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Yen crosses making the most of the good feels over the phase 1 trade deal

  
Analysis, Forex
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Positive sentiment is likely to persist into the signing of the US-China phase one trade deal on Wednesday January 15

USD/JPY is having an OK sort of session, on approach to its Friday high above 109.65. Yen crosses are generally higher also, AUD/USD is putting in some consolidation above 0.6900, kiwi also is near its recent highs and EUR is about to test its Friday high also. All these were helped along by some USD weakness on Friday on that disappointing NFP result.
Meanwhile the offshore Chinese yuan is pushing higher agisnt the USD also, benefitting also from phase1-itis.
Having said all this, the ranges here are not large for the majors, it is Asian after all. Its also a holiday in Japan today (markets closed).

CFTC Commitments of Traders: Dollar bulls retreat

  
Analysis, Forex

Futures forex positioning data for the week ending January 7, 2020:

  • EUR short 61K vs 74K short last week. Shorts trimmed by 13K
  • GBP long 17K vs 12K long last week. Longs increased by 5K
  • JPY short 12K vs 25K short last week. Shorts trimmed by 13k
  • CHF short 4K vs 6K short last week. Shorts trimmed by 2K
  • AUD short 27k vs 38K short last week. Shorts trimmed by 11K
  • NZD short 1K vs 5K short last week. Shorts trimmed by 4K
  • CAD long 26k vs 12K long last week. Longs increased by 14K
The theme across the board was less enthusiasm for the dollar. All the dollar longs were trimmed and there are growing longs in CAD and GBP. Is this really the big turn in the dollar? There is certainly some room to run on the speculative side before we get even close.
Here’s a look at the GBP net:
GBP net cftc

EUR/USD 1-year implied volatility falls to a record low

  
Analysis, Forex

Volatility continues to dry up in the major currencies space

EUR/USD volatility
The 1-year implied volatility falls to a record low of 5.42% and the trading range today epitomises the above sentiment rather perfectly. EUR/USD rests in just a 9 pips range today and the trading year ahead may see another snoozefest in terms of the overall range.
Euro area economic growth continues to remain sluggish but there isn’t any imminent signs of a major recession just yet. Meanwhile, the ECB is not likely to do anything this year and the Fed is also signaling more of a pause over the coming quarters.
Persistently low growth, low inflation and a global tilt towards more easing policy is likely to make 2020 yet another year of sideways trading – for the most part – in EUR/USD.
The overall range last year was a measly 691 pips. I wouldn’t be the least bit surprised if we do manage to beat that in trading this year.

USD/JPY: Intra-day range In 2019 narrowest since 1976; Where next? – MUFG

  
Analysis, Forex
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Can the low volatility continue?

MUFG Research discusses USD/JPY outlook and targets the pair at 107, 106, 105, 104 in Q1, Q2, Q3, and Q4 respectively.“The intra-day high-to-low trading range for USD/JPY in 2019 was 7.6% – that’s the narrowest trading range since 1976 according to Bloomberg data. Taking the last three years the trading range has been just 13.5% underlining the remarkable stability of USD/JPY. 3mth ATM implied volatility fell to 4.99% in December, a record low underlining the conditions conducive to carry. These conditions helped keep the yen weak but failed to trigger any notable sell-off of the yen,” MUFG notes.“In our view that is a reflection of underlying positives for the yen that will contribute to yen strength this year, even if financial market conditions remain relatively benign…We see limited upside for USD/JPY from current levels. The factors above will act to limit yen weakness. We do not assume any major risk-off event this year but the assassination of Qassem Soleimani in Baghdad on 3rd January is a clear near-term upside risk for the yen that has emerged as 2020 commences,” MUFG adds.

CFTC commitments of traders report. GBP longs are the largest long position since May 2018.

  
Analysis, Forex

Forex futures positioning data for the week ending Tuesday, December 31, 2019

  • EUR short 74K vs 72K short last week. Shorts increased by 2K
  • GBP long 12K vs 8K short last week. Longs increased by 4K
  • JPY short 25K vs 33K short last week. Shorts trimmed by 8k
  • CHF short 6K vs 10K short last week. Shorts trimmed by 4K
  • AUD short 38k vs 46K short last week. Shorts trimmed by 8K
  • NZD short 5K vs 8K short last week. Shorts trimmed by 3K
  • CAD long 12k vs 9K long last week. Longs increased by 3K
Highlights:
  • The GBP’s longs increased by 4K.  Last week, the position swung around from being short to long.  The long position is the largest since May 2018.
Forex futures positioning data for the week ending Tuesday, December 31, 2019_
  • EUR shorts remained fairly hefty although little changed from last week. The position is the biggest with the AUD the second-largest speculative position
  • The AUD shorts – although the 2nd largest speculative position – was trimmed by 8K
  • GBP, CHF, NZD and CAD positions are all within 12K of being square

Currencies 2019: “The Year of Low Volatility”

  
Analysis, Forex
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Record low ranges for many of the major currency pairs

If I were to name the currency year, it would be “The Year of Low Volatility”.
Three of the currency pairs had low to high trading ranges that were the lowest since 1980. Even the GBPUSD which had alll the Brexit goings on, had a relatively low range year (the 5th lowest since 2000).
If the low ranges are indicative of non-trending, the good news is non-trending transitions to trending. As a result, I would expect a more volatile/larger trading range for 2020 for many of the currency pairs. Keep that thought in mind in 2020.Below are the graphical historical ranges for the major currency pairs versus the dollar along with comments about each. .
EURUSD.
The EURUSDh had the lowest trading range going back to 1980 The low to high trading range for the EURUSD in 2019 could only extend to 691 pips.  That was the lowest range going back to 1980. The prior low was 883 pips back in 1996.  In 1997, the range rose to 2280 pips.
The low for the year reached 1.0879. The high for the year was up at 1.1570. The pair is 347 pips or so off the low price and 344 pips off the high price. That puts the pairs price smack dab in the middle of the trading range for the year.  Which way do we tilt in 2020?
GBPUSD
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Whether it’s early in 2020 or later, USD/JPY is setting up for a big move

  
Analysis, Forex

USD/JPY technical analysis

It’s the best time of year to zoom out and look at the long-term charts. USD/JPY is indicative of the broader trend of falling volatility and tighter ranges.
When this breaks, it’s not going to be 200-300 pips, it will be much more.
USD/JPY technical analysis
The dollar bears are coming out of hibernation at the moment and you can see the argument for why a break lower would be coming. At some point there is going to be a bear market in equities and money will fly to the yen.

Monday morning open levels – indicative forex prices – 30 December 2019

  
Analysis, Forex

Welcome to the start of the new FX week. Trading liquidity will be less than normal this and week as a holiday mood carries on.

And of course, the thinnest liquidity time of the forex week is right about now.
It improves as more Asian centres come on online.
Not too much change from late Friday levels:
  • EUR/USD 1.1178
  • USD/JPY 109.47
  • GBP/USD 1.3090
  • USD/CHF 0.9750
  • USD/CAD 1.3075
  • AUD/USD 0.6976
  • NZD/USD 0.6697
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