Greenback; nothing more, nothing less
After travelling for the last 2 days and, more importantly, missing the marquee event of the week (FOMC), I am, more than ever before convinced that this whole move we’re witnessing is simply a Greenback story, nothing more, nothing less. I hear you yelling at the screen as you read this. Yeah, but look at what’s happening out there, the world is risk-on positioned, the eurozone bond auctions were very healthily oversubscribed and thus highly successful so what sovereign debt crisis could you possible see in this?
To all of you I say open your eyes! You want to understand why this is a USD story, look at the DXY; 'collapsed' I believe is the technical term. Look at Sterling, not Cable, folks. Sterling, which sold off heavily across the board against everything else except the USD. Look at USDCAD (one of the few crosses remotely respecting fundamentals at the moment), rubbish data from Canada in the last 48hrs has put pay to the fact that yes, the greenback has been hit heavily - but when push comes to shove, back she comes.
Want more proof? Look at the equity indices, ramped higher on the back of pre-FOMC jitters (fair enough) only to come back after the initial euphoria had subsided. Yes they still look bid, but then that’s understandable in an environment in which rates will stay low for so long and QE is just a meeting or 2 away. Of course punters are looking for higher yielding instruments and better returns…
Still don’t believe me? Well do so at your own peril. Feel free to pay the highs for the EURUSD only to get chopped up in a stop hunting clean out of epic proportions, or perhaps the AUDUSD is more up your strasse, well the same applies here as it does to the EURUSD… Either way folks, mark my words, the world will get lazy and complacent sitting dramatically short of the big dollar, and will (in a matter of a week or so) pay the price, only to be left wondering what happened.
On the data front, we’re quiet today and the pattern of the last few days will likely continue. That is EURUSD bought on dips, USDCAD rangebound with more upside risk than downside, Cable bouncing between stops on both the top and bottom sides, AUDUSD still bid and bought on dips, EURJPY still looking constructive above 112.60 etc…
As far as levels and ideas, well here they are;
EURUSD: This puppy looks like it'll run higher overall on the day but… Look for 1.3470 to cap out, while on the downside 1.3350/80 has become important.
USDCAD: Look like it'll play the range with a heavy tilt to being long. 1.0350 is the first hurdle, with stops above, to take us (if cleared) into 1.0380/0410. Dips into 1.0230/60 might be bought.
USDJPY: The new line in the sand for the BOJ must now be 84.30/50 with a real danger sitting below 83.80. Make your own minds up here folks, but doesn't appear there's much value in this cross at the moment.
EURGBP: Another puppy that looks like it wants to run higher and I say let it. Only when we start seeing the 0.8630/50 levels being printed might traders consider selling it. On the downside 0.8530/10 provides intraday support while below there into 0.8480 remains a forest worth of wood that needs chopping.
EURJPY: As mentioned above still looks constructive above 112.60 and now 113.80/114.10 become not unreasonable targets.
AUDUSD: Still has the legs to run into 0.9630/50, but up there is likely to be sold… more on that in the coming days.