AUDUSD remains well bid

AUDUSD remains well bid after Friday’s strong showing against the US Dollar. The AUDUSD is underpinned by expectations of a hawkish statement bias by the RBA at their meeting tomorrow, even though its widely expected that they will keep rates on hold. However, the view in the market is that the RBA will raise rates by the end of this year.

Support on the day is at 8390 with resistance still up at 8470-80 area. A break above 85c will see some seriousmodel fund buying.

China’s SOEs set to terminate commodity contracts

In what could be a big blow to the investment bank industry, Chinese State-Owned Enterprises are set to cancel a large number of commodities contracts according to the Caijing online.

Nikkei opens up 0.7%, majors back to where they started

Much ado about nothing really this morning. The Nikkei has gained in line with Wall Street and the JPY crosses have more or less returned to heir opening levels.

Japanese manufacturing PMI at 3-year high but retail sales fall

Japan: Manufacturing PMI figures for July show a rise to 53.6 from 50.4, a three year high. PMI output rose to 58.7 from 54.7.

In other data, Japan July Industrial Output was up 1.9% mth/mth, better than the forecast +1.4%. Industrial output grew 8.3% in Q2 after falling a record 22.1% in Q1. August manufacturers’ output was seen up 2.4%, below previous forecast of +3.3%. September Manufacturers’ output seen +3.2%.

Japan July retail sales was down 2.5% yr/yr, better than the forecast of -3.6%. Month on month, July retail sales came in at +0.4% s/adj.

JPY crosses turn lower again

This looks like a day to watch the market and avoid trading, no matter how tempting it looks. We may see some silly moves later on which give excellent trading opportunities. It looks bid one minute and horrible the next.

The possible neckline in the cable at 1.6250 along with some decent sized bids have all been filled as GBP/JPY selling out of Tokyo takes control. EUR/JPY has also fallen. Dealers say that there are still a number of stops on the downside so be careful out there.

RBNZ Bollard- exchange rate “not helpful”

The head of the RBNZ has been on Reuters’ newswires this morning. He says that the NZ economy is recovering well after successful monetary and fiscal policy but the exchange rate (strong NZD) isn’t helping.

Buy the rumour, sell the fact?

We now need to see whether this adage works this time for the JPY crosses. For the last few weeks we have seen corporates in particular being very active in the market selling rallies on all the JPY crosses in anticipation of an opposition victory in the election. I’m sure some savvy speculative players have been taking the same tack. Now it remains to be seen whether this move actually gathers some steam or if, now that the election is out of the way, we see some of these positions closed.

Dealers say that they still see a number of stops on the downside in USD/JPY and GBP/JPY particularly so we may see one sharp move lower over the next 24 hours and we then ‘buy the fact’.

Apologies for some misinformation on USD/JPY

My friends in the interbank world are telling me that the 92.85 Reuters update was not in fact accurate and the low was actually 93.22 and there has been no trade below there. This opens up the possibility of a double bottom at the level. My humble apologies for the inaccuracies.

Cable Technicals; possible double-bottom forming

The 1.6160 level has formed a low on two seperate occasions on the hourly chart and there is a possible neckline now forming at 1.6250. Those longer-term shorts can cover close to current levels and reinstate on a break below or aggressive short-term players can buy a bounce off 50 with a tight stop.

Bids around 1.6250 in cable

Those looking for an entry level into the cable might consider 1.6250. There is a possible double-bottom at 1.6160 forming on the hourly chart with a neckline at 1.6250 and I also heard on Friday last of bids now around this level. (chart to come). The market is currently trading close to its NY closing level at 1.6265.