The FX market was all about flows and orders yesterday, with most focus on the AUD and the JPY. International asset managers were again busy selling out of Australian markets and this, along with heavy speculative selling, put a lot of downward pressure on the AUD. The JPY also came in for some heavy selling but as most of this was speculative in nature, it unwound quickly when momentum waned.

There isn’t much of note on today’s economic calendar so the FX market will watch Chinese credit markets and regional asset markets for lead indications.

USD/JPY took out short-term resistance at 98.25 and the market started to get very bullish with quite a few banks issuing bullish recommendations. This was a bit premature and momentum waned sending the pair back to opening levels below 98.00. This pair has conflicting signals with rising US rates, Fed tapering, and BOJ expansionist policy all bullish for USD/JPY. But the market is long and risk sentiment is weak, which is generally bearish for USD/JPY. Best left alone in my view and wait for any big swings before entering.

Hedge funds have been bashing the AUD/USD but remember that these are the same traders who were limit long at 1.05, so maybe its best not to pay too much attention to what they do! Asian central banks and the BIS have been the main buyers below 0.9200 and a base is forming in my biased opinion. The daily chart is ridiculously oversold and I expect to see a minimum retracement to .9620 and possibly .9765.

Cable is in a short-term up-trend in my view, after the double bottom formed near 1.5000. We are currently in a retracement phase and the ideal bullish entry level is near 1.5290/70.

The market seems to have turned bearish on the EUR/USD yet again, but recent history shows that they are wasting their time. This pair has been trading sideways for months and is likely to stay that way in my opinion. 

Some of the EUR crosses might provide better ways to express a bearish EUR view; EUR/NZD or EUR/GBP certainly stand out.

Good luck today.