Morning Report: Markets Digest SNB, ECB Eyed Next

KEY DATA RELEASES TODAY (GMT) :

1100 EUR German Buba Monthly Report

OVERNIGHT:

G10 FX market interest has been largely quiet with the bulk of our flows position reduction related. Markets themselves remain very jumpy, whipping back and forth 30 pips without reason. There’s still a lot of debris to be sorted out for market participants and all risk events this week, apart from ECB on Thursday, look to take a back seat. Swiss officials were in damage control after the surprise SNB policy action riled the markets last week. SNB Gov Jordan said he expects markets to stabilize, adding the cap on the franc was no longer justified as Swiss economy was improving. Jordan also said exchange-rate situation will remain under consideration in future decisions, and the minimum rate risked loss of monetary conditions through inflated balance sheet. Swiss Fin Min Widmer-Schlumpf noted the economy can cope with the removal of the cap, but also estimating EURCHF cross at 1.10 as a reasonable level for companies’ adjustment.

USDJPY was better bid early but came off as the Nikkei could not hold above 17k. The index opened gap up at 17,000.78, retracing more of the losses Friday following the SNB surprise Thursday night. It rose a bit more to 17,039.80 before falling back below 17k. USDJPY tracked the Nikkei move, falling from 117.67 to 116.92 post-Tokyo fix. The market was thin with players still fearful of after-shocks from the SNB move and really in no hurry to re establish positions ahead of the BOJ and ECB policy announcement Wednesday-Thursday. Large vanilla option expirations at 117.00 helped limit the move down.

EURUSD opened in Asia at 1.1530 after closing Friday in New York at 1.1569. The gap lower was due to weekend reports that Syriza was increasing its lead in Greek polls and the Der Spiegel piece indicating ECB President Draghi and German Chancellor Merkel may have come up with a compromise QE plan. The gap lower was quickly filled and EURUSD traded back to 1.1575 before EURJPY weakness helped it back down. The market looks to have completely priced in ECB QE with the only question now the size of the bond buying program. Some believe Draghi’s concession to have NCBs buy the debt instead of the ECB could mean a significantly larger QE than the E500 bln touted by the press. QE close to E500 bln could thus disappoint while anything above E1 trln will likely please.

Elsewhere, AUDUSD opened in Asia at 0.8220 after to-fro action Friday. Bid early in Asia, it traded to 0.8244 on Japanese AUD demand before falling back as AUDJPY fell back. The 5%+ plunge in the Shanghai Composite after China curbs on margin trading likely played a
part. AUDUSD pushed down to 0.8207 before steadying. Despite increased volatility and commodity price weakness, AUD is showing signs of trending higher again. China data due tomorrow could figure large in AUD’s direction.

Looking ahead, there is little on the data front today and with the US out for the Martin Luther King holiday we are likely in for a quiet session ahead

OVERNIGHT PRICE ACTION:

EUR: Below 1.1750 keeps pressure on the downside threatens retest/break of Fridays low
GBP: Below 1.5250 keeps focus on 1.50, break opens 1.54 test
JPY: 116 continues to hold on the downside, 118 resistance maintains downside pressure
CAD: Rejected again above 1.20 above 1.19 maintains upside pressure
AUD: 0.83 trendline test persists, while .83 contains .80 targeted, a break of 83 opens .8450

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearishAwait new signal
GBPUSDNeutralAwait new signal
USDJPYNeutralLong Jan 16116.91OPEN116.91 Intraday Signal
USDCADBullishAwait new signal
AUDUSDNeutralAwait new signal

ANALYSIS:

EURUSD Short Term (1-3 Days): Bearish  – Medium Term (1-3 WeeksBearish

  • Projected down trend channel support remains in tact on a closing basis, previous support at 1.1750 now resistance
  • Order Flow indicators; OBV ticking up from new lows, Linear Regression bearish and Psychology ticking up to test midpoint from below
  • Monitor price action at 1.1750 retest from below to set short positions to target retest of lows

eu2015-01-19 07_23_33-

GBPUSD: Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBearish

  • 1.50 first downside objective while resistance 1.54 holds. Shorter term resistance at 1.5250/1.53 continues to cap
  • Order Flow indicators; OBV at lows, Linear Regression and Psychology rejected at midpoints
  • Monitoring price action to reset short positions

gu2015-01-19 07_25_25-

USDJPY: Short Term (1-3 Days): Neutral  – Medium Term (1-3 WeeksBullish

  • 116 holds to maintain the potential for boarder bullshit consolidation pattern, shorter term 118 needs to be reclaimed to reduce downside pressure
  • Order Flow indicators; OBV consolidating at highs, Linear Regression and Psychology bearish but ticking back up to test midpoints from below
  • Risk free longs in play, please see key trades

uj2015-01-19 07_26_58-

USDCAD: Short Term (1-3 Days): Bullish  – Medium Term (1-3 Weeks) Bullish

  • Rejected again above 1.20, above 1.19 keep pressure on the upside, strong support at 1.18
  • Daily Order Flow indicators; OBV at highs, Linear Regression pulling back to test midpoint from above and Psychology piercing midpoints from above
  • Risk free longs in play, please see key trades for detail

uc2015-01-19 08_03_22-

AUDUSDShort Term (1-3 Days): Neutral – Medium Term (1-3 WeeksBearish

  • Trend channel resistance at 0.83 test continues, bias remains to the downside while this area contains, a break opens .84/85
  • Order Flow indicators; OBV consolidating at lows, Linear Regression and Psychology recapture midpoints from below but appear to be stalling
  • Monitoring resistance at 0.83 to set short positions initially targeting break of 0.80

au2015-01-19 08_35_01-

 

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