New week, no positions after that AUD disaster from last week. Blind luck got me out of that countertrend trade -- I was suffering from 10% drawdown at one stage (just couldn't pull the trigger on those losses). I got the sentiment, the timing, the levels all wrong...very lucky to get out at break even after the markets went spastic.

The Last Week:

* Central banks stick to the script on policy, but the market decides that Draghi is hawkish* USD never recovers from soft early week data* Another bad week for the N225, a good one for the JPY

Alright, new week new outlook. Here we go.

* Calendars slow down in the coming week, and FOMC members stand back ahead of the June meeting* JPY traders will continue to watch the N225, though the intervention threat grows sub 95.00.* 1.33+ was short lived on EUR/USD, but calling a top tends to be expensive

EURO

Barclays

• Euro calm to start the week and feels like it is going to do nothing exciting anytime soon. 1.3300/20 remains good resistance but the lack of selling interest makes it look like we continue to grind higher. Dip buying remains my favorite strategy for the moment
• German constitutional court ECB bond buying hearings, don't expect much but keep an eye out for headlines.
• I will look to buy today on a dip to 1.3230, stop below 1.3170 for a run above 1.33. 

Laidi

• When all is said and done, we expect the Fed to maintain its $85bn monthly purchases unchanged into the middle of the first quarter of 2014, and the ECB to slash interest rates to negative levels by year-end. This may imply a neutral-to-strong US dollar, but with a higher confidence level play in selling the yen against both the dollar and euro.

Goldman

• The EUR whilst sidelined trades pretty well. The alternatives to owning the dollar are currently very limited and the EUR ironically is perhaps at the top of the list. 
• The ECB is not engaging in QE, the notion of negative rates appears to be off the agenda and whilst Draghi will not welcome any currency appreciation the EUR should perform well on a cross basis. 
• Against the dollar though I think it’s a tougher call and expect us to trade within a 1.31/1.34 range until further notice. Whilst flexible I favour buying dips and in terms of today’s parameters expect initial support at 1.3220 and then at yesterdays 1.3177 low, whilst the next resistance hurdle is offered by the 1.3307 post ECB high.

Citi

• The price action says it all. Despite a move positive credit outlook on the US, EURUSD could not sustain sub 1.3200 and we have rebounded sharply to test again the 1.3300 level. 1.3300/1.3320 again remains critical resistance and a break through there looks like we could accelerate towards 1.3435. 
• On the day 1.3245/50 should be good support and for now I believe that should be the buy zone and we are in a short term uptrend. Another very quiet data day both sides of the Atlantic so underlying themes are likely to dominate.

UBS

• EURUSD BULLISH There is a strong resistance at 1.3342. A closing break above which would be positive over the longer term, opening 1.3520. Support is at 1.3178. 

Societe Generale

• If you look at the EA GDP deflator, a broader measure of price pressures in the economy, inflation has not been above 1.5%, never mind 2%, since late 2008... When you have Draghi breezily dismissing the disinflationary trend across the region, you understand that the downside risks to European growth have increased..We therefore expect further down-shifts to EA growth expectations going forward. 
• This would certainly follow the trend we have seen recently. SG economics believes that the response to weaker growth prospects is more likely to be an additional refinancing rate cut, than a negative deposit rate. 
• Consequently, SG economics expects a 25bp refi rate cut to be back on the ECB agenda by year-end. Should the ECB feel the need for further rate action beyond that point, we would expect forward guidance to be explored as a tool. We remain bearish euro."

JP Morgan

• EUR/USD our focus is now on key-Fib-support at 1.3120 (minor 38.2 %) which looks to be the decisive T-junction to distinguish between a still intact recovery to 1.3323/28 (weekly.-daily trend channels) and possibly to 1.3483 (minor 76.4 %) and the completion of a right shoulder top at 1.3305 on Friday. 

USD

Laidi

• When all is said and done, we expect the Fed to maintain its $85bn monthly purchases unchanged into the middle of the first quarter of 2014, and the ECB to slash interest rates to negative levels by year-end. This may imply a neutral-to-strong US dollar, but with a higher confidence level play in selling the yen against both the dollar and euro.

UBS

•  USDJPY BEARISH Upside will be viewed as corrective and unwinding the overextended downside conditions. Resistance is at 99.36 ahead of 100.40. Support is at 99.63 ahead of 

JPY

Barclays

• BoJ disappoints overnight as they don't "over deliver" this morning and make no change to their current easing policy.
• Order book: Now a better net buyer down to 97.00, topside is dominated by light stop loss buying but nothing of significant size.
• Sprint's vote on the Softbank offer (raised by 1.5 bio overnight) pushed back to June 25.
• Market remains fairly choppy and with BoJ out of the way back to data watch mode. Nothing major on the radar today, retail sales and claims Thursday. Preference to buy a dip into mid to low 97.00's..

Citi

• After a stronger close in USDJPY yesterday after S&P upgraded the US outlook, price action has tailed off again after the BoJ announcement where the CB kept monetary policy unchanged. They pledged to increase the monetary base at annual pace of JPY60-70tn and upgraded their assessment of the economy.  
• The knee jerk reaction weighed on both USDJPY and the Nikkei and selling interest ensued with USDJPY, posting a low of 97.78. Since then both have recovered and we open the London session of a firmer footing around 98.25 and net buyers have been noted off the lows and the price action looks more upbeat. The BoJ press conference will begin at 7.30 with nothing untoward expected from Kuroda and USDJPY  is unlikely to break out of the 97.70-99.30 range for the day.

JP Morgan

• Given the massive setback the JPY ran into since Friday the general conviction is certainly that the broader downtrend has been resumed. But for the latter to be confirmed and in order to eliminate the risk of just performing a countertrend B-wave rally it would take decisive breaks above minor 76.4 % retracements at 132.03 in EUR/JPY, at 154.75 in GBP/JPY and at 101.68 in USD/JPY.

BMO

• Disappointment from the BoJ and the subsequent news conference by Kuroda, has seen USD/JPY fall again, along with risk in general. It feels that this is a phase of liquidation/capitulation, which may not be over yet. Further pressure on emerging markets, and equities continue cause pain. Think this is a case of staying nimble and pick your levels on an intraday basis. 
• JPY gamma came off first thing today with the event risk out of the way, although as spot has carved a huge range over the session and continues to push lower everything is coming right back. 1 month was down to 15 from 15.55 before the BOJ, although this has retraced remarkably back to 15.5. It still seems the market is short some downside, and the vols will continue to hold up pretty well as the gamma has been performing. The 1 week was down to 16.5 from 20.5 last night, but these also have retraced now to around 17.25. 

AUD

Barclays

• With Asia EM under pressure and NAB business conditions weaker Aud tries key support under 0.9400 again. Holds for now but with bounces shallow look set for another attempt at some stage.
• There is little reason to buck the trend at this stage so sell rallies remains the strategy of choice.
• Labour force data Wednesday likely the next key determinant of near term direction.

Goldman

• NAB survey shows a mild improvement but not as much as many may have expected given the rate cut and fall in the AUD. Home loans similarly fairly subdued but the underlying trend remains positive. 
• AUD continues to trade very heavily and trades through the 0.9388 2011 lows overnight with stops triggered induced by the fall in AUDJPY. The price action is compelling from a bears perspective but we are mindful still of the scale of positioning into Thursday employment report. 
• Given the streets downward revisions to GDP forecasts and how much is priced for July’s RBA meeting the asymmetric risk remains for a stronger number, and given the volatility of the series that is a possibility so caution warranted. We remain short and a close below 0.9388 would likely encourage a fresh round of model selling. Topside yesterdays highs of 0.9481 the immediate resistance but the market not really looking to stop until the post payroll highs of 0.9675 now.

GBP

Barclays

• The UK housing market is gathering steam with the RICS house price balance showing sales at their highest levels since summer 2009.
• Cbl inches towards last weeks high and eurgbp static.
• We are short eurgbp but with the dollar once again under pressure it might be the case of further gains for cbl, good luck.

Goldman

• Massive move in green short sterling and out yesterday (-20bps at one point) and the move continuing today (greens -7bps now), much of which is some unwind of the Carney received positions but also in sympathy with the broader sell off in fixed income globally as treasuries push to new lows post the S&P upgrade on the US sovereign credit from negative to stable. 
• Interestingly the move has yet to have any notable knock on effect in currency space (this time over a week ago the market was aggressively adding to long dollar positions) but today outside of AUD and JPY very little interest in G10 space. 
• Regardless , the data set from the UK (another better RICS) continues to pick up off a low base and in cable 1.5680 / 1.5700 remains significant through which most of the cable bears would throw in the towel for those that still hold onto residual cash shorts. 
• Intra-day given the inability of GBP to push on, cable should be a sell risking 1.5620 with EURGBP failing to gain any real traction below 0.8480. Orderbook however remains light and while we like the risk reward of being short pounds now it feels like we have one more wash out to come.

Citi

• GBP remains well supported below 1.55, and I continue to see models cutting shorts. I think this demonstrates the extent of USD longs that remain out there, and so cable is a buy on dips for the time. The caveat to this is the data at 9.30, which will be closely watched. Offers now remain at previous post NFP high 1.5605/10 and then up towards the high of the squeeze 1.5685. GBP/commonwealths remain super bid and the trend is very much in place. I advocated buying 1.63 in GBPAUD and we now approach 1.66, and there is no reason to fight the trend. EURGBP remains a valueless wash.  

JP Morgan

• Cable also remains vulnerable, but keeps the door open for a proper test of the main resistance zone between 1.5703 and 1.5784/88 (200DMA/C=A/61.8 %) as long as hourly trend line support at 1.5490 is not broken on hourly close.

Trade update

Gotta admit I don't have a very strong handle on the market at the moment. The core short EURUSD position I'm running has been met with very significant headwind over the past 2 weeks. As I understand it, EURUSD has been dominated by cross flows particularly from major yen selling, and bearish news that would normally drive the pair 30, 40, 70 pips have had very little, if any, effect.

When a pair is not acting in an expected manner (i.e. trade lower on a combination of news & data that is clearly EURUSD bearish) despite having the kitchen sink being thrown at it, then this is a clear warning that its very likely to head the other way. My suspicions were later confirmed when the market took EURUSD up to the 3200 handle on Tuesday night.

Admittedly, this was a moment that was starting to get me hot under the collar. From a technical perspective this is where the weekly kijun resides along with a number of confluence factors. Unable to convincingly crack it, the pair reversed in early Europe yesterday, and was given a second wind triggered by ECB's Weidmann who signalled ECB preparedness to adjust interest rates further.

Now, I don't think there is much to be read from the reversal at 3200 (apart from being an attractive place for long term shorts) or that there are any significant long-term implications from Weidmann's comments. What has happened is that a whole bunch of short-term bears have been cleared out by the rush up to 3200, and now bullish breakout traders will be under the pump given that EURUSD currently trades 3050. From an orderflow perspective the bullish stops underneath the range will be getting huge, and now that we are not that far off from them, they are the obvious next target.

Position wise, my average EURUSD entry sits around the 3100 handle. I'm also trapped in a light gold position at $1480 and will forget about it because it looks like staying this way for a very long time.

And so, to another day of trading...

EDIT: I've let go of the short at breakeven during the Friday night session. This trade has had 2 weeks to breath and the most its done is around 70 pips. Think I have to wait for better levels, and when sentiment really turns...  Maybe better to look elsewhere for the time being.

Thursday EURUSD news

Sean at FWXX is thinking USDJPY macro:

Based on present fundamentals and historic levels, EUR/JPY at 140 is too high in my opinion, as indeed is AUD/JPY at 110+, purely on basis of historic levels. On the other hand, from a very long term perspective, seeing USD/JPY back at 110/115 is not a stretch of the imagination at all.

In other words, I think at some stage very soon there will be excellent bearish trading opportunities in EUR/USD or AUD/USD: EUR/JPY at 130 and USD/JPY at 110 would mean EUR/USD back below 120; whilst AUD/JPY at 105 and USD/JPY at 110 would imply AUD/USD trading back near 95 cents. This is what I expect to happen over coming months.

My preferred way to play this strong USD trade is through USD/CHF and I’m hoping to get the timing right to build a long position for a move to 1.10.

EURUSD is basically in a giant shitfight between EZ woes vs QE driven sentiment from USD & JPY.

EURUSD was rejected from the 3110 level last night (a strong confluence level), currently trades 3050-60.

Commerzbank:

CommerzBank $EURUSD Current position: Longs from 1.2908 exited 1.3110 Recommended trade: Sell at market, add 1.3120, 1.3145and place the stop for now at 1.3225. Shorter term (1-3 weeks): Targets the 1.2679/61 zone. Medium term (1-3 months): Targets 1.2400 en route to the 1.2042 2012 low

EURUSD and other market thoughts

EURUSD had an outstanding Thursday (propelled by comments from Draghi indicating ECB was not about to cut interest rates) and Friday last (due to underwhelming NFP results for America), that saw 3 big figures traded. Personally, I was still kinda shellshocked to do anything about it on Thursday by the BOJ announcement, during which EURUSD lay comatose for hours, and was unable to get a grip on it leading into the whipsaw created by Draghi's speech.

Right now, its Monday and the US session is about to come into full effect. EURUSD is trading around 3020-30. From a technical perspective the bulls have taken control at least in the short term. Having already done so for a number of week BNP Paribas continues to talk up their position, suggesting that

EUR/USD to track peripheral spreads, which themselves suggest the spot should be trading closer to the top end of a 1.30-1.32 range.

Fundamentally, nothing has changed. I think upside is limited given that there is still no real solution to a fragile Eurozone, for example:

• Italian elections;
• Portugal budget woes coming back to the front?
• some building concern over Slovenia
• the Cyprus precedent of railroading depositors...fuckin fatal
• Cyprus to get a 2nd bailout, by year end?

On the other hand, the market think the Fed will NOT scale back QE, and this is supporting the EURUSD. Wow, just as Im typing this, comments from the Fed's Painalto indicate otherwise.

From an intraday perspective, I reckon profit takers will be wanting to get out after Thursday & Friday's efforts...and the price action above the 3000 handle has not been particularly explosive throughout Monday. There is some talk of large 3000 option expiries which should dampen the market for a while. Still hearing plentiful offers above:

RT @orderflowforex: #EURUSD offers @ 3040, 3080 & 3100 - buy stops above 3050 #fx #forex 

@orderflowforex: #EURUSD - An Asian central bank noted seller above 1.30 #fx #forex  

I do have to consider that the positioning must be a bit stretched now. We have had 2 months of decline, and   long term shorts must be at least thinking about taking some profits off the table.

Sentiment studies have noted a climax in S&P, and thinks that the macro environment is changing for the worse, and that the smart money are thinking of getting out of the rally.

Overall, I remain  a seller of Euro at present, and will be looking to build shorts between 3000 and 3100 over the coming sessions, for a move down to 2750 if I'm lucky.

And so, to another day of trading...

Thursday update: All about the BOJ

Had been building EURUSD shorts since the start of the week (post Easter break) banking on continuing bearish sentiment over Eurozone difficulties. At the time of writing, the EURUSD is now starting to sell off on dovish comments from Draghi regarding the EZ, particularly:

• extended weak economic activity;
• growth subject to downside risk;
• risk of inflation;
• lack of banking capital and lack of action on structural reforms.
• See here and here.

Wow what a fucking party pooper that man. Anyway, I was building shorts in anticipation of further bearish moves but the playbook went out the window when I got out due to (what I thought were strong bullish) headlines related to Cyprus getting the bailout cheque. The chart below shows what happened.

Around the same time I flipped long, I went long EURJPY. Now in retrospect that first entry was not really a smart one because I was simply trying a correlation move without much further justification. I was eventually punished as the market moved 100 pips against me. Fortunately it stablized  in Asia as the market await for BOJ news. Forexlive and FXWW kept me up to date, announcement was expected around 0330GMT (around mid afternoon Melbourne time).

The chart below shows what eventually happened.  But what is not clear is the sudden 40 pip selloff by trigger happy EURJPY bears around 0320GMT? I was shitting myself at that point because I was already 30-40 pips down from my averaged entry. I wont lie, I felt rising panic to close off the trade early, but I held because I was (a) desperate and (b) unconvinced by that move because of:

1. how broadly the EURJPY was supported evident in the basing price action over NY & Asia, and
2. how quickly the market immediately bought up the currency back to median levels...I estimate probably over the next 5-10 minutes.

Week to date

Big week so far, the whole Eurozone debacle reached a new low point with Greece unable to form government after recent elections due to a collective inability to agree over a national approach to ECB/Germany demands for austerity.

Greece is headed back for the polls (June 17?). In latest developments on Wednesday, the ECB has locked out 4 spanakopita banks which caused some 50p range volatility. I would have expected another 100p drop on this news, but am surprised by the sideways price action. The market has been going down for 11 or 12 days now, perhaps it needs a solid retracement to keep the overall bearish trend healthy.

In terms of trade execution I had a couple of hits and misses. Missed a solid gold chance to sell €/$ on Monday. Pushed too hard on Tuesday by selling too soon in Asia, down -6%. Recovered to +12% by EOD. Stood aside on Wednesday which was good as I didn't feel the need to trade, and there were no signals anyway - it was pretty choppy. Sellers are waiting for better levels to sell at, but there's no big reason for open shorts to bail out of the trade.

Happy NY

Wow, it's been over 6 weeks since my last post?  Gosh I've been lazy-ass bastard...  But in defense it was the holiday season, and I've still yet to get my act together since the great collapse 4-5 months ago.  Ouch, the memory of that still stings... moral of the story don't fucking trade without fucking stops, you FUCKING IDIOT!! Haha...

Lots have happened since, the Euro's now down heaps ... trading around 1.28 from a high (?) around 1.40 only a few months ago.  Key themes are:

• Europe - ongoing debt concerns / structural deficiencies = bearish outlook throughout the next 6 months.  ECB's not overly fussed about the declining of the Euro, points to previous historical low of 0.90.  Fear of contagion is running high, with record amounts (550B?) pushed into ECB's overnight facilities over the late-Dec/NY period.  Greece needing another bailout by March.  In the face of all this rubbish I can't see Germany wanting to hold on for another full year.
• US - about to hit the debt ceiling (again), presidential elections in November, threatening Iran with war (oil's trading around $100 atm).  QE3 is a possibility (March?) which would sending gold and equities soaring = bearish but not at the expense of Euro at this point in time.

I recapitalised my trading account with $2k in November, and still trading small with 0.1 lots.  It stands at $2.9k.

Tonight is the first NFP for 2012.  I'm going to see Grandmaster Flash with the gf instead.

Looking ahead: July week 4

• EU -- Ongoing sovereign debt crisis
• Conflicting reports from weekend bank stress tests?  Monday could be chaotic, likely to SELL EURUSD (note Tokyo holiday)

• THURSDAY: EU emergency meeting re: 2nd Greek rescue package.  Traders do not expect players will find a compromise over their significant differences (Germany: private involvement vs ECB: no credit event).  SELL EURUSD favored, if no surprise compromise found...

•  USA -- debt ceiling
• Politicians dragging feet on 2 Aug deal.  Traders expect deal to be done (risk on?), but interim uncertainty = USD negative??

• USA -- credit rating downgrade?
• Possible notwithstanding result of debt ceiling extension.
• China says US will avoid default.

Sean at Forexlive.com says:

I’m thinking that a short EUR strategy for the first 3 days of the week but flipping into a long strategy as the emergency meeting looms, might work. Let’s see how it develops.