Cable has broken lower over the past few sessions as the Dollar has seen a safe haven bid during the turmoil that currently engulfs the markets, breaking back below the Head and Shoulders neckline that has dominated the picture over the past few months.

Thoughts from the trading floor

Monday saw a retest of the recent highs in Cable with the contract opening around 1.6475 and then selling off hard throughout the day. Since then the market continued lower, falling through the 1.6220 area which has acted as good support over the past two weeks, and is now where the neckline comes in. We broke back below this neckline on Wednesday but have since bounced back and are trading around it this morning. This area looks like becoming an important pivot point for the market once again.

Thursday’s low at 1.6107 is now important short term support for the market, having bounced quite impressively from here. A break and close below this point would be a bearish signal and should result in further selling of Cable. For now though this looks to have put a low print in the market and a move back into the trading range of the past two weeks is the most likely scenario.

The medium term outlook is again going to be dominated by the trade in the Dollar. During the chaos that has encapsulated the markets in August the Dollar has generally seen a slight bid against some of the riskier currencies, such as the British Pound and the Euro. These trades have generally been in line with the moves in equity markets. If the equities have made a low for the time being then expect some buying to come back into Cable, with another test of the 1.6475 being the first major target.

Bull View

Although Cable has sold off while the equities have seen big moves lower, Thursday saw an impressive bounce from 1.6110. A move back into the recent range and the bulls will try and target the recent highs soon after.

Bear View

After an impressive sell off the bears have let the market bounce back up above the neckline. A close below 1.6260 would allow the bears to try and retest Thursday’s low.

Futex View

If the market can close above 1.6260 today then we expect a move back into the recent range. Though we will be keeping a close eye on the equities. Any selling there will see Cable dip as well.

Cable has traded in a range between 1.6260 and 1.6440 this week as traders turn their attention to the ongoing US debt ceiling issue with the August 2nd deadline just days away now.

Thoughts from the trading floor

Cable has remained relatively bullish this week, with the market making new highs for July again on Tuesday and Wednesday. The market reached the 1.6440-70 area we mentioned last week but failed to break into and above it, creating a high tick on Wednesday of 1.6440. This area will act as short term resistance for now. If we break through here there are small levels at 1.6550 and 1.6600 which we would expect to hold on the first test.

To the downside 1.6260 has proved to be good support with lows made there on three consecutive days since Friday. This also coincides with the June 22nd high. If this breaks in the coming sessions the focus will turn back to the 1.6160-80 level. This is the key pivot point for the market and a break back below here should result in a lot of longs rushing for cover. The head and shoulders neckline has been nullified somewhat after breaking back above it but after providing such good support and resistance over an extended period, might be worth keeping an eye on if we do move lower. Today the line comes in at 1.6200 so just above good support.

The big news this week has been the ongoing dispute between the two main political parties in the US about the debt ceiling. This is likely to dominate over the weekend and probably into early next week as well. There is still some doubt that an agreement will be made but in all likelihood both parties will have to make some concessions and some sort of compromise will be reached. Whatever the outcome however, it is likely to have a big effect on the markets and we could see some large, volatile moves as traders react to the news. If an agreement cannot be met and a default follows, the fast money move will likely be a weakening of the dollar. Perversely though, if equities take a real pounding the dollar is likely to still be seen as the safe haven option as risky assets are sold off. Be mindful of the news and expect to see some larger than normal moves, with technicals playing a second fiddle to the fundamentals.

Bull View

1.6260 is an important support level that will need to hold but if this is achieved expect another test of the 1.6440-70 area over next week. Beyond here 1.6550 and 1.6600 are in sight.

Bear View

The bears defended the 1.6440-70 area on the first test and have sold the market back down to near the lows of the past few sessions. A break below 1.6260 is needed before the important 1.6160-80 is tested (and keep and eye on the neckline at 1.6200).

Futex View

We still favour buying any dips down to 1.6160-80 but are mindful of the possible larger than normal moves that could occur after the any news on the debt ceiling. A break above 1.6470 and we expect to see 1.6600 soon after.

The Euro vs. the Swiss Franc has seen volatile trade over the last week. The market posted fresh record lows last week, around the 1.1400 handle, and has since settled around the 1.1600 handle.

Thoughts from the trading floor

The EUR/CHF is trading just around the 1.1600 handle, with the record low being marked around the 1.1400 handle. The recent failure from the 1.2320-57 level marks this as a good short term resistance. Also the 1.2400-27 level is the major resistance and short-term market pivot. If bulls are to avoid further liquidation they must look to take back this area of the market. Below here, it remains liable to big capitulations, as seen over the last week. Technically, the market looks set to continue to trade lower, with the break below 1.2400 marking the potential of this next leg lower to be aggressive and violent in its nature. Bulls will need to see the current lows hold and must look to retake the 1.2357-1.2450 area. A major reversal can only occur once this area gives. Otherwise bears remain firmly in force. The cross should now be entering its most violent stage of the move lower and thus we should observe quick failures of rallies. Yesterday we saw such price action. This continues to highlight short-term weakness. Last week’s rejection of the 1.1900 handle also highlights the quickening in pace of the trend lower. Selling short-term rallies on euphoria remains the most profitable strategy for the moment.

Last week’s announcement to provide further aid for Greece and the attempt to ring fence the rest of the periphery saw the cross trade from record lows to just shy of the 1.1900 handle. However since then, concerns that these measures may not be enough to save the Eurozone from further deteriorations have seen the EUR/CHF move back down to the 1.1600 handle. The relative quick rejection of this euphoria continues to highlight the case that the Eurozone debt crises is picking up pace, which is also reflected by the quickening in pace of the downtrend in the EUR/CHF. Global uncertainty regarding the US debt ceiling has also allowed the Swiss Franc to move to fresh record highs against the USD as participants look to flee to one of the few’ gold standard’ currencies in the world. It is likely that Portugal and Ireland will next come under the radar of nervous investors and we would anticipate a move against those countries soon. The major concerns are the Italian and Spanish debt markets. Those markets have been very quick in giving up gains made last week, and further deterioration there should see the Swiss Franc accelerate even further in its advance. Ultimately the deterioration in Spain and Italy will seal the fate for the Eurozone.

Bull View

The bulls will look for the market to stabilise around the current levels before the market can stage a comeback. A move back through the 1.2350-1.2450 area should stabilise the market.

Bear View

The bears will look to maintain pressure below the 1.2400 handle. The market has consistently made lower highs and lower lows on a weekly/monthly basis since 2010, and below 1.2403-89 the market remains liable to a fresh and violent leg lower over coming weeks.

Futex View

We favour the short, medium and long term bears. We feel that the Eurozone debt crises will approach the endgame scenario heading into the coming weeks.

Cable surged higher yesterday as risk assets across the board saw strong gains on the back of the deal announced by EU leaders for Greece, taking the market back above the head and shoulders neckline that has recently capped the gains..

Thoughts from the trading floor

The big news yesterday was the announcement by EU leaders of further aid to Greece and the already bailed out nations of Portugal and Ireland, including the ability to offer credit lines to other nations should they encounter problems in the future. This resulted in a huge appetite for risk assets, as equities rallied hard along with commodities along with the dollar selling off. As a result, Cable surged higher and finally broke back above the head and shoulders neckline that has dominated the long term picture over the past couple of months.

The neckline had previously capped gains at the end of last week and during sessions this week and the break and close above changes the medium term picture for the market. The neckline, along with the series of highs made in the past few sessions should now act as support for the market and be a key pivot point. Should this move higher fail to hold, and the market sell off back below the 1.6160-80 level quickly then it may prove to be a false break higher that flushes out the weak shorts. A move back down to 1.6000 would then be expected.

The move and close yesterday though should result in further gains over the coming sessions. The market touched the first resistance to the upside at 1.6345 this morning though has since sold off from here. In the short term, 1.6260-80 has to hold to keep the bullish stance and if this can be achieved a break through 1.6345 should see a move up to the 1.6440-70 area of resistance. Next week sees the first release of the GDP estimate for the second quarter and price action may be tempered by this going into Tuesday morning. Cable of course may swallowed up by the bigger picture again depending on how the markets see the Greece deal going forward, and how the rating’s agencies react to it. We could have increased volatility in risk assets should a ‘selective default’ be announced for example. The moves in the dollar would then take precedence over the technical outlook.

Bull View

Having broken and closed back above the head and shoulders neckline the market has a medium term bullish stance. Having already touched 1.6345 the bulls will look to retest here and break up to 1.6440-70.

Bear View

The bears failed to hold the neckline yesterday and may now need to rely on fundamental news to get the market back below here. 1.6260-80 is an important area for the bears to get the market back below if they are to test the important 1.6160-80 area.

Futex View

We saw the neckline act as resistance a couple of times this week with some good opportunities to sell and cover for a point or so but the close above now leaves a bullish medium term outlook. We would favour buying any retests around the important 1.6160-80 area. 1.6260-80 may also provide good initial support.

Cable has sold off over the past few sessions after retesting the head and shoulders neckline on Monday and failing to move back above it. The low this morning is just above the 1.5936 level.

Thoughts from the trading floor

On Monday the head and shoulders neckline came in at 1.6144 and the high was made at 1.6141 with the market failing to make a move above back above it. This now leaves a bearish outlook in the medium turn with the 1.5936 level and recent daily double bottom at 1.5912 providing short term support. If these lows break then expect a move down towards 1.5750 over the following sessions. A move to here would confirm the bearish outlook on the market.

The longer term target on the head and shoulders is around 1.5350 which ties in nicely with the lows made in December. This is a much longer term play and we wouldn’t expect the market to reach this point for another few weeks at least. If this move does play out, support to will come in at 1.5640-70 and then 1.5450 before the December low levels. In the shorter term then the market remains weak and the recent lows should act as an important pivot for the market. If these hold then a bounce up to 1.6060 is expected at the least. This may also show signs of the market remaining range bound for a few sessions before finally going one way or the other. The top of this range should be the highs made this week around 1.6140 and up to the head and shoulders neckline, which is obviously edging higher each day.

The all-important NFP release is due out of the US today which could have a major bearing on all dollar paired currencies. In recent weeks we have seen some of the stronger US data result in a strong dollar - a trend that has been missing for some time so we will look to see if this continues in the wake of NFP. Expect some volatility after the release and the close will be important relative to the strength or weakness of the numbers.

Bull View

The bulls will look to defend the 1.5936 level again with a view to eventually retesting the head and shoulders neckline again. First though 1.6040-60 is an important hurdle to overcome.

Bear View

The bears sold the market back off after touching the neckline earlier in the week and the market is now back near the recent lows. A break and close below here should see a move down to 1.5750 initially.

Futex View

The head and shoulders neckline remains and important resistance to the upside, and the recent lows at 1.5936 and 1.5912 are a key pivot point. We still favour selling the bounces until we see a close above the neckline, and will look to go with momentum should we get a close below the recent lows.

Today sees the release of the ECB policy decision and the usual press conference. The ECB is expected to hike interest rates by 25bp. to 1.50%. This is built into the expectations.

Thoughts from the trading floor

The ECB hiked interest rates in April to 1.25% from 1.00%. Since the start of the year ECB have ramped up their hawkish stance on policy by dropping the appropriate word to describe rates. In January, they introduced the statement that the see short-term upward pressure on overall inflation, and at the same time “very close monitoring is warranted.” In March, the ECB signalled a April rate hike by announcing that “strong vigilance” was warranted on upside inflation pressures. Last month, the ECB signalled that they viewed inflation risks with “strong vigilance”. The policy stance was described as “accommodative”. If the ECB hike rates as planned today, it should confirm that the ECB are in a rate hike cycle. This is almost a given for the markets. After this, the markets need to work out how aggressive the cycle will be. The market is currently pricing in one further rate hike this year after the expected hike today

Going back to the start of the year, the ECB announced that they would “monitor very closely” upside inflation risks in January and February before signalling “strong vigilance” in March whilst dropping the word “appropriate” to describe interest rates. The monitor very closely statements of the April and May were then followed by a “strong vigilance” comment last month. Extrapolating forward this would imply a rate hike this month followed by a monitor very closely statement. This is expected by the markets. We have a similar situation to one we had last month where peripheral debt issues was the main driver of the markets heading into the ECB meeting (Bunds rallied firmly the day before the ECB meeting) and the German bonds subsequently shrugged off the strong vigilance commentary.

Key words to look out for:
“Appropriate”- (very dovish) This would suggest that potentially the ECB have decided that the current short-cycle (given they hike rates today) has come to an end and are in a wait and see mode. The one further hike expected late this year should then be unwound.

Announcing “monitor very closely”, with rates remaining “accommodative”- is expected by the markets. This would be quite event risk neutral.

Strong vigilance would indicate a hiking of rates next month. Doing so may need the ECB to use the words “(very) accommodative” to describe interest rates. Should be very hawkish as it would suggest a more aggressive cycle of hikes than currently priced in.

Interest rate corridor width:
Currently stands at 150bp. (marginal rate minus deposit rate). The pre-crises width for this corridor was 200bp. whilst the ECB’s liquidity provisions are being implemented (MROs, etc) widening the corridor to 200bp. should have a limited impact (may initially be taken as a tightening of liquidity). If this is announced alongside the easing out of the liquidity facilities, this would be seen as a further hawkish development. However, would put ECB in difficult position as many peripheral banks need the liquidity facilities to remain solvent. We also need to look out for the tender process of the MROs and LTROs. Currently they are conducted at a fixed rate. If this changes to a variable rate process, it would be a hawkish development. The ECB has continued to conduct fixed rate tenders despite hiking rates already this year as the peripheral banks are reliant on this process for liquidity.

Today’s other focus for the markets may be on the ECB measures to support peripheral banks. There has been talk of a two tier system where banks in the bailed out nations receive further liquidity provisions than the others, currently the ECB using fixed rate MRO and LTRO tenders for this process. Also the ECB will be quizzed about the recent Portuguese debt downgrade to junk by Moody’s. If another ratings agency follows and cuts Portugal to junk, this means that the ECB cannot accept Portuguese debt as collateral unless they make special provisions as they did for Greece.

With regards to the non-standard measures, described as “enhanced credit support” and the Securities Markets Programme, the ECB stated that these are “temporary in nature”.

Bull View

The Euro was under-pressure yesterday on the back of the Eurozone peripheral debt issues, and thus a surprise hawkish surprise may be required by the ECB to reverse the declines. The market may need the ECB to signal a more aggressive tightening phase for monetary policy, either through ramping up inflation rhetoric or the big surprise of another vigilance statement.

Bear View

The bears will cite the continued weakness in Eurozone peripheral debt as a sign that the market is “overvalued” and look to shrug off the expected hike by the ECB today. They may look for some sort of dovish surprise to support their case that the ECB are at least more deeply concerned about the ongoing peripheral issues.

Futex View

We favour bears, unless there is a hawkish surprise form the ECB, we favour the cross to weaken following the ECB press conference.

Cable has been relatively choppy this week but overall has bounced a little from the double bottom made at 1.5912-13. We are currently trading above the 1.6060 level but have still failed to break back above the head and shoulder neckline.

Thoughts from the trading floor

Cable traded below the 159.40 level on both Monday and Tuesday but managed to only move lower by 20 ticks, making a double bottom at 1.5912-13 which is now key short term support. A break below here and further losses down to 1.5820 and then 1.5750 are expected. The previously broken head and shoulders neckline today comes in at 1.6140. As long as the market fails to close above here on a daily basis then technically the market still has a bearish outlook.

Despite weakness seen in the sterling currency in recent weeks the recent run up in stocks going into the end of the quarter has lead to some weakness in the dollar as risk assets have seen a sharp bid. Sterling against the Euro is still very weak and the recent bounce in Cable seems more to do with the weakness in the Dollar rather than Sterling strength. The market is still currently trading below the 1.6110 level and the aforementioned neckline. If we do continue to bounce and break above these levels then the next area of interest is 1.6260-80 with 1.6310 providing key resistance.

Cable does still seem to be suffering from a fear of more QE by the Bank Of England and still looks weak across the board. However moves today and early next week may be dictated by market sentiment elsewhere. If we see an unwind in some of the ‘window dressing’ moves we have seen in the equity markets the past few days that could lead to a weakening of risk assets including Oil, which would lift the Dollar against the major currencies. If however the moves we have seen recently are the start of a more protracted move higher in the equities then expect Cable to see some more gains in the coming sessions.

Bull View

The bulls defended the 1.5940 level well this week and will look to target 1.6140 to the upside. A close above the head and shoulders neckline is key if the market is to bounce further.

Bear View

The market has failed to break the 1.5940 level significantly so far but the bears will look for another retest in the coming sessions. A break below the daily double bottom will target 1.5820 and 1.5750.

Futex View

We are still bearish the sterling currency in the medium term but are wary of risk related trades affecting the strength of the Dollar. We will still look to sell into bounces up to 1.6110-40 but view the equity and Oil markets closely.

The Euro vs. the Swiss Franc has staged a modest comeback over recent days and is trading just shy of the 1.2100 handle this morning. The catalyst for these moves has been the naive euphoria surrounding developments in Greece. Yesterday the Greek parliament voted to implement the next round of austerity measures.

Thoughts from the trading floor

The EUR/CHF is trading just above the 1.2050 handle, with the record low being marked around the 1.1800 handle. The recent failure from the 1.2320 level marks this as a good short term resistance. Also the 1.2400-27 level is the major resistance and short-term market pivot. If bulls are to avoid further liquidation they must look to take back this area of the market. Below here, it remains liable to big capitulations, as seen yesterday. Technically, the market looks set to continue to trade lower, with the break below 1.2400 marking the potential of this next leg lower to be aggressive and violent in its nature. Invariably this will mean that choppy price action will be seen until the market can make a clear run away from the 1.2400 handle. Immediate term resistance above the 1.2100 handle is 1.2142-50. Bears looking for the market to make successive lower highs on the weekly timeframe must look to defend this level. Thus a short position around here with a tight stop has a favourable risk/reward. If this level holds, look for the 1.1800 handle to give soon. A move through here would mean that the market has formed an outside bar on the weekly charts, which also coincides with an outside week on the German Bund. Thus a move through the 1.2150 handle and a break of this week’s lows in the bunds may signal an extended move higher for the EUR/CHF with a target of around the 1.2400 handle.

Yesterday saw the Greek parliament pass the new austerity package in order for Greece to clam its next round of aid tranche form the EU and IMF. There is talk that the EU are looking into further aid, with the most likely outcome to be fresh loans to Greece combined with some sort of decent Private sector involvement. There has been talk that the Eurozone countries will encourage the Greek debt holders to roll over maturing debt into longer term durations to help with Greece’s insolvency issues. Also Greece is being encouraged to speed up privatisation measures to raise capital.
Although, ultimately this measure will be just another case of “kicking the can down the road”, the short-term reaction for the markets is likely to be risk friendly. It seems at the moment that the EU is looking more towards the restructuring/re-profiling route and are trying to figure out a way to do so without leading to a technical default.

Bull View

The bulls will look for the market to stabilise around the current levels before the market can stage a comeback. A move back through the 1.2500 handle should stabilise the market.

Bear View

The bears will look to maintain pressure below the 1.2400 handle. The market has consistently made lower highs and lower lows on a weekly/monthly basis since 2010, and below 1.2403-89 the market remains liable to a fresh and violent leg lower over coming weeks.

Futex View

We favour the short, medium and long term bears. We feel that the Eurozone debt crises will approach the endgame scenario heading into the coming weeks.

Cable has broken lower over the past few days as talk of more QE in the UK, coupled with Bernanke seemingly ruling out QE3 in the US in the near term has weighed on the currency pair.

Thoughts from the trading floor

After holding the 1.6060 low last week the market fell just short of our 1.6280 target, topping out at 1.6260 on Wednesday. Since then we have seen a strong sell off with the Pound trading below 1.6000 for the first time since April 1 after finally making a clean break of the daily head shoulders. The market bounced of the key low made in March at 1.5940 yesterday as risk markets across the board saw a bounce going into the US close. This will be key going forward and a break below here should see further losses down to 1.5830. The low made in late January at 1.5750 is the major support level to the downside. In the longer term, the head and shoulders target is around the 1.5100 handle.

If yesterday’s low turns out to be a double bottom then upside resistance lies at 1.6060 first, before 1.6110 comes back into play. The daily head and shoulders retest today lies at 1.6125 and this will need to hold over the next few sessions if we are not to bounce back into the top half of the years trading range.

The pound has sold off over the past couple of sessions mainly due to the issue of Quantitative Easing on both sides of the Atlantic. In the UK there is quite a debate within the MPC between the doves and the hawks and the doves are currently winning. This stance was further strengthened with arch-hawk Andrew Sentance leaving the MPC recently. A poor reading from this months CBI distributive trades was further evidence of the weak recovery currently ongoing in the UK. Couple this with Fed chairmen Ben Bernanke seemingly ruling out another bout of stimulus (QE3) and the Pound has suffered against the Dollar.

Bull View

Bulls will hope yesterday’s low creates a double bottom at 1.5940 and will look to test the 1.6060 and 1.6110 levels. Getting back above the head and shoulders neckline is key if the market is to regain some upward momentum.

Bear View

A successful break of the head an shoulders neckline has lead to further selling down to the key short term 1.5940 level. Bears will look to make another test down here and a break should see further pressure come into the market, with 1.5830 and 1.5750 eyed.

Futex View

We will look to sell any bounces up to 1.6110-25 with a view to a break of yesterday’s low over the coming sessions.

The Euro vs. the Swiss Franc has remained under pressure over recent days, unable to recover with the rally in risk assets seen over the same period. This is suggesting that a quick turn-around is not imminent.

Thoughts from the trading floor

The EUR/CHF is trading around the 1.2050 handle, with the record low being marked around the 1.1950 handle. The recent failure from the 1.2320 level marks this as a good short term resistance. Also the 1.2400-27 level is the major resistance and short-term market pivot. If bulls are to avoid further liquidation they must look to take back this area of the market. Below here, it remains liable to big capitulations, as seen yesterday. Technically, the market looks set to continue to trade lower, with the break below 1.2400 marking the potential of this next leg lower to be aggressive and violent in its nature. Invariably this will mean that choppy price action will be seen until the market can make a clear run away from the 1.2400 handle.

Tuesday saw the Greek PM receive a vote of confidence from the Greek parliament to continue his role. This makes it more likely that the proposed austerity measures needed for Greece to receive the whole of the next trance of aid due from the first bailout package. Currently the market expects this austerity package to also pass. However we have heard continued discontent from the Greek opposition which means that this is far from a foregone conclusion. Thus the risks remain tilted towards risk aversion, especially where the EUR/CHF is concerned. The markets have used this corss as a major protection tool and therefore it has tended to not match euphoric risk rallies in other asset classes.

Going forward, as far as the market is concerned, restructuring and re-profiling of debt will likely be a bad outcome with regards to risk appetite. Re-profiling is likely to lead to a credit default type event. However, encouragingly for the bulls, Greece may get more money in exchange for national asset sales or at least Greece having to use these assets for collateral on the loan extensions. Although, ultimately this measure will be just another case of “kicking the can down the road”, the short-term reaction for the markets is likely to be risk friendly. It seems at the moment that the EU is looking more towards the restructuring/re-profiling route and are trying to figure out a way to do so without leading to a technical default.

Bull View

The bulls will look for the market to stabilise around the current levels before the market can stage a comeback. A move back through the 1.2500 handle should stabilise the market.

Bear View

The bears will look to maintain pressure below the 1.2400 handle. The market has consistently made lower highs and lower lows on a weekly/monthly basis since 2010, and below 1.2403-89 the market remains liable to a fresh and violent leg lower over coming weeks.

Futex View

We favour the short, medium and long term bears. We feel that the Eurozone debt crises will approach the endgame scenario heading into the coming weeks.