KEY RISK CONVICTIONS / TRADE IDEAS

From the FXWW Chatroom: Market Update: ISM data has dented USD bulls hopes for a September move significantly with Williams overnight not doing enough to change expectations despite maintaining September is still on the table.

EUR: With the USD under pressure the Eur benefitted to some degree although  with the ECB fast approaching the market seems reticent to engage meaningful. The ECB on Thursday should be interesting; researchers are split on whether QE will be extended at this point. Levels to watch  are the 200dma and last week’s low at 1.1125
and the daily pivot and 100dma at 1.1215, topside resistance appears at 1.1340.

GBP:  Strong services PMI added to the recent stronger than expected data out of the UK. Post US ISM we broke the 1.3372/76 highs. Whilst holding above there 1.3500/30 is the next stop. UK IP on the docket today and Carney testifies at 2.15 where he is likely to be questioned about the better PMI’s.. A continued raft of data surprises could see a sustained move higher even to the extent of closing the Brexit gap to 1.4000..
JPY: USDJPY takes the full brunt of the weak data and major technical damage inflicted on the break through 102.80/103.15.  Risk of further declines to 100.40 consolidation zones.

AUD,NZD,CAD: AUDNZD the main focus today with a break of TL support. The NZD continues to outperform. Seemingly unstoppable as we make new yearly highs. Hard to argue with the price action but will likely force the RBNZ’s hand at some point soon.  Following the headlines from Saudi Arabia/Russia oil initially rallied 4% before stabilizing on a 45 handle and is slowly grinding higher again. USDCAD has broken the 200dma at 1.2939 on the oil move. Trend line support comes in around 1.2840. There is nothing priced for the BOC today  so risk are skewed to a dovish surprise.

Scandi: EURSEK made a false break through the long term trend line at 9.60/61. The move higher in EURSEK has been driven by unrelenting demand from models in USDSEK. Given the large rate differentials it is unsurprising that we are seeing this demand. The Riksbank this week is a key event, some market participants are expecting the Riksbank to move back to a tolerance band on inflation and to formally move to CPIF and the inflation gauge. Personally I think that the bar is quite high for this to occur with any such change to mandate needing to be cleared in parliament. If it were to occur I think that on the headline both will be taken as hawkish outcomes. However I find it hard to believe that if the central bank do move to an inflation band the will not highlighting that their prefer would be for a period of inflation overshooting rather than undershooting target. Watching 9.60/61 and 9.51 as the main levels. EURNOK is back to the lows following commodity currencies. I am currently square but waiting for the CPI print for direction, last month’s number was very strong and many viewed this as a hurdle for further cuts from the Norges bank. If this high print turns out to be an anomaly then the market will be quick to re-price a Sept cut from the Norges bank.
As the CORAX has highlighted we have seen a good amount of NOK buying over the last few weeks. 9.33 the level to watch on the topside. On the downside 9.21 and 9.14 the main levels. (DB)
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