USD unwind or pain trade?

The pain trade continued for many Monday as we picked up from where we left off on Friday. More downside for the USD as the DXY consolidated its recent run of strength - and you could hear the screams of pain on the street, most of which were mine...

The main culprit (as always), was EURUSD. Not to be outdone by Cable, however. Interestingly the other USD pairs, while affected, didn’t seem to fare that poorly. EURGBP played catch-up in the end and remains heavily undervalued at present levels if historical price action is anything to go by, so be aware of more potential upside in the cross.

Overnight we had the main driver out of Australia with the RBA minutes on tap and then a slap across the back of the head with the BHP announcement about its outlook for production and demand into the coming months/year. Understandably, the AUDUSD moved on the basic materials comment more so than on the central bank minutes. The latter was pretty much in line with expectations. The gist was, we’re happy with where things currently are, but we have the capacity and won’t be shy about cutting rates if and when needed.

Market-moving data on the day starts with UK CPI and this will be the pre cursor/teaser to tomorrow’s MPC minutes and budget release. We also have the US building permits and more FED speakers this time with Ben mounting the pulpit.

Levels on the day for the majors look a little like this from where I’m sitting;

EURUSD: Currently chewing through bids at 1.3215/20, with small stops just below and more substantial bids coming in at 1.3180, basically the same levels that marked resistance on the way up in recent days.

GBPUSD: The Cable has a lot of wood to chop between here (1.5840/50) and 1.5820, with stops below opening the door to a deeper correction into 1.5775. Offers sit topside for now but a lot have been taken out after yesterdays stellar move higher into 1.5900.

AUDUSD: Having taken out the 1.0530 area we sit heavy this morning as the USD climbs back a little. Printing fresh lows as I type, looking for 1.0480/90 to hold, unless this USD move really comes back to life.

USDCAD: Rangebound at best and 0.9880 has yet again proven to be the line in the sand. The topside is equally obviously bound by 0.9950 for the near future. A range trade that everyone in the market is currently looking at.

Good luck and helmets on.