USD rebounds across the board as hedge funds add to long positions

Pairs like USD/CHF and USD/CAD are attracting hedge fund buying interest and all of the big Prime Brokers reported consistent USD buying from their big accounts. The GBP was the only one of the majors to hold its ground against the greenback, as it made back some lost ground on the crosses.

Japanese CPI and jobs data will be released today and they normally do not have a major impact on the Yen. End-of-week positional adjustment is more likely to have an impact.

EUR/USD remains in a solid short-term downtrend (see chart) but the medium term picture suggests further range trading so I’d be very wary about initiating shorts ahead of likely Sovereign buying interest 1.3000/20.



EUR/JPY has been consolidating since Tuesday between 119/122 and although the bull-trend remains strong, I still favour a deeper retracement to test a 38.2% pull-back level at 117.25 (see chart).



USD/JPY did not react to the announcement that Kuroda had been nominated for the BOJ Governorship which may be a sign that this market has finally stopped reacting to Government rhetoric. I prefer the sell-rally strategy here simply because the market is heavily positioned one-way.

The AUD/USD has returned to yesterday morning’s levels and we can expect more slow range trading with a mild bearish bias. Japanese retail investment funds have been selling AUD/JPY and hedge funds are still selling AUD/USD. On the other hand, Sovereign players and asset managers are primarily dip-buyers. With next big optionality at 1.0150 likely to prove magnetic, I favour buying a bounce out of this level.

The GBP rallied overnight with GBP/CHF flows to the fore, which is likely to be profit taking after some big moves in this cross. Cable still needs to close last Friday’s gap lower from 1.5250 on the Moody’s downgrade news.

Good luck today and TGIF.