Global Markets:

  • The Shanghai Composite gained 0.50 %, driven by expectations that the Chinese government will introduce new stimulus measures
  • The Nikkei is unchanged on the day; Australia’s ASX down 0.20 %
  • Gold is trading at $1314 (+0.20 %)
  • US 10 year yield stands at 2.73

FX Flows/Orders:

  • USD/JPY has bids from 102.10 down to 102.00; stops are noted through 101.95 and in better size around 101.75
  • To the topside, solid offers at 102.75/80; key resistance is the top of the daily Ichimoku cloud at 103.10, sizeable stops resting above that level
  • EUR/USD spent the Asian session in a 12 pips range; smaller bids at 1.3810 and stops through 1.3790; better demand from 1.3765 down to 1.3750
  • Offers are getting thicker from 1.3875 towards the 1.39 level
  • AUD/USD was able to break above the 200 DMA at 0.9145, but the stops above 0.9160 survived
  • Cross flows are supportive for the Aussie Dollar; further gains in AUD/USD likely
  • First intraday support at 0.9120, then 0.9070/80
  • In GBP/USD, dealers see selling interest from 1.6515 up to 1.6520 and solid demand 1.6465-70
  • Range players are looking to sell EUR/JPY ahead of 142.00; large stops noted above the big figure
  • Banks see good demand for USD/CAD from macro names from 1.1165 towards the 1.1150 level
  • Offers at 1.1220 light; no mention of larger stop orders near

 Market Sentiment:

 Most traders expected a rather quiet US session yesterday with no econ data releases and little on the newswires. However, EUR/USD rallied sharply from 1.3790 to 1.3875 shortly after the London close. There was no apparent reason and many dealers blamed it on stops being triggered. One dealing bank noted that there were larger stops above 1.3830 that probably accelerated the move and the pair was gradually slowed down by sizeable offers above 1.3860. It didn’t feel as if short-term participants were overly short the Euro, but it was most likely just a case of stops running & absence of meaningful sellers.

 AUD/USD was finally able to break above the 200 DMA around 0.9145, though it didn’t sustain gains for too long above there. The pair is likely to remain bid during the European session and cross flows should underpin the Aussie strength. If the currency should remain resilient, traders should keep an eye on EUR/AUD and GBP/AUD. As a quick look at the daily chart will indicate, long positioning is still crowded and both pairs are nearing key technical levels.

 The main event of the day is UK CPI data. The rate is set to fall from 1.9 % to 1.7 % due to lower fuel and food costs recently. 1.6460 and 1.6567 are the key levels to watch in GBP/USD. Half an hour earlier are the German IFO releases. The business climate survey is likely to show a small decline amid increased market worries over Ukraine and a slight slowdown in German econ activity.

 Upcoming Events:

  • 09:00 GMT – German IFO Business Climate Index (111.0)
  • 09:00 GMT – German Business Expectations (107.6)
  • 09:00 GMT – German Current Assessment (114.6)
  • 09:30 GMT – UK CPI (MoM 0.5 %, YoY 1.7 %)
  • 09:30 GMT – UK PPI Input (MoM 0.3 %)
  • 13:00 GMT – US House Price Index (0.7 %)
  • 14:00 GMT – US CB Consumer Confidence (78.6)
  • 14:00 GMT – US New Home Sales (445k, -4.9 %)
  • 14:00 GMT – Richmond Manufacturing Index (-1)
  • 16:00 GMT – ECB President Draghi speaks