Asian FX market wrap: mild risk aversion after early stop-loss hunt

• EUR/JPY opened higher this morning on renewed Greece and BoJ speculation
• AUD/USD also gapped higher in thin early trade to trigger a .9200 barrier
• Mild risk aversion set in thereafter as regional bourses slipped around 1% lower
• Chinese Premier says CNY is not undervalued
• Signs appearing that China is becoming increasingly outspoken in its dealings with Washington
• More disappointing house-price data out of the UK
• Speculative market positioning report suggests market: long AUD, CAD, JPY; short EUR, GBP, NZD; flat USD, CHF

EUR/JPY gapped higher in the early interbank market, trading to 125.30 after closing in NY at 124.50. These gains have been given back amid the aforementioned mild risk aversion and the on-going repatriation by Japanese corporates. USD/JPY still sees a lot of corporate selling interest at 91.10/20 and EUR/JPY is also attracting offers from 125.50 to 126.50 from European-based Japanese corporates. Ranges: USD/JPY 90.56/80. EUR/JPY 124.44/125.30.

AUD/USD took out a barrier option at .9200, trading to a high of .9204 on interbank platforms, before settling back on the reports of increasing tension between China and the US regarding the level of the RMB. Fairly heavy stops ae reported below .9100 and particularly below .9060. Range: .9130/.9204.

EUR/USD moved higher early on the EUR/JPY and AUD/USD moves but the prospect of Sovereign offers above 1.3800 (particularly between 1.3825/50) dissuaded any bullish heroics and this pair also drifted lower throughout the session. Range: 1.3727/76.

Sterling was unaffected by the housing data and in fact managed to make some gains against the EUR and the AUD. Cable range: 1.5154/97.

Markets: Nikkei -0.1%, HK -1%, Kospi -1%. Gold steady at $1105/oz.

Uninspiring housing data might see the GBP under early pressure in London

The latest UK housing data is not inspiring and with the British Press having had the whole weekend to come up with some negative headlines, I would not be at all surprised to see the pound under a bit of pressure in early trade. I see cable trading in a 1.4950/1.5350 range for the majority of this week and I will again look to trade the edges of this range.

Slightly nervy markets leads to risk-off session

After the big stop-loss push earlier this morning in EUR/JPY and the barrier play in the AUD/USD, the FX market has now turned risk averse on the back of sliding equity markets in the region. HK and Korea are both over 1% lower and the Nikkei has turned from +0.3% after the open to -0.2% just after lunch. EUR/JPY is back to its NY closing level at 124.50 and the AUD/USD looks sort of sickly on it’s session lows at .9130.

China ups the rhetoric in dealings with Washington

I’m not a huge fan of AEP in the UK Telegraph but he has written a nice piece here on the change in the Sino-USA relationship that has become apparent over the last few months.

Barrier option at .9200 was tripped in AUD/USD this morning

Typical early Monday morning price action and shenanigans saw a barrier option at .9200 tripped when prices dealt at .9204 on some interbank trading platforms. Most charts are showing .9199 as the high but I’m hearing from one of the Australian banks that the market did in fact trade above the figure.

I don’t particularly like the way AUD/USD is trading at the moment and a clean out does still look possible. Lots of stops building now below .9100 and again below .9060. On the other hand, this is the way the AUD/USD tends to trade. Starts going up, looks terrible for a few days as if it cannot go any higher, and then it suddenly accelerates higher again. Buying big dips still looks like the safest bet here.

Speculative market positioning report: EUR shorts increase

• AUD and CAD positioning moved to overweight from neutral after a week of heavy buying. AUD long positions increased by 25%.
• EUR shorts increased by 10%, to a new record level
• GBP open positions were reduced by about 6% but the market remains significantly short
• JPY long positions were trimmed by almost 20%

Generally speaking, the market is neutrally positioned on the USD and CHF. It is long AUD, CAD and JPY and is short EUR, GBP and NZD.

Around the markets: quiet start to the week

Regional equity markets have been pretty slow so far this morning, the Nikkei is +0.3% and the Kospi is -0.3%. Gold is  steady at $1103/oz but there’s still talk in the market that some of the bigger long term players are exiting their long positions. The EUR and the AUD are slipping back against both the USD and the GBP. The sentiment for the JPY remains bearish but corporate selling of both EUR/JPY and USD/JPY is tempering any moves higher.

USD/CAD: support holds at 1.0155

I know nothing about USD/CAD, let’s make that clear from the outset, yet I do get some good pieces of information there from time to time. I was told last week by a professional trader that if you want to be long, make sure your stops are below 1.0155. The low on Friday night was 53 I believe. It looks like this level has been vindicated, so if you are still long I’d be getting nervous below 1.0150.

Japan’s government frustrated by strong JPY

When this government was elected last year the market was strongly of the belief that they would not intervene to contain movements in the JPY. The release of a draft proposal last week to increase the size of the intervention war-chest certainly belies that market belief. Articles such as this in the WSJ would suggest that the government is going to get serious about curtailing the rise of the Yen.

Another session of tight ranges looms; get your jobbing hat on

I still think that we are in a bullish consolidation of the major pairs and that EUR/USD and cable are likely to trade higher over the next few weeks. That said, I certainly would not be jumping in to either at present levels. EUR/USD, in my opinion, is in a 1.3450/1.3850 phase and we should trade the edges with a bullish bias. Cable has, in the short term, slightly more upside potential I think. I’m still long but will look to book profits around 1.5285 and then re-load on dips for the next leg higher.