Prepared by Ken Veksler, Senior Manager, Trading & Advisory
Today promises to be an important day not so much as a result of the raft of data we have ahead, but more so because several crosses and indices are at the precipice of either breaking major levels or staging significant retracements of recent gains.
In detail on the data front we have the ECB out and of most interest will be what (if anything) they decide to do on the 1yr refinance rate. Any mention of an increase in the price or alternatively a shortening of the loan duration window will send the EURUSD into a hissy fit of unbridled volatility, and my money firmly sits on stops being taken out at the 1.5125/30 level and a strong drive into 1.5165, from there expect some serious profit taking into 1.5050/30. But as I said it will be volatile out there today folks.
On the USDJPY we took out the much anticipated stops above the 87.50 level and got 87.90 on the move. The cross still looks bid but I prefer to fade the move and sell on rallies looking for stops to be placed above 88.30. There should be an orderly (read as boring) move back into 87.20/00 over the course of the remaining week.
We also have the initial and continuing claims out of the US today, and truly expect a mixed bag that will most likely leave the market a little confused, the timing of the release isn’t helped by coinciding with the Trichet press conference.
Euro zone GDP will also be worth keeping an eye on, although at first glance I would think that any negative sentiment expressed in the EURUSD as a result should be used as an opportunity to initiate spec longs.
The AUDUSD is in my view approaching the spot where I would think about starting to fade the rally and I am a seller into 0.9330/50, I think this market is due a squeeze and small clean out.
And finally the Cable is also looking overbought and I look at scaling into shorts between 1.6730 and 1.6825, stops above 1.6865 and limits around 1.6550 and 1.6470. Obviously this is not an intraday trade, but one worth looking at a little closer as this thing is simply now trading a sideways range.
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