Morning Report: Syriza Win Spikes Euro Lower

KEY DATA RELEASES TODAY (GMT) :

0900 EUR German Ifo Business Climate exp 106.7 v 105.5
1015 EUR Eurogroup Meetings

OVERNIGHT:

The DXY prints above 95.50 for the first time in 11 years, as the relentless USD strength shows no signs of abating just yet. Many comparisons are now being drawn with previous USD bull rallies, particularly that of the mid/late 90s.

EURUSD opened at 1.1185 after closing Friday at 1.1205. The reason for the gap lower was exit polls showing the Greece anti austerity Syriza Party doing better than expected. Subsequent reports out of Greece indicated Syriza would win a ruling majority with 150 seats or more. EUR came under broad pressure with EURUSD down to 1.1098 to trigger stops and take out 1.1100 option barriers. Heavy EURJPY sales helped fuel the move. Once stops and barriers were out of the way, EURUSD staged a vicious reversal to 1.1202 to fill the early gap. It fell back a bit before steadying. It will be interesting to see how Europe reacts to the Syriza victory as markets appeared quite sanguine Friday (Greek stock market up 6.0%+). The trend for EURUSD remains decidedly down and rallies will continue to be viewed as selling opportunities and option barriers at 1.1000 now in focus. Only a break above 1.13200 will ease downward pressure

USDJPY and the JPY crosses showed little direction in thin Asia trading. The action was almost entirely on the back of EUR flows, supportive for USDJPY but no so for the crosses. USDJPY see sawed between 117.26-83, down initially from 117.76 to the low on EURJPY sales, back up to the high as EURJPY bounced and then steadying later around 117.59. Japanese bids were also noted from 117.50 on the initial move down and heavy at 117.25. Bids remain to 117.00 and offers ahead of 118.00. Stops are eyed both sides of these levels. EURJPY fell from 131.58 to 130.16 with the anti austerity Greek Syriza Party winning the election and likely to take the reins of government. Short-covering saw a rebound to 131.88. Conditions were extremely thin. The bias remains down and stops could be large sub 130.00, a level tipped to have optionality.

Elsewhere, with holiday in Australia today the aggressive AUDUSD sell off continued, with a low print of 0.7855. There is very little support on the charts, until we get down to 0.77. GBPUSD, Friday’s low was tested, so for now 1.4950 area is the key interim level.

Looking ahead, the week starts with SNB Sight Deposits, then UK GDP on Tuesday. On Wednesday, we have rate decision from the FOMC, as well as Australian CPI. We get Japanese CPI on Thursday. Finally, Friday ends the week as we see Canadian GDP and the SNB release 4Q 2014 currency.

OVERNIGHT PRICE ACTION:

EUR: Bias remains down below 1.1450 targeting 1.1212
GBP: Below 1.51 keeps focus on next support zone at 1.48
JPY: 119 resistance, while 117 supports expect a 120 test
CAD: 1.25 next resistance, 1.2050 support for next leg higher
AUD: 0.80 support broken,  technical support is eyed at 0.7945

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDBearishAwait new signal
GBPUSDBearishShort Jan 191.5100OPEN1.51Intraday Signal
USDJPYNeutralLong Jan 16116.91OPEN116.91 Intraday Signal
USDCADBullishAwait new signal
AUDUSDBearishAwait new signal

ANALYSIS:

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

  • 1.12 support remains intact on closing basis, while 1.1320 contains upside attempts 1.10 is the next downside objective. Above 1.1320 opens retest of 1.1460’s
  • Order Flow indicators; OBV at new lows, Linear Regression and Psychology bearish
  • Monitor price action at 1.1320 and 1.1460 retest from below to set short positions to target 1.10

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

  • 1.5050 support zone should know act as resistance to target projected downside trend channel at 1.48
  • Order Flow indicators; OBV consolidating at lows, Linear Regression bearish and Psychology bearish but ticking up to attempt midpoint test from below
  • Monitoring price action at 1.5050 to reset shorts targeting 1.48 initially

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

  • 117 -119 range, topside break initially targets 120 ahead of 2014 highs. Failure at 117 opens retest/break of key medium term bullish support at 116
  • Order Flow indicators; OBV consolidating below recent highs, Linear Regression stalling at midpoint Psychology pierces midpoint from below
  • Risk free longs in play, please see key trades for details

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

  • 1.25 next resistance, 1.23 near term support, broad bullish trend remains intact above 1.2050
  • Daily Order Flow indicators; OBV consolidating at new highs, Linear Regression and Psychology bullish
  • Monitoring price action to reset long positions around 1.2350

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

  • 0.80 broken support now key resistance, while this caps to the upside the next downside objective is .7750 projected channel support
  • Order Flow indicators; OBV at lows, Linear Regression and Psychology bearish
  • Monitoring price action at 0.80 retest from below to target 0.7750

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