Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 16 April 2014 at 10:13 GMT

Postcards from the Edge: Do Japan and China know something we don't?

Director / Accumen Management
United Kingdom
• USDJPY will hit 98.50 sooner rather than later
• Nifty levels on the cards for AUD traders
• US data and Fed comments to be a bellwether for USD bulls

The Nikkei just decided to up and rally 2.6 percent overnight on nothing more than fresh and rather thin air. In an otherwise quiet Asian session (yes, I know we had Chinese data; more on that in a minute), the boost in Japanese equities saw correlation lovers dumping the JPY, via not only the USD leg but equally so against the likes of the EUR, thus causing general disheartenment among those in the market who thought they understood what was going on. I remain a JPY bull and, as per my thoughts yesterday, still think we will see a rather ugly move into 98.50 sooner rather than later. Keep those peepers of yours peeled.

And now... China!
Data was mixed, but overall in line with expectations and while even those expectations were guided lower after the most recent Plenum in China, the market for the most part took the overnight print in its stride. As far as I see it, as long as prints don’t come in too wildly far from median expectations, the moves associated with such prints should for the most part be somewhat subdued. We’ve been hearing about the Chinese implosion for years now and all we’re seeing is a slow drift rather than outright Armageddon. For once the market is taking the whole thing as it should – with a bucket of salt.

The AUDUSD was little moved on the news and remains in consolidation mode for now. I still like being long of the Little Battler, but choose levels rather selectively as to where to add to the core position. I think a clean out to the downside is still in the making and anything at 0.9230 or thereabouts offers brilliant levels and risk/reward profiles for longs with stops to go in under 0.9170/50. If you can manage to average into a position with a price of about 0.9260/50, you’re king of the hill in my book.

UK employment data was staggeringly better this morning and has thus seen Betty get a boost and run into Asian sovereign offers around the 1.6815/20 area. Those offers are still there, but I would wager they will likely get hoovered as the day wears on. I spoke of a 1.7000 print yesterday and still maintain the view. Albeit not happening today, of course.

For those who still (stubbornly) want to be long of USD, I bid you the best of luck especially ahead of Fed chief Janet Yellen speaking this afternoon. Other US data (housing starts and building permits) this afternoon should also be a bellwether of sorts for USD bulls as the numbers will likely be rather rubbish in my view.

The Bank of Canada is on tap this afternoon and while no move is expected, I think we’re likely to see less dovish and thus more hawkish rhetoric from the central bank. Look for recent bottom feeders in the Loonie to potentially suffer some pain.

No levels today, folks, c’mon it’s nearly Easter!

Helmets on and good luck out there today.


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