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Copper moved overnight ahead of US non-farms

Four markets in focus today: GBP/AUD, GBP/JPY, EUR/GBP and High Grade Copper.

Copper
Source: Bloomberg

GBP/AUD

I suggested long GBP/AUD on June 18 at 1.8140 and after a period of weakness the trade is now in the money. Yesterday’s Australia trade balance was poor and given the huge contribution net exports provided to the Q1 GDP print the massive deficit could put downside risks to the Q2 number on September 3. At 11:30 today we get Australia’s May retail sales and economists expect an unchanged reading, so an unexpected fall could increase the fears around Q2 growth. GBP/AUD has broken above the downtrend drawn from the May 21 high. I continue to hold a positive bias here.

GBP/JPY

I looked at long GBP/JPY trades on June 20 at 173.55 and the trade seems to be working quite well at present with sterling clearly the currency to be leveraged too. Given the recent rally and break out I would look to move stop losses on the trade to 173.20, just below the 61.8% retracement of the recent move.

EUR/GBP

EUR/GBP shorts seem to be working well and I feel lowering stops on the trade to 0.8085, just above the 61.8% retracement of the move from 0.8152 (on May 29). I am looking at an extension to the 0.7920 area; however I feel that over the medium-term we could see the 78 handle come into play. The ECB meeting takes place at 21:45 AEST, with Mario Draghi’s press conference is 45 minutes later. We shouldn’t hear any new measures announced, however we could get more details around Targeted Long-Term Refinancing Operations (TLTRO). There are risks the EUR under goes some short covering tonight, but I expect this to be limited.

High Grade Copper

Overnight we saw a strong ADP payrolls print (281,000 jobs vs 200,000 expected) in the US and as a result expectations around tonight’s non-farm payrolls report (due at 22:30 AEST) are elevated. The market is looking for 215,000 jobs to be created and judging by price action in various markets after the ADP private payrolls print, it seems the key beneficiaries of a robust print could be high-grade copper. US bonds had a good sell-off as well on the jobs print, but moves were tempered by dovish language from Janet Yellen.

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