Daily Briefing 100823

1.  Review.

I wrote “Even if a consider that one should more focused on interest differentials these days are more oriented for a short term approach based on risk-on/off. USD weakness looks like already priced, but further slowdown could be led to EUR strength (WA says after price is bottomed 1.24). EUR felled very quickly; 1.28 is a first support area, next will be 1.24.” Bad US data make the EUR fell to 1.27 breaking the 1.28 support level. “Irish bond auction should be monitored on Tuesday to see risk sentiment against EUR and CDS for Irish bonds. Short term financial data look like not supportive for EUR . I will watch closely the 1.28 support to confirm the EUR bullish sentiment.” The support held during the auctions but failed on bad Thursday employment data. “Tuesday there will be lot of numbers from US, PPI, house data and manufacturing.” Those number were mixed, bad Thursdays bad data switched to a risk off sentiment. “Regarding JPY and BoJ intervention I will monitor 1. JGB yields (I see it on CNBC ticker) its 1.00% now. 2. US 10 yr yields 2.72% now, low 2.67% since Fed. 3. German bund yields. 4. USDJPY price action during any risk off & risk on events. Those data will help to determine if JPY has bottomed”. JGB are 0.94%, TYN 2.62%, Bunds at 2.26%. JPY gained on bad data release at the 85.0, the support hold and recovery to the 86.5. This is the fourth failed test to the 85.0 handle in two weeks.
Trades
Bad drawdown at -630€ at the end of the week , still waiting for the risk-on increase; just a hope after bad US data?

2.  Analysis.

"Fundamental analysis"
Last week was characterized by mixed US data and some bad data on Friday that led to a flight to safety and a risk-off sentiment again. Some good data come again ZEW and German data, but it was offset by bad US data and flight to safety. Long term upside move looks like limited, due to the austerity measures and the growth anyway slow. It is difficult to see a bottom in this risk reversal sentiment, after risk on played for a couple of weeks. Friday data ware totally unexpected, but show that US is not really on a growth path. Anyway the data are considered not that important and maybe could be a tiny market action. Gold jumped above 1200. China is buying EUR and JPY, dumping US bonds. Greece and German spread increased again (www.bloomberg.com/apps/quote?ticker=.GRK:IND). BoJ intervention is linked to US growth; if positive data JPY would weaken without need of intervention, but strong JPY could stay for a long time.

"Technical analysis"
EURUSD felled at the 1.27 levels, and the 1.28 did not hold; if further downside next stop is 1.24. EUR COT short increased after rising since June again (-7k), USD long increased (+18.7k) and USD index hold in the 80 support area; JPY is increasing long positions long (+50k). USDJPY traded in the 86 area. Probably is staying down here in these dips. US futures retraced from the 1100 highs to 1070 (confirming the failure to close above 100 and 200 day MA). AUD are increasing (54k), showing a bias versus risk-on positions, very strange in this risk-off sentiment. GOLD/Oil ratio raised at 16.3, from the 15 level since begin of July, with both oil down and gold surging; but VIX stays at the 25.5: did we saw a double bottom? Gold hit 1237, pointing to the previous high 1260 area.

"Market dynamics”
Again I say that these days are more oriented for a short term approach based on risk-on/off. USD weakness looks like already priced, but further slowdown could be led to EUR strength (WA says after price is bottomed 1.24). EUR felled very quickly; 1.28 first support area looks like broken, next will be 1.24. Spread Greek German bonds should be monitored and can sustain negative EUR action. Short term financial data look like not supportive for EUR. I will watch closely the 1.28 support to confirm the EUR bullish sentiment. Regarding JPY and BoJ intervention I will monitor again JGB yields, US 10 yr yields, German bund yields and USDJPY price action during any risk off & risk on events. Those data will help to determine if JPY has bottomed. Rumors of BoJ intervention and possible meeting with BoJ and government could cause JPY volatility.

Median grid
EURUSD GRID 1.280 - 1.350, (grid change), neutral bias
USDJPY GRID 84.00-88.00, neutral bias
AUDJPY GRID 73.00-81.00, short bias

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

Prices
US down at 1077, (Q2)
GOLD up at 1237 (Q3)
Crude 72.17
EURUSD 1.2717 (Q1)
USDJPY 85.261(Q2)

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 book the B&B long EURUSD and reenter position on a dip; I will monitor

EURUSD
I will close the long if further downside at 1.2630. If not I will enter a long B&B on the yob level (1.2795) 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)
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EURNOK
Hold short positions

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4.  Trades
4.1 open trades, their type & their value:
7 Open 13-ago-10 EURUSD L 1.2805 Q1 1:1 B&B 1.2717 -88.0000

2 Open 13-apr-10 USDJPY L 93.2400 Q3 1:1 toe-in 85.79 -713.0000
6 Open 05-mag-10 USDJPY L 94.5900 Q2 1:1 toe-in 85.79 -851.0000
10 Open 06-mag-10 USDJPY L 93.8600 Q3 1:1 Panic 85.79 -776.0000
16 Open 14-mag-10 USDJPY L 92.3000 Q1 1:1 B&B 85.79 -619.0000
18 Open 02-giu-10 USDJPY L 92.2100 Q2 1:1 B&B 85.79 -619.0000
19 Open 30-lug-10 USDJPY L 86.3400 Q2 1:1 B&B 85.79 -64.0000
6 Open 04-mag-10 AUDJPY L 86.0500 Q4 1:1 toe-in 75.83 -1021.0000
7 Open 06-mag-10 AUDJPY L 85.1300 Q4 1:1 toe-in 75.83 -929.0000
17 Open 03-giu-10 AUDJPY L 78.8500 Q1- 1:1 Hedge 75.83 -237.0000

4.2 Leverage

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

Total positions per currency:
USDJPY +6
EURUSD +1
AUDJPY +3
Position
USDJPY -713, -851,-776, -619, -610, -64
EURUSD -88
AUDJPY -1021, -927, -237

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) .  (8794= -35%)
3.  Account equity if planned trades go wrong: 1000
4.  Pip distance to line in the sand level.  1294, with gear (10) 129