Daily Briefing 100606

1.  Review.

I said “More downside is expected for the EURUSD in the long run if the 1.2150 level does not or the 1.2090 is reached. … There some potential for risk to grow in the next week, suggesting a buy of JPY crosses on dips and short closing.   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” . EURUSD broke the 1.2 level, now trading at 1.196. Risk rallied a little during the week, looking for better days ahead, but the weak US job report on Friday put the risk off mode again, with huge JPY short risk crosses losses.
Trades
I close another USDJPY and AUDJPY short hedge positions, with some loss. Still holding EURNOK shorts, despite the overshooting.

2.  Analysis.

"Fundamental analysis"
Global markets destabilized last week after the NFP and a Hungary default talk, with a big sell off. Fundamentals  NFP data were lower than expected,. Dollar and  JPY were rising anyway on bad figure (again sign as USD is acting as safe haven currency).  NFP were quite difficult to decipher but it was significant and will last for the next weeks on negative risk sentiment; Hungary default if more a political talk that a real issue, but put some doubt again about the sovereign debt solvency. A week CNY PMI and mixed data from US gave  no sign of clear recover or if the stock market is simply  drove by easy money.

"Technical analysis"
EURUSD hit historical lows, gained the 1.1.9 level and it looks like a strong break of the current Q1 levels range. It would be a short on rallies. Key support are 2006 1.18 and 2005 1.63 lows. EUR COT short are again decreasing from at the historical lows (-93k) maybe for some short covering during days before, USD long are still decreasing (+20k), showing a big divergence; JPY short are lowering (-6k).  USDJPY after hitting 88 level, retested the 98 level back to 93, back in the 89 area, now at 92 area. It is dangerous to a buy on these dips. US futures were sold off, hitting the 1065 low. AUD long decreased (+15k), unwinding the risk on positions. GOLD/Oil ratio is still high from a 13 in the last months to 17.2 and VIX is again at 35, pointing for a risk off sentiment. Gold is to be monitored, because is flat since a week.

"Market dynamics".
Risk events are the EU finance minister meeting on Tuesday and the CNY CPI and other data on Thursday and Friday. Risk off sentiment looks like to last for some time (weeks?) so I will not add more risk positions to my portfolio. I will be a seller on EURUSD dips (UBS three month forecast is 1.15). JPY is expected to weaken for fundamentals (UBS three month forecast is 95), but near weakness is expected for risk aversion

 

Median grid
EURUSD GRID 1.2300 - 1.30, short bias (Grid change?)
USDJPY GRID 88.00-92.00, neutral bias
AUDJPY GRID 74.00-82.00, short bias

Basically still a risk-off bias

 Prices
US  down at 1064, (Q2,)
GOLD up at 1219 (Q2)
 Crude 70.3
EURUSD 1.196 (Q1-)
USDJPY 91.7 (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 (1.210); 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)
Comment:< >

 

AUDJPY
Close the shorts on a dip (75)
Comment:< >

 

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: (TODO)

2 Open  13-apr-10   USDJPY  L   93.2400 Q3  1:1 toe-in  91.70     -136.0000  
6 Open  05-mag-10   USDJPY  L   94.5900 Q2  1:1 toe-in  91.70     -271.0000
10 Open 06-mag-10   USDJPY  L   93.8600 Q3  1:1 Panic   91.70     -198.0000
16 Open 14-mag-10   USDJPY  L   92.3000 Q1  1:1 B&B 91.70    -42.0000
6 Open  04-mag-10   AUDJPY  L   86.0500 Q4  1:1 toe-in  77.81 -1089.0000
7 Open  06-mag-10   AUDJPY  L   85.1300 Q4  1:1 toe-in  77.81 -997.0000
16 Open 20-mag-10   AUDJPY  S   72.8800 Q1- 1:1 Hedge   77.810     -228.0000

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.  (1389=1.6%)
2.  Account equity (Including open positions) .  (1173= -15%)
3.  Account equity if planned trades go wrong: 1000
4.  Pip distance to line in the sand level.   4237, with gear (4) 1059