Good morning,
We’re going to be in for a relatively quiet day today as we remain light on the data front, in fact virtually completely free of any event risk save for the US existing home sales later this afternoon. So what does that mean for a market that was shaken up rather significantly towards the tail end of last week?
In simple terms increased risk aversion and small flows across the board. The contributing factors are of course President Obama’s legislative tirade, the uncertainty (although now waning) over Bernanke’s second term confirmation and chatter that China is now looking at the start of a new tightening cycle. In the scheme of things I feel that all these factors will come to pass in the coming weeks and on reflection will prove to be but a small speed bump on the road. At worst Obama’s plans will end up being a watered down version of their former selves if even at all passed, Bernanke will be there for another shot at getting an ailing economy off the ground and China will find a way to seemingly tighten without causing even the hint of a crack in the current resource bubble.
So while today is going to prove to be fairly quiet I’ll take a closer look at the following crosses;
GBPUSD: I remain bearish the cross and now see the tide turning. The only thing giving the Cable any sort of bid tone is the EURGBP which currently remains under pressure. Nevertheless I think rallies into 1.6190/6200 (on the off chance 1.6150/60 breaks) need to be sold and once 1.6080 is broken on the downside this will act as further confirmation of more downside.
EURUSD: Just like the Cable above I am still bearish here too, but honestly probably a little less certain if only there seems to be more work to be done here before we do legitimately go any lower. 1.4210/30 holds the key and 1.4250/60 the ultimate upside resistance to confirm that we’re still on our way lower. A retest and break of 1.4090 is now necessary for me to feel more comfortable of my 1.3900 intermediate target.
USDJPY: It’s an interesting one this one, the market is calling it lower (for obvious risk aversion fears) while the technicals paint an ever so slightly different picture. Where do I see it? Well in simple terms I think in the interim 90.70/80 caps the upside while 89.80/70 is potentially and looks a little vulnerable to be broken. Some are calling a break here the signal for a retest of 85, personally I think that’s a little too farfetched in the current climate.
AUDUSD: I hold my bearish view while the market now awaits the RBA on Feb 2nd. I think 0.8980/90 will form and maintain a base in the lead up to the meeting while 0.9135/50 should keep the upside capped.
USDCAD: I like it higher and my target for now remains 1.0625/30. Pullbacks into 1.0470 present good buying for more upside.
Best regards,
Ken Veksler
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