Daily Briefing 100718

1.  Review.

I was confident the risk-on rally was a little bit more sustained, but a strong reversal occurred at the end of the week, even for the bad data from US. Even if it is form a couple of weeks ago, I do not think anymore that EURUSD rally is only short covering, but the down trend looks like to be broken. S&P 1100 resistance hold on and AUDJPY 77.5 support was easily broken to 75.
Trades
No trades done, but the “only” -400€ at the beginning of the week is now -674€.

2.  Analysis.

"Fundamental analysis"
Last week was characterized again by a dollar weakness, undermined by a potential slow down in the recovery. with no really good fundamentals data. Manufacturing index, UoM sentiment an d unemployment data were lower than expected. TIC were low, showing that USD safe haven buying is slowing down. EURUSD recovery, but no risk currency gained the same time; gold din not surged despite USD loss and JPY gained versus the dollar too. US deficit and QE is becoming more a issue (

http://www.telegraph.co.uk/finance/currency/7893238/Feds-volte-face-sends-the-dollar-tumbling.html), alarming that a double dip recession is coming. Fed said that economy may not regain its path until 2016, calling for more QE and moving forward rate hikes expectances.

"Technical analysis"
EURUSD left historical lows and now is in the current Q1 levels range (short bias) at 1.24. It would be still short on rallies. Key support are 2006 1.18 and 2005 1.63 lows. EUR COT short decreased in a jump (-27k), USD long are decreasing (+14k), showing the big divergence is finally converging; JPY is now big long (+47k). USDJPY traded in the 88 area, breaking down in the 86 area. Probably is staying down here in these dips. US futures retested and failed to break the 1100 highs. AUD are little increasing (23k), showing again the end of the unwinding of the risk on positions. GOLD/Oil ratio is stalling at 15 since begging of July; but VIX is still quite volatile now at 26, pointing for a small risk off decreasing. Gold after the double top time at 1266 high is now at 1192, pointing to test the 1166 low.

"Market dynamics”
EURUSD rally seems to be likely a short sell covering; bank stress test expected to drain out uncertainness and to be a strong reversal turnaround (UBS). Dirk’s views is instead bullish on EURUSD (Goldman Sachs is expecting a 1.35 EURUSD and a USDJPY to 83 by the end of the year). European debt is likely to be solved (or at least there is a plan for it) and bank stress should not cause more stress. ECB is not going to do rate hikes before the Fed and the Fed is not going to do it by this year, looking to the bad economic data. So it looks like that the EURUSD downtrend is broken and the EURUSD bias is to be set to long. High uncertainty is still alive and I would not add other risk positions. JPY gained against every currency, USD too. China data were not too hot and did not added stress to the market; also the housing bubble is not going to come and government is managing carefully the issue.

Median grid
EURUSD GRID 1.220 - 1.280, long bias
USDJPY GRID 88.00-92.00, neutral bias
AUDJPY GRID 74.00-82.00, short bias

Basically still a risk-off bias by the end of week

Prices
US down at 1062, (Q2)
GOLD down at 1192 (Q2)
Crude 75.5
EURUSD 1.2930 (Q1+)
USDJPY 86.5 (Q1-)

3.  Plan
What to say: quite close to the line in the sand … I will try to work out of the money positions for JPY longs (too bad);

EURUSD
I will enter a long B&B on the yob level (1.2558) as retracement; 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
Already too many positions (+5)
Comment:< >

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

EURNOK
Hold short positions
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 86.57 -667.0000
6 Open 05-mag-10 USDJPY L 94.5900 Q2 1:1 toe-in 86.57 -802.0000
10 Open 06-mag-10 USDJPY L 93.8600 Q3 1:1 Panic 86.57 -729.0000
16 Open 14-mag-10 USDJPY L 92.3000 Q1 1:1 B&B 86.57 -528.0000

18 Open 02-giu-10 USDJPY L 92.2100 Q2 1:1 B&B 91.4000 -520.0000
6 Open 04-mag-10 AUDJPY L 86.0500 Q4 1:1 toe-in 75.21 -1084.0000
7 Open 06-mag-10 AUDJPY L 85.1300 Q4 1:1 toe-in 75.21 -992.0000
16 Open 20-mag-10 AUDJPY S 72.8800 Q1- 1:1 Hedge 75.21 -364.0000

4.2 Leverage

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

Total positions per currency:
USDJPY +5
EURUSD 0
AUDJPY +2,-1
Position
USDJPY -667, -802,-729, -528, -520
EURUSD 0

AUDJPY -1084, -992 (-364)

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.  (1445=5%)
2.  Account equity (Including open positions) .  (9226= -30%)
3.  Account equity if planned trades go wrong: 1000
4.  Pip distance to line in the sand level.  1700, with gear (8) 215