Recap last week.
The start of the week was very subdued with EURUSD having 30/50 tick ranges. CABLE tried it’s best to stay above 1.25 but failed. USDJPY was a horrible price action to trade – jerky moves and no conviction. And RISK OFF never far away. Majors were at the mercy of crosses and for much of the week the tail most certainly wagged the dog.
On Wednesday USDJPY gave up its strong ADP gains after the FOMC minutes mentioned balance sheet “normalisation” The market didn’t believe the current rate path could sustain a roll-back and USDJPY went to new lows – The Nasdaq led the rout. All was forgiven on Friday though when FED’s Dudley stated the reduction of the balance sheet will not effect the tightening cycle. Thanks for that.
UK Services PMI was a big beat but CABLE failed to crack 1.25. In fact it finished on Friday at new lows.
However, the main story for me was USD with most of the action happening Friday. NFP came in at a huge miss of 98k but USD bulls blamed it on the weather and it recovered AND SOME.
EURUSD broke the 100DMA at 1.0620 which is now a key risk for shorts. CABLE could not gain on strong Services PMI and also broke the 100DMA at 1.2413 (in fact it closed lower at 1.2370) AUD and NZD were all kicked where it hurt – RISK OFF helped off course.
- BUY into any USD weakness. That’s my call. Simple.
- UK CPI Tuesday. It’s big but CORE is the one to watch. Sell rallies but sell large at 1.2500
- EURUSD Sell 1.0620 but 1.0500/20 looms large too
- CABLE sell into 1.2400 stop above 1.2440
- AUDUSD Sell into .7540 but shorts will cover around .7500
It’s normally a quiet week post NFP but we are not in a normal market. Conflicting market sentiment (EU and a weak CPI with a dovish ECB and a divergence of soft/hard US data)
If this isn’t bad enough we’ve also got short term RISK plays along with flows and crosses having their say. I suggest you reduce your size until we find orderly PA.
That’s it from AP towers. Trade safe.
Patrick and Adam
See charts below: