Daily Briefing 100531

1.  Review.

I said “More downside is expected for the EURUSD in the long run; the 1.2150 level hold and I would expect here a correction to 1.32... I would expect risk off remaining to this low for the next week, but not deteriorate. I see the risk asset rally at attractive levels, but too risky to add positions to risk asset exposure. Basically I have to decide if to stay with the long and close the shorts with a loss or stay with the short and close the long with a huge loss, hoping to have something back with the shorts” EURUSD did not corrected that much, juts 1.24 and is trading now at 1.22. Risk did not deteriorate and I waited to add new risky positions, but it was time to close some hedge short. Despite risk off not deterioration gold stayed flat, while oil rallied.
Trades
Close a USDJPY and AUDJPY short hedge position. Still holding EURNOK shorts, despite the overshooting. Traded a profitable EURUSD short.

2.  Analysis.

"Fundamental analysis"
Global markets stabilized last week, showing that the previous sell off was extreme. Some data *MSCI index and CRB index rebounded from the recent lows). Fundamentals data were lower than expected, especially regarding US GDP. Dollar, JPY and CAD were rising anyway on bad figure (contrary to the expected, sign as USD is acting as safe haven currency). Unemployment are always stable at 460k. Spain downgrading to AA+ after market close added pressure to EURUSD

"Technical analysis"
EURUSD gained the 1.24 level, but back to 1.22 and it looks like trading in the Q1-Q2 levels range. It would be a short on rallies. Key support is still the 1.2150 low. EUR COT short are again at the historical lows (-106k), USD long are the decreasing (+21k), showing a big divergence; JPY short are lowering (-10k). USDJPY after hitting 88 level, retested the 98 level back to 93, Is trading back in the 89 area. It is dangerous to a buy on these dips. US futures were sold off, hitting the 06 low. AUD long decreased (+19k), unwinding the risk on positions. GOLD/Oil ratio is still high from a 13 in the last months to 16 and VIX is back at 32, pointing for a risk off sentiment. Gold is to be monitored, because is flat since a week

"Market dynamics".
More downside is expected for the EURUSD in the long run if the 1.2150 level does not or the 1.2090 is reached. Key is the initial market reaction after S&P Spain downgrade. Three month outlook is still 1.18 level, suggesting short on rallies. A break of the 1.2680 resistance will suggest a reach of the 1.32 level. There some potential for risk to grow in the next week, suggesting a buy of JPY crosses on dips and short closing. I see the risk asset rally at attractive levels, maybe time to add diligent positions to risk asset exposure with quick profit taking. I decided if to stay with the higher long and close the shorts with a small loss too. Fundamental data to be monitored to assess the risk sentiment are US ISM report on Tuesday and Thursday and the Employment report on Friday.

Median grid
EURUSD GRID 1.2300 - 1.30, short bias
USDJPY GRID 88.00-92.00, neutral bias
AUDJPY GRID 78.00-86.00, neutral bias

Basically still a risk-off bias, but pausing risk

Prices
US down at 1084, (Q1-, same as last week)
GOLD up at 1214 (Q2)
Crude 74
EURUSD 1.22 (Q1)
USDJPY 91 (Q1)

3.  Plan
I will try to work out of the money positions for JPY longs;.

EURUSD
I will enter a long B&B on the next yob level (1.2350); I will hedge on a couple of level down (-100 pips). I can open a new toe in long same level. I will take profit at 50-100 pips
Comment:< >

USDJPY
Close the shorts on a dip (90) and buy a B&B in the grid
I will enter a long B&B on the next yob level (91) as pullback 1:1 from 90, I will hedge on a couple of level down (-100 pips). I can open a new toe in long same level. I will take profit at 50-100 pips
Comment:< Risk was positive and I closed a short in the money>

AUDJPY
Close the shorts on a dip (75) and buy a B&B in the grid
I will enter a long B&B on the next yob level (77) as pullback 1:1 from 75, I will hedge on a couple of level down (-100 pips). I can open a new toe in long same level. I will take profit at 50-100 pips
Comment:< Risk was positive and but I did not closed shorts, deep out of the money>

EURNOK
Hold short positions; I will enter a short B&B on the next yob level in the grid (7.933), I will hedge on a couple of level down (-100 pips). I can open a new toe in long same level. I will take profit at 50-100 pips
Comment:< >

4.  Trades
4.1 open trades, their type & their value:

2 Open 13-apr-10 USDJPY L 93.2400 Q3 1:1 toe-in 91.06 -218.0000 -203.974
6 Open 05-mag-10 USDJPY L 94.5900 Q2 1:1 toe-in 91.06 -353.0000 -333.868 Buy a dip
10 Open 06-mag-10 USDJPY L 93.8600 Q3 1:1 Panic 91.06 -280.0000 -262.5542 Buy a dip
14 Open 07-mag-10 USDJPY S 91.0700 Q1- 1:1 Hedge 91.06 1.0000 0.7000
16 Open 14-mag-10 USDJPY L 92.3000 Q1 1:1 B&B 91.06 -124.0000 -114.691
17 Open 14-mag-10 USDJPY S 89.1300 Q1- 1:1 Hedge 91.06 -193.0000 -172.1738
6 Open 04-mag-10 AUDJPY L 86.0500 Q4 1:1 toe-in 77.81 -892.0000 -767.1075 Normal long bias
7 Open 06-mag-10 AUDJPY L 85.1300 Q4 1:1 toe-in 77.81 -800.0000 -681.9699 Buying a dip
15 Open 20-mag-10 AUDJPY S 72.8700 Q1- 1:1 Hedge 77.81 -462.0000 -310.9956 Open 6
16 Open 20-mag-10 AUDJPY S 72.8800 Q1- 1:1 Hedge 77.810 -462.0000 -310.2856 Open 7

4.2 Leverage

Aggregate position size expressed as a gearing ratio (Ex = 4:1)

Total positions per currency:
USDJPY +4,-2
EURUSD 0
AUDJPY +2,-2
Position
USDJPY -203, -333,-262, -114, (1 ,-172)
EURUSD 0

AUDJPY -892, -800 (-462, -462)

4.3  Effect of planned trades

Account summary:
ActivTrades live account
Starting date: 1/4/2010
Starting capital: 1366
Line in the sand level:  750

1.  Account balance (Settled trades) and growth as a percentage.  (1337=-3%)
2.  Account equity (Including open positions) .  (1180= -14%)
3.  Account equity if planned trades go wrong
4.  Pip distance to line in the sand level.  4305, with gear (2) 2150