20 January 2012 at 9:30 GMT
It is not even the end of January yet and I (I’m sure like many others in this market) feel as though I need a holiday already.
That is the state of these markets. The touted short squeeze in EURUSD and associated “risk” pairs that I was talking about in my final posts of 2011 hasn’t been as violent or perhaps volatile as first thought, and yet the net result hasn’t deviated. Here we are for no good reason or rhyme trading higher than any logic could perhaps explain. The lack of violence in the move has actually allowed most to quickly adjust to this new scenario and fed their overall appetite for “hope” and thus switch into fresh longs (however small they may be) and unwind some shorts held from the end of last year. A similar play has been seen in the US equity market for example, although the base case there is one of differing circumstance.
Moving onto the market for today... News overnight while limited in scope did have a brief impact on the market, predominantly better flash PMI data out of China ahead of their weeklong new year celebrations next week. Despite still printing below the 50 level for the third month in a row, it was still a better number and thus gave the Asian indices a small boost as well as various commodities. Little else to go by overnight as most (not unlike myself) are looking forward to the end of what has been a difficult week.
Today’s key event risks are limited and the standouts are UK retail sales this morning while in the North American session we have CAD CPI and US Existing home sales. As always though we can expect various headlines to throw some additional volatility into the market.
As far as the crosses are concerned, first thing this morning we’ve been seeing some USD strength (more consolidation rather than anything else) expressed predominantly against the EUR and the Sterling. This tune may well continue for another hour or so, but I would read too much into it.
On the EURUSD only a break and close below 1.2830 can for the time being be regarded as a signal affirming a broader correction of this week’s spike higher. Until then though the upside is capped by the 1.3030 level and coincidentally this level also broadly marks the average of the IMM shorts currently being held out there. I don’t have a clean view on this pair today, however gun held to head trade, I would suggest that dip buyers will reappear with good bids touted around the 1.2880/00 levels for the time being.
In the Cable, well it’s come a long way and not even Darling’s comments this morning have been too much of a dampener on price action. Of course there will need to be a pause for reflection and consolidation but for the time being the 1.5550 level is the key and pivot for this cross. Only a daily close above here confirms genuine further upside. Until such time look for 1.5430 initially on the downside to be the first port of call on any sustained short term weakness.
USDCAD has probed lower yesterday reaffirming range and support levels with 1.0080 and certainly 1.0050 confirmed as the downside buying zone for those looking for a weaker Loonie. The topside needs a break and close above 1.0230 (today or otherwise) to confirm that we continue to head higher. In the absence of such a move, we will continue for now to be confined to a rather narrow 1.0080 by 1.0230 range.
The AUDUSD is certainly trying, you can’t fault that. In the scheme of things however the little battler is starting to show signs of fatigue as the move higher has been quite arduous. On the topside 1.0480 is still the level, while a sustained break and close below 1.0330 or even 1.0280 can be regarded as confirmation of a real move lower. Read my piece yesterday to see how I feel about the Aussie.
That covers it for today folks, as your scribe looks very much forward to a well deserved adult beverage later today.
As always though I would suggest you don’t ruin your weekend with a cheap Friday punt.