1. Review.
I wrote “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); 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”. EURUSD broke 1.32 level on Friday US job report. No decent dips before this move to enter a long position. “Releases this week will be important for US almost every day and I will look on that as confirmation about US weakness”. I will not expect a strong JPY against US;” USD lose ground versus EUR , JPY and AUD.” BoJ intervention is expected below 85. “ JPY Trade minister said he is very concerned about yen rise and they would need to take some action in future. “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”. Anyway wome data below the expected was disappointing for the AUD.
Trades
Holding the same now “only” -526€ at the end of the week , looking for the expected risk on increase to decrease the drawdown. No trades this week.
2. Analysis.
"Fundamental analysis"
Last week was characterized by a lot of US fundamentals; employment data was a bad data, despite some positive comment by US president, determining again a dollar weakness, suggesting again that this a recovery with no employment and just supported by government spending. Only good data were ISM for manufacturing and non manufacturing. Good data come again from EZ, especially from the German data. Gold after a sharp decline regained its levels and jumped on US job jamboree. Fed is expected calling for more QE and moving forward rate hikes expectances. This factor anyway could be already priced in and QE announcement could not weaken the USD.
"Technical analysis"
EURUSD jumped around 1.33 levels. Long positions could be taken on dips, but upside move looks like limited, due to the austerity measures and the growth anyway slow. EUR COT short decreased again (-7k), USD long are stable (+12.3k), no more divergence and USD index is now in the 80 support area; JPY is increasing long positions long (+48k). USDJPY traded in the 86 area. Probably is staying down here in these dips. US futures retested the 1100 highs, but there is a failure to close above 100 and 200 day MA. AUD are increasing (49k), showing a bias versus risk-on positions. GOLD/Oil ratio is stalling at 15 since begging of July, with both oil and gold surging; but VIX is not that volatile now at 21 support level. Gold after taking the 1156 lows high is now back at 1205, pointing to go back to the 1300 area.
"Market dynamics”
A good summary about the market sentiment comes from A Pfennig for Your Thoughts 8/6/2010; there are now two divergent views: the first is the risk-on/risk-off; they buy USD on bad USD data, as safe haven currency and they sell USD on good US data, moving into risk trades. The second has a more classical approach based on interest differentials; they sell USD on bad US data, because the interest will kept low and they buy USD when data are good, because of potential interest tightening. The last approach has recently got investors interest. I should chose one strategy based on the economy recovery expectation: if I think that the recovery cannot be without US consumers I will chose the first; if I think that the recovery can be without US consumers, but the rest of the world will be enough, I will chose the second, more focused on interest differentials. I think I will be for the second approach.
EURUSD rally seems to be likely to stay at the 1.32 levels, as median (now 1.28 and 1.35 levels would be the range); EURUSD bias is to be set to neutral. Interest differential are playing a role now: the spread between EUR and USD 3 month labor is at 0.4 boosting the EUR. Rising EUR labor is not a worry if not accompanied by a falling USD labor. There reason that the spread will weaken in the next weeks signaling a medium top in EURUSD. For the moment USD is still a sell and I will enter on long on dips below the 1.3 level. Next week FOMC meeting will be one of the most important of the year. If further QE will be announced bond yields will fall sending the USD lower (good for JPY long). If not, that is Fed will not buy back Treasuries) there is potential risk for a Treasuries sell off, sending yields and USD higher (good for JPY shorts). German data are good and the ECB bonds buy back is about to close; other parts of EZ do not show any sign of growth, giving not much space for tightening. There is then some space to the upside but the medium term is still mined from fiscal concerns.
Median grid
EURUSD GRID 1.280 - 1.350, (grid change), neutral bias
USDJPY GRID 88.00-92.00, neutral bias
AUDJPY GRID 73.00-81.00, short bias
Basically still a risk-off bias by the end of week
Prices
US up at 1119, (Q4)
GOLD up at 1205 (Q3)
Crude 80.82
EURUSD 1.3280 (Q3)
USDJPY 86.5 (Q3)
3. Plan
I will try again to work out of the money positions for JPY longs, just sitting on them for now. I will try to enter a long EURUSD position on a dip; I will monitor EURSEK for a long if there is a retracement. I will add a short on EURNOK
EURUSD
I will enter a long B&B on the yob level (1.3020) as retracement; I will hedge on a couple of level down (-100 pips). I will take profit at 50-100 pips
Comment:< >
USDJPY
Already too many positions (+6)
Comment:< >
AUDJPY
Already too many positions (+3)
I will enter a short B&B on the yob level (78.31) as retracement; I will hedge on a couple of level down (-100 pips). I will take profit at 50-100 pips
Comment:< >
EURNOK
Hold short positions
I will enter a short B&B on the yob level (7.9) as retracement; I will hedge on a couple of level down (-100 pips). 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 85.50 -774.0000
6 Open 05-mag-10 USDJPY L 94.5900 Q2 1:1 toe-in 85.50 -859.0000
10 Open 06-mag-10 USDJPY L 93.8600 Q3 1:1 Panic 85.50 -784.0000
16 Open 14-mag-10 USDJPY L 92.3000 Q1 1:1 B&B 85.50 -627.0000
18 Open 02-giu-10 USDJPY L 92.2100 Q2 1:1 B&B 85.50 -618.0000
19 Open 30-lug-10 USDJPY L 86.3400 Q2 1:1 B&B 85.50 -72.0000
6 Open 04-mag-10 AUDJPY L 86.0500 Q4 1:1 toe-in 78.48 -757.0000
7 Open 06-mag-10 AUDJPY L 85.1300 Q4 1:1 toe-in 78.48 -665.0000
17 Open 03-giu-10 AUDJPY L 78.8500 Q1- 1:1 Hedge 78.48 -29.0000
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 -774, -859,-784, -627, -618, -72
EURUSD 0
AUDJPY -757, -668, -29
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) . (9474= -31%)
3. Account equity if planned trades go wrong: 1000
4. Pip distance to line in the sand level. 1974, with gear (9) 219
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