Daily Briefing 100802

1.  Review.

I wrote “EURUSD rally seems to be likely to stay at the 1.3 levels, as median (1.25 and 1.32 levels would be the range); It looks like that the EURUSD downtrend is broken and the EURUSD bias is to be set to long and I will enter on long on dips below the 1.3 level”. This was confirmed by this week price action, testing the 1.32 level and then staying in the 1.31 area. ECB slowed down its bong repurchase program. “I will look on that as confirmation about EZ strength and US weakness.“ Data from US confirmed US weakness “I will expect a strong JPY against US; BoJ intervention is expected below 85.”. JPY could benefit from a rising Yuan, then the 10Y note should be monitored for a sharp rise, that will call for a BoJ intervention (because in this case the JPY will rise due to the lack of support of US buying). US data ware confirming weakness in recovery. EU data instead confirmed an unexpected strong rise in economy.
Trades
Holding the “only” -487€ at the end of the week , looking for the expected risk on increase to decrease the drawdown. I entered a long USDJPY at 86.34, but I did not the 88 level short.

2.  Analysis.

"Fundamental analysis"
Last week was characterized again by a dollar weakness, undermined by a potential slow down in the recovery, with no good fundamentals data: low consumer confidence, low orders, no improvement on the jobs, slow down in the GDP . Good data come instead from EZ, especially from the German data. Gold after a sharp decline (option expiring date) regained its levels. Fed said that economy may not regain its path until 2016, calling for more QE and moving forward rate hikes expectances. There is a call for a deflation risk in US and the QE policy will be support it.

"Technical analysis"
EURUSD stayed around 1.31 levels. It would be not anymore short on rallies but long positions could be taken on dips. EUR COT short decreased again (-21k), USD long are stable (+14k), showing the big divergence is finally converging and USD index is slowly pointing to the 80 support area; JPY is decreasing long positions long (+29k). USDJPY traded in the 86 area. Probably is staying down here in these dips. US futures retested the 1100 highs, even with 68% of surprising earnings it did not rise that much. AUD are increasing (40k), showing a bias versus risk-on positions. GOLD/Oil ratio is stalling at 15 since begging of July; but VIX is still less volatile now at 24, but always suggest a uncertainness in the markets. Gold after taking the 1156 lows high is now back at 1180, pointing to go back to the 1200 area.

"Market dynamics”
EURUSD rally seems to be likely to stay at the 1.30/1 levels, as median (1.25 and 1.32 levels would be the range); like that the EURUSD downtrend is broken and the EURUSD bias is to be set to long. The chances are that the EURUSD will go back in the grid or a clear break of the 1.32 level will bring it to the 1.33/4 area. and I will enter on long on dips below the 1.3 level. Risk sentiment, that is giving boost to the EUS, is still uncertain and I will not buy on a breakout. Moody’s downgrade comments and end month portfolio balancing weighted on US last week, but this week economic data can do the same to weight the USD. Some technical factor could support US anyway. Releases this week will be important for US almost every day and I will look on that as confirmation about US weakness. High uncertainty is still alive and short term view should be taken. I will not expect a strong JPY against US; BoJ intervention is expected below 85. Long term outlook is still positive for AUD and CAD. Weakness of JPY cross are more for risk off view (JPY as safe heaven) then for bad fundamentals.

Median grid
EURUSD GRID 1.250 - 1.320, (grid change), long bias
USDJPY GRID 88.00-92.00, neutral bias
AUDJPY GRID 73.00-81.00, short bias

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

Prices
US up at 1099, (Q4)
GOLD down at 1180 (Q2)
Crude 78.93
EURUSD 1.3051 (Q1+)
USDJPY 86.5 (Q1-)

3.  Plan
I will try again to work out of the money positions for JPY longs and enter a long EURUSD position; I will monitor EURSEK for a long if there is a retracement.

EURUSD
I will enter a long B&B on the yob level (1.2860) 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 (+6)
Comment:< >

AUDJPY
Already too many positions (+3)
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 86.46 -678.0000
6 Open 05-mag-10 USDJPY L 94.5900 Q2 1:1 toe-in 86.46 -813.0000
10 Open 06-mag-10 USDJPY L 93.8600 Q3 1:1 Panic 86.46 -740.0000
16 Open 14-mag-10 USDJPY L 92.3000 Q1 1:1 B&B 86.46 -485.0000
18 Open 02-giu-10 USDJPY L 92.2100 Q2 1:1 B&B 86.46 -575.0000
19 Open 30-lug-10 USDJPY L 86.3400 Q2 1:1 B&B 86.46 12.0000
6 Open 04-mag-10 AUDJPY L 86.0500 Q4 1:1 toe-in 78.17 -788.0000
7 Open 06-mag-10 AUDJPY L 85.1300 Q4 1:1 toe-in 78.17 -696.0000
17 Open 03-giu-10 AUDJPY L 78.8500 Q1- 1:1 Hedge 78.17 -68.0000

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

Total positions per currency:
USDJPY +6
EURUSD 0
AUDJPY +3
Position
USDJPY -678, -813,-740, -485, -575, 12
EURUSD 0
AUDJPY -788, -696, -68

4.3  Effect of planned trades

Account summary:
ActivTrades live account
682Starting 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) .  (10018= -27%)
3.  Account equity if planned trades go wrong: 1000
4.  Pip distance to line in the sand level.  2518, with gear (9) 279