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Japanese markets return after the long holiday today – where to for yen

  
Analysis, Forex

Japan was out on Monday, Tuesday and Wednesday but reopens for trading today.

Some chatter about on where to for the USD/JPY for the session:
  • risk aversion being stoked by renewed US-China tensions over both the corv coronavirus and trade – risk aversion supportive for yen
  • USD/JPY is just above  its lowest seen since mid-March
  • on the wide, range seen 105.50/106.50
  • bids under 105 building

Eurodollars

  
Analysis, Forex
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I have some questions regarding eurodollars and attempted to answer them myself: Why is GE quoted as interest rates, but de facto acts like a commodity ? Why were GE quotes up (rates on eurodollar deposits down) during the 2008/2020 crises. There was lots of cash demand.

– GE futures prices DO show de facto demand for cash (any fx cash offshore demand)
– GE is priced as rate to par of deposits
– GE reacts to or anticipates FED rates, as FED reacts to cash demand
– the rate of the deposits are not directly driven by supply and demand of global cash, but are driven by “external”/ non-eurodollar-mkt interest rates
– GE quotes can not be understand by the internal supply and demand of the eurodollar mkt conclusion: even GE-quotes are interest rates, GE-quotes act de facto like commodity prices, e.g. currently show huge cash demand.

Does you agree with my answers?

CFTC commitments of traders: EUR net long position remains the largests speculative position

  
Analysis, Forex

Forex futures positioning data for the week ending April 28, 2020

  • EUR long 80K vs 87K long last week. Shorts trimmed by 7K
  • GBP short 7K vs 1K short last week. Shorts increased by 6K
  • JPY long 32K vs 26K long last week. Longs increased by 6K
  • CHF long 6K vs 5K long last week. Longs increased by 1K
  • AUD short 38k vs 35K short last week. Shorts increased by 3K
  • NZD short 14K  vs 14K short last week. Unchanged
  • CAD short 29k vs 24K short last week. Shorts increased by 5K

Highlights from the CFTC commitments of traders:

  • EUR shorts remain the largest speculative position, but investors trim position by 7K.  It is the largest position trim.
  • AUD shorts increased and is the second largest position
  • CHF, GBP, NZD net positions remain small

AUDJPY Shorts: Is there a balm in Gilead?

  
Analysis, Forex
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Well, sort of.

AUDJPY

After Wednesday’s initial enthusiasm for the pharmaceutical company Gilead’s COVID19 treatment, Remdesivir, the market returned back to risk off yesterday lunchtime. The ECB’s actions, or rather lack of action, left investors selling European stocks. That negative sentiment shortly flowed through into the US cash open and the previous gains were quickly replaced by yesterday’s losses. We also saw downside in copper prices, gold, silver, and platinum prices. the pitch was skewed by some pretty heavy month end flows into the JPY and the USD. However, when the dust has settled AUDJPY shorts look attractive.

Weak

The AUD is falling as US and European equity markets have fallen. As a high beta currency we can expect the AUD to lose value in line with the risk tone tilting off. As long as equity markets remain pressured then we can expect further AUD selling.

Strong

The JPY is receiving bids due to its safe haven status alongside the CHF and the USD.

Therefore, expect AUDJPY sellers on any rallies higher. The AUDJPY is at an interesting point technically. With price sitting underneath the 100EMA and in the daily gap from 06/09 March the AUDJPY has reached a natural infection point from its move higher. Stops can be places above the high of the 200EMA to limit risk and the Daily pivot point underneath at 66.00 make a fair place for a daily target.We expect this trade to play out over the next 2 or so weeks.

Gilead

Trade Risks

The main risk to this outlook:

Any positive news on COVID19 in relation to treatment/cure. Also, if Australia’s COVID case load continues to fall and this opens up Australia’s economy more quickly than others we can expect that to support the AUD.

USD/JPY tests next key support as dollar remains weak

  
Analysis, Forex

USD/JPY runs into the 50.0 retracement level of the recent swing move higher back in March

USD/JPY D1 29-04

That level sits at 106.45 and will be a key daily support to watch before a potential drop back towards 105.00 next in the pair. The shove lower comes as the dollar is continuing to stay weaker across the board in European morning trade.
Despite some recovery in the dollar late yesterday, the fact that USD/JPY failed to reclaim 107.00 continues to give sellers the advantage from a technical perspective.
And so far, sellers are continuing to keep up the momentum in trading today.
The mood in equities is still more or less the same with European stocks holding mild gains with US futures up by around 0.7% currently. Meanwhile, the bond market is telling a different story with US 10-year yields down by about 2 bps to 0.593%.
For now, the daily support at 106.45 will be key for USD/JPY sentiment. A firm run below that will see little in the way of stopping a move back towards 105.00 potentially.
The risk for sellers is if buyers start to chase a move back above 107.00.
Looking ahead, the Fed will be the key risk event to watch today so let’s see if there will be more market clarity once that is over and done with.

Another warning of EUR/USD moving to parity – technical analysis

  
Analysis, Forex

Bank of America note on the euro, says EUR/USD parity is a technical risk:

  • says the pair is coiling into a tight range
  • a bearish continuation pattern,
  • should sell into rallies
  • BoA prefers to sell into 1.09s, stop loss 1.1165/1.12 and downside targeting measured move levels: 1.0433, 1.0330, 1.0230 and possibly 0.9903
  • Sees parity as a risk into the end of June

(BoA note late last week)

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