Ken Veksler, Senior Sales Trader, Saxo Bank
Interesting moves overnight not least of which involving central banks and delinquent governments. I of course refer to the CHF and JPY crosses which were the biggest movers overnight and their respective crosses saw some serious price action.
Starting with the JPY and more precisely the USDJPY, a cross that has been heavy for the better part of the last 2 weeks saw a serious strengthening of the JPY yesterday taking out not only major support levels and associated stops sitting precariously below, but also long standing and previously well protected option barriers around the 87.50 and 87.00 levels.
It all started in the European session as one particular French name was involved in the first round of selling breaking the 87.50 support level and forcing the cross to multi year lows into 87.15. After a slight recovery the push lower resumed once again and overnight we saw more levels taken out in what was very one way price action. Clearly the crosses also took a battering and with the AUD looking rather sheepish the next biggest move was that in the AUDJPY which gave up around 2 big figures on the move although it has recovered a little this morning.
Jawboning by the Japanese Finance Minister did nothing but confuse the market and perhaps set traders sights on testing the government’s resolve. End result, the verbal intervention amounted to only mentioning that they would monitor price action closely and not allow for too greater volatility. They’re kidding right? Have they been looking at the screen at all?
Otherwise the other big mover was the CHF, which sought, found and broke through parity against the greenback overnight and only for some direct intervention in the USDCHF initially this morning, followed then by EURCHF saw the thing move the better part of 80 pips, hah ha ha…. Clever as they might be the SNB seems poorly positioned to currently take on a market which is hell bent on forcing their hand. The line in the sand for intervention has now been moved and the dynamic turned in that EURCHF is now practically a sell on rallies rather than previously being a good buy into artificial central bank support around the 1.5080 level. Keep an eye on this one folks, I’m pretty certain we haven’t yet seen the end of this move.
America, land of the free and brave and overweight is on holiday today and price action promises to be thin and whippy at best as a result. We saw the EURUSD climb to 1.5140 overnight and has only had a slight retreat since. I think pullbacks might be a little deeper than most expect and this, once cleaning out weak stops and positions, present good buying opportunities. I still see the 1.5164 as the intermediate target on the upside.
I remain short the GBPCHF and in large part thanks to the CHF, and somewhat less the Cable we see this cross hit my first target overnight of 1.6560 where I take half my position back. I look for 1.6400/30 to take the rest back but will see how the market runs. While we’re on the Cable, this thing refuses to make a move of any real substance and I remain a seller of rallies into 1.6700/50 looking for 1.6550 as first take profit levels.
Otherwise as a side note I am short the AUDNZD cross at 1.2731 and have another order to sell some at 1.2777, with a stop for the whole position at 1.2843, looking to target (modestly) 1.2627 and further out 1.2530. This trade is not for the faint hearted and will take time, so if you lack the patience to watch paint dry or grass grow I suggest you best not get involved.
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