Goldman Sachs FX Spot Desk Strategies

Summary of our Traders’ Strategies:

  • EUR: I maintain a core short and will only add on rallies, with 1.3480 now being a sell point and a stop lowered to 1.3530 (ideally 1.3550 for those with deeper pockets).
  • JPY: We are currently flat in the cash space at these levels and will take a lead from the US side of the equation this week.
  • GBP: Whilst being long Cable may prove tough into payrolls as the market takes the USD higher we continue to like holding short EURGBP. Key levels: 55dma 1.6949 key support with 1.7120 above key resistance EURGBP cycle lows of 0.7874 the support with 0.7990 the downtrend and key resistance, before that last week’s top of 0.7940 in focus.
  • NZD: Kiwi continues to trade heavy after last week’s RBNZ – we retain our shorts rolling a stop through 0.8600/25 with 0.8480 and then the June lows of 0.8400 the immediate targets where we will consider taking something back.
  • CAD: The 200 DMA (1.0832) has been a decent pivot back to early 2013 and a break back through the level would open up 1.09 and 1.0960 on the charts. Support comes in at 1.0790/1.0800 ahead of 1.0750/55 into US NFPs on Friday.

EUR
My position and view remain the same, still looking for further Euro weakness. Evidence of a US pick up mounts whilst despite better PMIs the overall European picture particularly on the inflation front remains anaemic. Price action is heavy and lethargic. I think short EURUSD will be top of the trade list that players will want to have on when the market gets back to full speed in September and for this reason I think we will trade lower until the market gets fully engaged. Short positioning has grown but we are not at saturation point yet. I maintain a core short and will only add on rallies, with 1.3480 now being a sell point and a stop lowered to 1.3530 (ideally 1.3550 for those with deeper pockets). The 200 wma around 1.3424 has supported us thus far but I’m looking for a move towards 1.3360 before considering taking some profit and view potential scope to 1.3250.

JPY
CPI out of Japan on Friday did little to provide us with a domestic catalyst to kick start USDJPY out of the recent range and despite the second consecutive dip in the inflation figure, Governor Kuroda has greatly helped to manage market expectations on this front , with a sharp dip below 1% not needed in the coming months. As we mentioned on Friday we have a slew of technical levels between here and 102.08 and despite the heavy US data docket ahead of this week, we may have to wait until the business end of the week and NFP to achieve a break in the recent range. Interest and flows have been light from the franchise, with the one notable supply towards 102.00 from gamma players. We are currently flat in the cash space at these levels and will take a lead from the US side of the equation this week.

GBP
Ten point range overnight sums up the lack of interest in any of the weekends press. Focus on the week domestically on Friday’s start of the PMI series but payrolls undoubtedly the main point of focus. In the last few weeks the franchise has started to see a subtle change in the underlying flow in GBP – tactical sellers (leveraged/real money) have emerged on a general scepticism towards how much is priced into the curve, heightened expectations towards the data and the degree of positioning. Whilst these are undoubtedly concerns the quality of the data still sets the UK apart (as per GDP Friday) and warrants buying GBP on dips in our mind but probably not an easy an outright long as before. Whilst being long Cable may prove tough into payrolls as the market takes the USD higher we continue to like holding short EURGBP. Key levels: 55dma 1.6949 key support with 1.7120 above key resistance EURGBP cycle lows of 0.7874 the support with 0.7990 the downtrend and key resistance, before that last week’s top of 0.7940 in focus.

AUD/NZD
Aussie and Kiwi continue their drift lower with the cross stalling ahead of the June highs at 1.1035. Support in AUDUSD is well defined at the multi July/last NFP lows of 0.9327/29/36 and a breach of this level would open up the more important 0.9190/0.9210 support level that held in April/May/June and houses the 200 DMA too. Kiwi continues to trade heavy after last week’s RBNZ – we retain our shorts rolling a stop through 0.8600/25 with 0.8480 and then the June lows of 0.8400 the immediate targets where we will consider taking something back. As ever the bar for NFP appears high – whilst the market will be somewhat numbed to an “outlier” (at least a positive one given the number of false starts over the past 6 months), the relatively light positioning in the majors could lead to more constructive price action this time? Time will tell, and with the domestic calendars lights, the US side of the equation will likely lead.

CAD
An impressive technical close for USDCAD on Friday as the pair breaches and holds above the BOC highs (1.0795) and more importantly the 55 DMA (1.0797). The 55 DMA had held on multiple tests since mid-March and with positioning within the spec community light after the uneventful BOC, marginally higher June inflation figures and stronger retail sales, we have ventured long with a tight stop back through 1.0750/55. The 200 DMA (1.0832) has been a decent pivot back to early 2013 and a break back through the level would open up 1.09 and 1.0960 on the charts. Support comes in at 1.0790/1.0800 ahead of 1.0750/55 into US NFPs on Friday – Canadian figures a week later given how early in the month the first Friday falls.

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