Risk back in favour?

After an incredibly dull day yesterday with the major markets closed, it was Asia again that led the charge, risk seemingly back in favour this morning as I walk in, on the back of what seems a relatively innocuous Wall Street Journal article citing the fact that Germany is prepared drop its push for restructuring of the Greek debt in an effort to facilitate a new aid package for the beleaguered southern nation. Coupled with the fact that the EURUSD was trading above that 1.4250 pivot level at the time that the market took notice of this article was enough to push the cross through stops in a hunting frenzy and allow it to trade at a  high of 1.4405 or thereabouts overnight. In other news we see the NZDUSD trading at all time highs as consumer and business confidence registered its biggest print in over a year, all the while the rather confused finance minister was off jawboning and contradicting himself yet again.

Adding to the excitement was Moody’s out saying that it would place Japan on review for a possible downgrade.

Turning to the day ahead, we all know it’s month end and some of the flows we’ll see today are clearly going to be related to this, meaning more USD sales if anything. Beyond this we have the Bank of China interest rate announcement as well as the Eurozone flash CPI estimate printed this morning.

With regard to the market, looking at the EURUSD first, given the current price action, equities and commodities all higher it’s hard to imagine that the pair won’t test (and in all likelihood take out) resistance sitting at the 1.4430 area. After a brief stop run above there I would expect the cross to settle into a 1.4300/1.4400 day.

The Cable is benefiting once again from broad USD sales and looks for 1.6580 as the next natural cap. If this sentiment persists for the bulk of the day it’s not unlikely to see the cross trading into serious offers sitting around the 1.6650 area.

The AUDUSD traded higher on the back of all of the above taking out stops above 1.0730 and trading to 1.0750 on the exhaustion that followed. Fading rallies intraday might be the way forward with sales and stops needing to go in closer to that overnight high area.

The JPY and its crosses are understandably a little battered on the back of this briefly renewed risk sentiment and Moody’s news, however they remain confined for the most part. EURJPY is the current standout for being overdone on this spike and selling at market is the call amongst a few of my contacts with their stops going in above 118.30, looking for a return to around the mid 115 area.

CHF data this morning proved to be worse on both the headline and the devilish detail but the only cross getting anything out of this was the EURCHF which has spiked but still trades heavy nonetheless.