Forex New

ASIA SUMMARY

With the events of the Bank of Japan and Federal Open Market Committee (FOMC) passed, traders refocused on the markets. New levels in the markets, most notably in EURUSD, brought a fresh round of setups into Thursday’s Asia Session. Market players sought to take advantage of where New York closed the day, specifically eyeing the 1.3400 level in EURUSD. As a result, trading conditions have been characterized by healthy ranges, normal volume, and above-average volatility.

For weeks we have centered on USDJPY and the JPY crosses as the carry trade was the dominating trading theme. Though those pairs offered a good trade, with EURJPY firmly near the highs of 157.50 as of this writing, today was all about EURUSD. The pair went out around yesterday’s highs in the 1.3385 area. Naturally, speculation abounded as to the quantity of inviting stops that global banks eyed above 1.3400. Invariably, the session began with the feel that traders would test the figure. With EURUSD floating in the upper-1.3390s, the market waited until the lone economic release to make the move.

At 1950 EST, a stronger-than-expected Japanese Merchandise Trade Balance (actual: +979.6b, consensus: +700b) pushed the USD lower just enough to fuel buyers in EURUSD, and in a blink, 1.3400 was eclipsed. We saw typical trading when there are many interested parties. There were stops triggered, followed by heavy back-and-forth action in the 1.3405-10 range. After the high was put in just above that range, the sellers crunched EURUSD back below 1.3400. Momentum longs were forced to liquidate and it never recovered. Since the blip above the figure, EURUSD has held a tight 1.3385-00 range with waning volume.

In the big picture, the message is loud and clear. The market is going to take its shots at the USD, especially if the Fed slants its message to the dovish tone heard today. Although EURUSD failed to convincingly overcome 1.3400 in today’s session, we have not seen these levels since March 2005. From here the market may target 1.3480 (March 2005 high) and 1.3575 (2006 high). AUDUSD has already advanced to multi-year highs. The USDCAD recovery was decisively rejected upon the release of a strong Canadian CPI number. USDCHF is looking to find a base somewhere above 1.2000 as the pair finds itself down nearly 500 points from early February. The only bright spot has been USDJPY, which has avoided the carnage so far as carry trade strength returns.