The Non-farm Payroll jobs data from the U.S. on Friday marks a period of trade that will likely be range-bound and sporadic as automated markets seek out fair value on risk. Traders will be at the mercy of regional market open and close reactions, which is a pattern of trade that has been in place for three months at extreme levels, and for three years overall.
Investors have either evolved into, or been replaced by, near-term traders who look to be in, out, and in again, as each of the Asian, European and U.S. markets open and close. The lack of liquidity is a fact of business life and is the environment that those who have worked through previously adapt to.
Those traders and investors with a weaker constitution move into the safe harbor of low-yielding Treasury bonds, and hope that today is not the day that the Fed unveils Quantitative Easing measures that would quickly sink the over-bloated Treasury boat.
TheLFB trade desk has witnessed five Black Swan events that have changed the course of economic and traded-market arenas over the last 30 years, and this one is no different; just bank early, pull stops, and get an automated plan of work.
Eur/Usd is trading at the 100-day SMA in volatile fashion. Overall short outlook that could bounce long if equities find buyers. Gbp/Usd is trapped in tight ranges with a very mixed outlook. Take care here; the pair has found fair value. Aud/Usd has a log-jam of activity on the daily chart is not offering too much outside of reactions to red-flag releases.
Usd/Cad is absorbing a weak period of Canadian economics is in play, and with oil trade holding 72.50 support Usd/Cad has found fair value at 1.0590. Usd/Chf is looking for a near-term long reversal off any failed short tests of 1.0200. Usd/Jpy is tracking lower with the fear of Bank of Japan intervention now gone. There is room to move lower to 82.00, but it may be hard-fought in the near-term
There does not look to be a burning desire for the global market to be long-dollars; it is more of a necessity to hedge a falling yield and equity market with Treasury Note positions that are Usd-based. Until liquidity hits the inter-bank market and major institutions actually absorb bad debt and balance sheet items that are incorrectly valued, long-dollars will be in play whenever S/P futures drop in value. Long and Short straddle set-up that favors banking at Target 1 areas 7-10 ticks away.
Equity markets moved lower at the start of the week, with Asian and European markets giving back the gains made on Friday. The Japanese Nikkei dropped lower from 9290 to test 9020 support after the Bank of Japan offered very little from the highly anticipated emergency meeting. The German Dax dropped from a high last week of 5990, to test 5900 support, while at the same time S/P futures failed to break 1075 resistance and tested 1050 support. Favor short S/P to T2 areas 6 and 11 points away, or long to T1 6 points away.
Speculative interest has increased as the global yield starvation forces traders to examine anywhere that may potentially have better risk/reward than parking spare cash in Treasury notes. Holding 72.50 maintains a bullish outlook for crude oil, although trading ranges will be tight. Long and Short straddle set-up that favors banking at Target 1 areas 50c and 90c away.
The need to hedge the Usd moves has allowed gold trade to stake a claim to be a stand-alone asset class that seems to have few peers when global expansion is in doubt. Look to buy the dips and then favor the Long trade plan targets to T2 areas $15 away.
Marco Hague is one of the founders and principals of The London Forex Broadsheet (commonly known as TheLFB), a global forex trader portal with headquarters in the U.S. Hague began his career with the Bank of England dealing with foreign exchange control, and he has been trading for the last three decades. He has been involved with institutional risk asset ratio analysis and the implementation and maintenance of institutional trade desks globally.