Today’s Trades 12.20.2017 – CADJPY, EURAUD, GBPAUD

Swing

*Good morning/afternoon everyone!*

There is a very good chance that we’ll final Congressional approval of the tax reform bill today. The House passed their version yesterday, the Senate passed their version hours later and now the House will take a final vote after the Senate ruled that 2 provisions in the bill did not comply with budget reconciliation rules and were removed from the Senate bill. Either way, the bill is done and poised to land on President Trump’s desk before Christmas. As a result, the dollar is trading higher against the Yen, euro and Swiss Franc. It is struggling versus GBP and the commodity currencies but sterling could be vulnerable to losses after EU Brexit Chief negotiator said UK won’t be covered by international agreements after they leave the European Union. The resilience of the commodity currencies are astounding, particularly after the weak New Zealand trade balance and decline in dairy prices but that could be a testament to tax reform’s positive impact on risk appetite. Looking ahead, only the U.S. new homes sales report is scheduled for release, so taxes and risk appetite will continue to drive FX flows. With the Dow eye 25K, we could see USD/JPY push to 113.50

*The MAIN THEMES I see today are*

+USD
-GBP
-JPY
+AUD
+CAD

*Trading Biases*

+USD, +AUD, +CAD, +NZD
-GBP, -JPY,
mildly -EUR, -CHF

*Today’s Initial Trades*

1. Buy CADJPY at 87.95, Stop at 87.67, Target 88.23
2. Sell GBPAUD at 1.7452, Stop at 1.7480, Target 1.7424
3. Sell EURAUD at market now 1.5433, Stop at 1.5461, Target 1.5405

Close ALL open day trades by 10:20AM NY / 15:20 GMT

GBP/AUD – Funda Should be On its Side

GBP/AUD – Funda Should be On its Side

Chart Of The Day

GBP/AUD – Funda Should be On its Side

Earlier this morning we went long GBP/AUD. Since then it has fallen off its highs but we should have data on our side in the next 24 hours. Australian employment numbers are due for release tonight and a retracement is expected after last month’s strong rise. The RBA expressed caution about the labor market and it will very difficult for full time jobs to match the prior month’s increase. Retail sales in the UK should also rebound after the decline in March. Wages are on the rise and according to the British Retail Consortium, spending was strong last month.

Technically, GBP/AUD is still holding above the 20-day SMA while the 50/200 day SMA cross signals the possibility of renewed gains. All we are looking for is a move back above 1.75.

GBP/AUD – Sell Signal in Play?

GBP/AUD – Sell Signal in Play?

Chart Of The Day

GBP/AUD posted a major signal on the charts today as profit taking came into cable while Aussie found support at the 7600 figure boosted by firming commodity prices. With Article 50 to be triggered tomorrow, the pound is feeling the full weight of the event as traders begin to pare their longs. Although Brexit has been well anticipated for months, the reality of the situation is beginning to sink in. There is plenty of uncertainty regarding how UK will be able to extract itself from the European Union which could translate into further selling pressure.

Meanwhile, in Australia, the better tone in commodity prices is supporting the pair which has only experienced a shallow correction off its recent highs. Another positive day could propel the unit towards a retest of the recent 7700 highs which could push GBPAUD even lower.

Technically the pair has carved out a major bearish engulfing candle at the 1.6500 figure and look ready to target support at the 1.6000 level as shorts press their trades.

GBP/AUD to 1.61?

Chart Of The Day

GBP/AUD to 1.61?

Sterling was the only currency that performed worse than the U.S. dollar this past week and we think further losses are possible. Data has been terrible with manufacturing, service and construction activity slowing and consumer credit dropping. These are the early affects of Britain’s decision to leave the European Union with more weakness likely to follow. However the main driver of sterling’s weakness this past week had less to do with data and more to do with the Bank of England’s cautious outlook. Despite upgrades to their economic forecasts, the BoE seemed in no rush to raise interest rates as they now expect inflation in 2 year’s time (a key measure) to be slightly lower than previously estimated. The problem for the BoE is the lack of clarity on how Brexit and Trump will impact the local and global economy. More specifically, Carney said “the Brexit journey is really just beginning. While the direction of travel is clear, there will be twists and turns along the way.” Investors were disappointed by his cautious tone and sent sterling tumbling as a result. The U.K. trade balance report is the only piece of market moving data on the U.K. calendar this coming week. Although the weak GBP should support demand, we expect further underperformance in sterling. Meanwhile the Australian dollar could outperform ahead of the RBA meeting. The RBA is widely expected to leave interest rates unchanged and maintain a neutral monetary policy stance as there has been both improvements and deterioration in Australia’s economy since their December meeting. Consumer spending for example has been soft, labor activity lacking and inflation slightly weaker. However business activity and confidence is on the rise as the Chinese economy continues to recover.

GBPAUD020717

Technically, GBP/USD is under a lot of pressure and having broken below the 20-day SMA appears likely to make a run to 1.61 and possibly even 1.60. If it rises back above 1.6450 however we could se a stronger recovery to 1.66

GBP/AUD – Headed Below 2.04?

GBP/AUD – Headed Below 2.04?

Chart Of The Day

GBP/AUD – Headed Below 2.04?

The main focus for the next 24 hours will be on the British pound and the Australian dollar. The Bank of England has a monetary policy announcement and Australia will release its latest employment rate. Based on the recent trend of U.K. data, the BoE has a lot to be worried about and we believe there’s just very little will within the central bank to raise interest rates this year. Fresh concerns about low commodity prices and market volatility could send GBP to fresh multi-year lows. Australia’s employment report will be released before the BoE rate decision and while economists are looking for job losses in December, the uptick in the employment component of manufacturing and service sector PMIs point to a positive surprise.

Fundamentally GBP/AUD should head lower and technically we are looking for the currency pair to re-test 2.05 and slip as low as 2.04. The 200-day SMA near 2.07 serves as key resistance but below we have the 23.6% Fibonacci retracement of the 2013 to 2015 rally near 2.05.

BK GBPAUD Big Trade Orders – Canceled

Swing

GBP/AUD Big Trade Orders

Place Order to Buy 1 Lot GBP/AUD at 2.0945

Place Order to Buy 1 More Lot at 2.0720

Stop for ALL 2.0560

Sterling performed well today despite the lack of U.K. or U.S. data. The gains for the currency pair were swift once the 1.5570 level was broken. Last week the changes to the Bank of England’s economic forecasts suggests that the central bank is in no rush to raise interest rates. For the past few months we have been saying that the BoE will raise rates in 2016 and our outlook has not changed. The most important thing to remember is that while the BoE is in no rush to tighten, they will still be the next major central bank to raise rates and therefore sterling should be bought on dips and not sold on rallies. At the same time, the back to back weakness in Chinese data should limit the gains in the Australian dollar. Ultimately we believe that on a fundamental basis GBP/AUD will rise back to 2.13

Technically, the recent slide in the currency pair has taken GBP/AUD to attractive levels. Not only is the currency pair rising back above the first standard deviation Bollinger Band (a sign of a turn) but it also bounced off 2.08, a level that held as support in July. If the turn gains momentum, it could take GBP/AUD to 2.13

GBP/AUD Headed Back to 2.13

GBP/AUD Headed Back to 2.13

Chart Of The Day

GBP/AUD Headed Back to 2.13

Sterling performed well today despite the lack of U.K. or U.S. data. The gains for the currency pair were swift once the 1.5570 level was broken. Last week the changes to the Bank of England’s economic forecasts suggests that the central bank is in no rush to raise interest rates. For the past few months we have been saying that the BoE will raise rates in 2016 and our outlook has not changed. The most important thing to remember is that while the BoE is in no rush to tighten, they will still be the next major central bank to raise rates and therefore sterling should be bought on dips and not sold on rallies. At the same time, the back to back weakness in Chinese data should limit the gains in the Australian dollar. Ultimately we believe that on a fundamental basis GBP/AUD will rise back to 2.13

Technically, the recent slide in the currency pair has taken GBP/AUD to attractive levels. Not only is the currency pair rising back above the first standard deviation Bollinger Band (a sign of a turn) but it also bounced off 2.08, a level that held as support in July. If the turn gains momentum, it could take GBP/AUD to 2.13

GBP/AUD – Turn or Buy?

GBP/AUD – Turn or Buy?

Chart Of The Day

The Aussie staged a vicious 2% rally today after the RBA hinted that the currency had weakened enough. As we noted in morning research, “The central bank has to walk fine line between keeping Aussie low enough to make exports competitive while maintaining its value high enough to avoid making imports a massive burden for the consumer.One possible key factor in its change of stance may have been the soaring costs of petrol. Despite crude being at $45/bbl Australian gasoline prices are actually up 6% since the start of the year and the RBA may have been eager to temper the rising burden to the motorists.”

Thursday’s AU employment report could be the key event risk for the pair as any marked decline in labor demand will make the market bearish the pair once again despite the neutral talk from RBA. Meanwhile in UK all eyes will be on tomorrow’s PMI Services report which is the key data point for that economy. The UK central bank has been making hawkish noises about potentially raising rates, but it won’t act unless the data proves supportive.

So in short, if UK PMI Services continues to show healthy expansion, todays nasty selloff in the pair should be viewed as a chance to buy the dip, as long as 2.0800 level continues to hold.

GBP/AUD Itching to Break 2.13

GBP/AUD Itching to Break 2.13

Chart Of The Day

GBP/AUD Itching to Break 2.13

GBP/AUD is itching to break 2.13 and we believe that this week’s event risks provide the perfect catalyst. Sterling traded lower today for no specific reason and given last week’s hawkish comments from BoE Governor Carney, Wednesday’s central bank minutes will most likely be less dovish. In fact today’s house price report from Rightmove reinforces our view that the Bank of England is growing more comfortable with their outlook for the economy and closer to raising rates. Hawkish comments would reinvigorate the rally in sterling. In contrast, today’s steep decline in gold prices reduces the attractiveness of holding AUD. The Reserve Bank of Australia releases the minutes from its July monetary policy meeting this evening. At the meeting, they said, monetary policy needs to be accommodative and further A$ depreciation seems likely and necessary. This comment was surprising because at the time, AUD/USD was trading around 0.7450, right around their 75 cent target. Given that the RBA met during the meltdown in Chinese equities, the tone of the monetary policy statement will most likely reflect their concern about the possibility of further weakness in stocks and its implications for China’s economy. So while AUD bounced intraday, dovish minutes will send the currency to fresh multiyear lows versus the British pound.

GBP/AUD is trading at its strongest level in 6 years. Technically it has broken through the 50% Fibonacci retracement of the 2008 to 2013 decline at 2.0760 and the psychologically significant 2.10 level. The next area of resistance once 2.13 breaks is the 200-day SMA at 2.20. Should the currency pair reverse and drop below the 50% Fib then the next stop will be 2.05. In the meantime, the uptrend remains intact.

GBP/AUD Big Trade +130

Swing

***BK BIG Trade GBP/AUD – Close Trade at Market (now 2.1065) for +65 each +130 total

***We are triggered on both lots of GBP/AUD for an average entry price of 2.1000

GBP/AUD Big Trade

Place Order to Buy 1 lot GBP/AUD at 2.1075

Place Order to Buy 1 More at 2.0930

Stop for ALL 2.0720

Over the next 48 hours, there are 2 major event risks that we are focusing on – the RBA and BoE minutes. These minutes should show just how much of a gap there is between UK and Australian monetary policy. Based on last week’s comments from the Bank of England, Governor Carney wants to see rates rise sooner rather than later. In contrast, the turmoil in Chinese markets along with the decline in commodity prices should make for a dovish RBA. We are looking for further gains in GBP/AUD and see the latest decline as an opportunity to buy ahead of these 2 event risks.

GBP/AUD Could Hit 2.05

GBP/AUD Could Hit 2.05

Chart Of The Day

GBP/AUD Could Hit 2.05

The British pound started the week strong, trading to its highest level versus the Australian dollar in 6.5 years. While the currency pair gave up part of its gains to end the day unchanged, we are looking for further strength in GBP/AUD. This is a busy week for sterling with a number of important U.K. economic reports scheduled for release. While the BoE minutes may be mixed, economists are looking for stronger data all around but we are skeptical especially on job growth because the PMIs reported lower employment growth in the service and manufacturing sectors. Good numbers could drive sterling sharply higher but the next catalyst will come from Down Under. The RBA minutes are scheduled for release this evening and if you recall, earlier this month, RBA Governor Glenn Stevens said the central bank is open to further easing if it will be beneficial to sustainable growth. He felt that the currency was too strong and needed to fall further. We expect the minutes to echo these cautiously dovish views and encourage A$ traders to erase some if not all of today’s gains.

Technically, resistance for GBP/AUD is at the June 2008 low of 2.03. If this level is broken, then it should be clear sailing to 2.05. Support is much closer at today’s low of 1.9970, slightly under the psychologically and technically significant 2.0 level.

GBP/AUD Big Trade +118

Swing

Big Trade Update Close GBPAUD at market 1.9750 +118 on trade we will reload later

GBP/AUD Big Trade

Place order to SELL GBP/AUD at 1.9870

**If first entry is TRIGGERED, another order will follow

Stop at 2.0075

The Australian dollar is in play for the next 24 to 48 hours with the Reserve Bank gearing up for its monthly monetary policy meeting. We believe that the RBA will leave rates unchanged, paving the way for a rebound in the Australian dollar. In the past 2 weeks, AUD has fallen quickly and aggressively, dropping from a high of 0.8160 to 0.7598. 0.7533 is the 6 year low for AUD/USD. We believe that this slide in the currency along with mixed economic reports will make the RBA less worried about exchange risks and more comfortable with the current level of monetary policy. If we are right, AUD should trade higher and enjoy a much needed relief rally. We have chosen to buy AUD versus the pound because seven straight trading days have past without a rally in the currency. Sterling is oversold and while today’s PMI manufacturing report fell short of expectations, manufacturing activity still increased from the previous month so the outlook is not that grim but unless there is an upside surprise in the data, the fear of a BREXIT (UK leaving the EU could still hang over the currency). The service sector also seems to be holding up better but if this week’s PMI Services data misses, sterling could extend its losses.

Technically, 2.0 should be pretty stiff resistance for GBP/AUD. We have chosen to SELL GBP/AUD on a break lower instead of at market because we don’t want to be in the trade if the RBA says they still plan to lower rates this year.