Morning Report: Whipsaw Trading In Major Positions Washout Post FOMC

KEY DATA RELEASES TODAY (GMT) :

1015 EUR EU Economic Summit
1015 EUR Targeted LTRO 40.0B v 129.8B
1230 USD Current Account -103B v -100B
1230 USD Unemployment Claims 295K v 289K
1400 USD Philly Fed Manufacturing Index 7.2 v 5.2

OVERNIGHT:

The FOMC meeting and FED Chair Yellen’s presser were the catalyst for a collapse in Fed fund expectations yesterday. US equities back to the highs, one investment bank survey showed a huge bearish bias on US equities leading into the FOMC.

Why lower dots? Yellen points to: 1. Meaningful downward adjustment in inflation forecast. 2. Longer-run unemployment rate marked down (i.e. more slack) key points are (1) Dovish centre of committee has shaved off 1/2 – 1 hikes, but kept the end point (3.5%) unchanged. (2) Rest of committee has converged towards them. (3) macro assessment consistent with these changes: (A) USD impact is “transitory” and (B) Nairu is lower. So gives more time, but does not change the endpoint. Reserve managers and asset managers will be waiting to offload EUR positions and buy US Fixed Income even with much lower curves. The moneys involved are large and patient suggesting we will have to wait for the full liquidity during the later part of the European morning for it to gently step in.

Bottom line, USD squeeze probably isnt over yet even given the climax kind of price action since interbank reports suggest not many players were involved so that any USD bounce may be sold off for next day or two, While long term accounts pared long USD positions in both cash and FX options some opportunists came in and bought them.

EUR: 1.0750-1.0800 level should be supported, potentially it may try 1.10 again. prefer long strategy for intraday, short in midterm but better to wait until above 1.10. EURUSD climbed to 1.0920 post Asia opening and when it turned back to 1.0890, flow reports suggest macro names were surfacing to enter short Euros. Market later went for stops below 1.0800 in the late morning. There is a 1.10 option strike expiring today NY cut worth 3bln and 2.7bln at 1.0800 Friday NY expiry.

JPY: Intraday, it may trade positive with risk sentiment recovery by US rates coming off, better be long via crosses. In midterm, I should admit that It has become much harder to test 122 handle again. Several banks have reported good bids surrounding 119.00-20 from importers while nothing sensational on top unless we get to 121.70. Do take note there is a 121.00 option expiry tomorrow in NY worth about 3.6bln

PRICE ACTION OVERVIEW:

EUR: While 1.0610/30 contains downside potential for further corrective price action
GBP: While 1.4780/48 contains downside potential for further corrective price action
JPY:  While 119 contains downside potential to retest year to date highs
CAD: While 124/50 contains downside potential to retest year to date highs
AUD:  While .7860/80 contains upside target .72

KEY TRADES:

FX PairShort TermPosition/DateEntry LevelTargetStopComments
EURUSDNeutral Await new signal
GBPUSDNeutralAwait new signal
USDJPYNeutral Await new signal
USDCADNeutralAwait new signal
AUDUSDNeutralAwait new signal

ANALYSIS:

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

  • While 1.10 caps upside on a closing basis, expect retest of 1.0660/40 as initial support for potential retest of reaction highs, Below 1.06 suggests trend resumption and retest of year to date lows.
  • Order Flow indicators; OBV ticks up from lows, Linear Regression and Psychology bullish
  • Monitoring price action and Order Flow below 1.10 to reset short positions targeting 1.03

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

  • Holds resistance at 1.5010/30 on a closing basis, while 1.4850 supports potential for retest of 1.50 below 1.48 suggest trend resumption and retest of year to date lows
  • Order Flow indicators; OBV at lows, Linear Regression and Psychology ticking up to test midpoints from below
  • Monitoring price and Order Flow against 1.5010/30 targeting 1.46/45

gu2015-03-19 07_28_00-

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

  • 119 support son first test above 121 suggest trend resumption and retest of year to date highs with 124 the target beyond
  • Order Flow indicators; OBV continues consolidation, Linear Regression pierces midpoint from above, Psychology supported at midpoint
  • Monitoring price action and Order Flow indicators for longs targeting 124

uj2015-03-19 07_30_48-

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

  • While 1.2450 supports still potential for close above 1.28 to target key 1.30 only below 1.2350 concerns bullish bias
  • Daily Order Flow indicators; OBV at highs, Linear Regression pierces midpoint form above Psychology supported at midpoint retest
  • Monitoring price action and Order Flow indicators to set longs  targeting 1.30

uc2015-03-19 08_20_29-

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

  • Trendline resistance contains whipsaw upside reaction, below .76 suggests trend resumption and targets a break of .75 with .72 the next objective.
  • Order Flow indicators; OBV ticks up from lows, Linear Regression pierces midpoint form below Psychology bearish rejected at midpoint retest from below
  • Monitoring price action and Order Flow indicators to set shorts targeting .72

au2015-03-19 08_45_08-

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