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.

Chinese Premier says RMB not undervalued

Chinese Premier Wen Jinbao has been using quite strong language in recent months when talking about the level of the Yuan and of Chinese financial interests around the globe.

EUR/USD: Sovereign sellers 1.3825/50

I’m hearing that there are quite a few Sovereign offers building between 1.3825/50. The same names were heavy buyers between 1.3450/1.3550 so the offers could be similarly heavy (but I’m speculating on the size).

AUD crosses running out of steam

Whilst they are by no means out of the woods just yet, it looks to me like the EUR and the GBP may be trying to form short term bases against the AUD. If EUR/AUD can get back above the 15-day MA at 1.5055 (it’s presently trading around 1.5000) then the fierce recent downtrend can be slowed down. GBP/AUD is similarly trying to base at 1.6250 and if it can overcome resistance at 1.6760 then it may also suggest that the downtrend is being arrested.