OVERVIEW

Over the past 24 hours markets generally have maintained their positive tone. For currencies this has seen the ‘risk on spikes’ hold onto the gains from earlier in the week; commodity dollars in particular are strong, Europeans are broadly neutral, whilst the USD and JPY as havens have slipped across the board. The bullishness has been supported by ECB president Draghi seeming to hint at more support from the central bank for the bond markets. Looking ahead analysts are predicting strong US NFP later today, which is reckoned to further support the ‘risk on’ mood. Here at FXMR were are not so sure about all this. To us the earlier co?ordinated moves by the PBoC and leading CBs smacks of near?desperation, whilst eco data continues to paint a picture of the developed world tipping back into recession. This weekend sees the publication of our Strategic Report in which we will spend more time on this, and explain why we think that the undeclared German policy is to force a break?up of the euro…

Key: PA = Price Action | LR = Linear Regression | MA = Moving Average.

AUD [USD: 1.0225]

The AUD has held onto earlier gains, however the market has completely stalled at these higher levels. In short it cannot press higher because the eco fundamentals do not justify it, whilst lower levels would see caught out shorts from earlier in the week snapping up bargains. What’s needed is some fresh input. This we get from US jobs data today and a likely rate cut from the RBA next week.
On the charts the major trend has turned bullish whilst the hourly is mildly bearish. This points to more range trading and the levels for us are at 1.0065 and 1.0329.

NZD [USD: 0.7805]

Much as with the AUD (see above), and all markets for that matter, the Kiwi has come to a standstill. Poor global eco data limits the upside whilst short covering prevents a deeper retrace.
On the charts the daily averages have twisted higher to turn the major trend bullish, but only mildly so at this point. We need to see a test of the trend, at 0.7665?0.7700, and then a rally to confirm. Europe might provide the trigger (statements and/or bonds) and then there are the US jobs data late on. Resistance is at 0.7810?15 and an hourly close through 0.7820 could produce a 1% jump towards 0.7900 but we would be aggressive sellers on any such move.

AUD [NZD: 1.3100]

This market has stopped! The charts show that any attempt above 1.3165 has been clobbered whilst consistent support has been found from the bullish 22?day average down around the 1.3075 area. The major trend is bullish, though weakening, whilst the hourly points lower. All in all we cannot see any value in trading the cross. Next week maybe, but not now.

EUR [USD: 1.3470]

As elsewhere EUR USD has traded within a narrow range. At least we predicted this, writing yesterday that the topside was limited by 1.3530 (the bearish 22?day average). The high was at 1.3525. Now it is all eyes on European bond markets where sentiment remains very vulnerable to a misplaced word or rise in yields. On fundamentals we cannot argue for a higher level. After all US data is consistently strong whilst Europe slips back into recession and risks falling apart. However that does not prevent the continued inflow of funds to Europe, all be it for negative reasons.
The charts have a bearish major trend, whilst the hourly has stalled. Working off that we cannot argue for a break of the range between 1.3405?15 and 1.3515, at least not ahead of the key US NFP data later.

JPY [USD: 77.77]

Yesterday saw the major and minor trends turning higher and USD JPY has drifted up, if only by 20 points or so. At this point in time we cannot separate the relative attractiveness of either currency and hence have no intention of becoming involved until after the weekend. For the record support is to be found at 77.35?50 and resistance at 78.10 and then 0.7825?30.

GBP [USD: 1.5700]

Cable has seen a little movement but you had to be sharp, and lucky, to catch it right. Governor King of the BoE has again spoken in pretty desperate terms about the global economy and the risks of a Euro?area break up. However the market continues to ignore these warnings having been bitten earlier in the week. This has enabled Cable to hang onto the gains from 1.5450. We expect a return to those levels, but perhaps not until next week. This weekends Strategic Report will provide more details. On the day support is at 1.5625?50 and resistance at 1.5725?50. Nice weekend to all.

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