through 1.0790 with 1.09 and 1.0960 the immediate targets on the horizon. With the events on the US calendar well-advertised (GDP, FOMC, NFP) perhaps Canadian figures are heading for the side lines. Cad GDP for the month of May is due for release on Thursday with a 0.4% MoM print expected – primarily led by very good export figures and retail sales that month (autos the contributing factor). Ultimately USDCADs path from here relies on the tone of the statement from Yellen this evening, and we will look to be reactive with respect any change to the boards stance on labour market or rate of hiking.
AUD/NZD
Little to report this morning with both AUD and NZD treading water at current levels. Admittedly though both had decent sized moves earlier in the week, and a little consolidation in the consensus shorts is to be expected ahead of the heavier US calendar. There will be light support in AUDUSD down towards 0.9360 after which the July triple bottom comes back into play at 0.9327/29/36. In Kiwi we remain short with a rolled stop through the 0.8600 level that we couldn’t break back above the morning after the RBNZ. Initial target remains 0.8480 and then 0.8400, but in reality we will likely only reconsider our stop level here, looking for a larger and more prolonged move into the 0.81/82 region in the coming weeks.
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