FX levels to live your summer by

Summer time and the livin’s easy...

At least as far as the FX market is concerned the above seems to certainly be the case.

After all the jubilation and excitement of last week we seem to have settled into the “risk on” grind I mentioned in my piece yesterday and to that end even a mildly neutral RBA overnight was hard pressed to deter the little battler from its ascent into the 1.0650/80 area of next significant resistance. Elsewhere, no real news overnight and practically the same for the data slate today. All of which means that ranges will continue to be confined to roughly 0.5% bands (if even that wide) and thin markets will continue to await headline bombs if and when they should happen to appear.

Looking at crosses for the day and likely for the week, here’s how I currently see it:

EURUSD: There will now be endless talk of barriers and expiries grinding every 50 points from here. So with that in mind, 1.2450 and 1.2500 will prove to be critical for the near term upside. The latter of which is more psychological than perhaps sizeable, by way of barrier. The former has attracted interest over the last few days and thus far we’ve been within mere points of getting the barrier tripped and triggered. With momentum on its side and peripheral yields coming off (slowly) in expectation of impending ECB action, it for now looks like we should see 1.2450 tumble before the close of play on Friday; further upside will likely be of a technical merit post this 1.2450 event. On the downside levels to look for are 1.2350 and 1.2280. The danger is that the market has gotten long last minute and weak washouts down to those levels are quite likely...

AUDUSD: Unstoppable?! Perhaps. Carry/Yield trade?! Definitely. With this in mind and the RBA sat on hands for the foreseeable future, the near term directionality for the little battler will be all about employment data on Thursday and the RBA monetary policy on Friday. The former has been smalls sketchy in previous reads, varying from good to bad and I feel the devil (as per last week’s NFP from the US) will be in the detail and composition. The latter is likely to tell us what we already know, and that is that the RBA will need a couple of months worth of data to get a better grasp of the early effects of the newly introduced carbon tax on the broader economy. So net/net look for the policy statement to echo the overnight rate sentiment.

GBPUSD: Trapped in a range and unlikely to go anywhere outside that range for the remainder of the month. The direct USD leg is now more of a USD story rather than reflective of the Sterling, as elsewhere the Sterling is actually suffering at the hands of better performing crosses. It only takes a moment to see the damage done in the GBPAUD, GBPCAD and EURGBP etc. In the direct leg I look for the downside to be smalls cleaned out with 1.5350 a legitimate target for early September, until then however we’re likely to grind to the upside along with the general risk environment. Topside looking for 1.5750 to contain any exuberance, while on the downside 1.5470 is your first port of call for major support.

USDCAD: Having taken out the parity barrier, the Loonie continues to drift with 0.9980 and 0.9950 as the most immediate downside targets. The topside looks rather busy with offers lined up above 1.0050/70.

GBPAUD: Now this one is smalls out of left field, but I’ve placed it on the radar as I think there is a rebound of biblical proportions awaiting this cross... Eyes peeled and patience at the forefront.

For now though folks, helmets and sun screen on as the summer rolls on.