Daily Briefing 101022

1.  Review.

I said “USD, that was supposed to go down, strengthen, suggesting a correction in extreme short positions. But this could end up in a significant shift in the market direction, as we see relative growth prospects in monetary policy as he ground for further USD strength. Growth slowdown is weighting on EUR and JPY.” USD recovered again versus EUR and JPY, with the Irish crisis still opened, but risk turned off at the end of the week, where EZ crisis looks under control. “Further USD strengthen suggest commodities and gold weakness in the week ahead. WTI reached pivotal 84-85$ prices; weakness below would suggest a decline to 80 level on next week”. Crude reached 80$ level and gold declined to 1330; rebound at the end of week “ I would expect both gold and crude to decline sustaining a strong USD. I think there is some guidance to exploit EZ sovereign debt during G20 (maximum exposure) to hide the QE2 effects, showing a strong US that is not. Then I will be long EUR if the 1.36 level holds and long USDJPY if dipping.”. 1.36 is holding, after a small dip at 1.3490, JPY did not dipped
Trades
Shorted EURUSD at 1.530, expecting a range to 1.34 but I closed with loss at 1.3670. Closed a USDJPY long from 83.25 at 83.5

2.  Analysis.

"Fundamental analysis data"
US retails sales: 1.2%, better than expected
AUD RBA minutes: rate hike was well pondered, a modest hike was prudent.
ZEW: EZ 13.8 against 2.3; German 1.8, against an expected -5; first increase since seven months. German GDP growth is expected to be 3.7%, faster growth since 1991.
USD PPI: 0.4% against a 0.7% reflecting low car, truck and computer demand. Low PPI keep a lid on lower inflation; Companies are not increasing prices but reducing off-the-shelf package size.
US TIC: long term securities purchases were 80bl against 100bl expected, low from previous 120bl reading
US CPI: 0% against expected 0.1%, to a record low inflation.
US unemployment claims: +2k to 439, less than expected 442k
US housing data weak down 11%. That is not helping employment and giving credit to QE.
US Philly Fed Manufacturing Index strong at 22, 4 times the expected value.
German PPI m/m: 0.4% as expected, that accelerate inflation in respect of previous year.
CNY CPI: 4.4% against 3.6% expected, that suggest a new RRR rate hike of 50 bps, expected end of year

"Fundamental analysis"
EUR industrial production for Q3 is suggesting a slowdown in EUR growth and this is still expected to be more in Q4. USD data was again more upbeat. Bernanke justify QE2 with these unemployment numbers. CNY rate hike announcement caused a small risk off but it was good digested by the market; good US data, no bad EZ, end of Irish crisis and QE2 free money are still supportive for risk on.
US yields increased and this could be supportive for the USD.
Risk about EZ peripherals countries is rising again (spreads and CDS rising again) caused EUR to move down in the 1.35 area. the Irish story is QUITE over and a rescue package is coming. BoJ is not intervening at these YEN level .

"Technical analysis"
USD gained further of the pre-QE2 levels after QE2 release losses, but lost gains at the end of week especially against EUR. EURUSD tumbled at 1.35. Support at 1.36 look like to hold. 1.36 area is still a key support for EUR, because is the area where started dipping in the 1.2 levels. COT data are below, basically flat. USD close to 78.5, sill above the 78.4 support, before resistance; USDJPY traded stable comfortably in the 82 area after weeks jumped in the 83 area. Again at this level BoJ would intervene if the 80 level will be broken. Gold all time highs at 1.3060; US futures stable again in to the 1180. GOLD/Oil ratio stable, little rising; VIX stable to low levels. 2.8 is a critical resistance for US yields, to be watched for the USDJPY correlation.
COT JPY up at 24.1k (-12k)
COT USD up to 10.6k (+2.2k)
COT EUR at 10.1k (-13kk)
COT AUD down 26.9k (-13k)
TYN up to 2.87% (+0.1%)
JGB at 1.07% (+0.03%)
Bunds at 2.7%. (+0.2%)
German/Greece up to 8.86% (-0.01%)
VIX down to 18.4 (-0.4)
Gold/Oil up to 16.5 (+3.8)

"Market dynamics”
Again this week USD, that was supposed to go down, strengthen, suggesting a correction in extreme short positions. Further US strengthen is expected in the week ahead, especially versus EUR if market shift attention to other peripherals or Spain. Further USD strengthen suggest commodities and gold weakness in the week ahead. WTI reached pivotal 84-85$ prices; weakness below would suggest a decline to 80 level on next week. I would expect both gold and crude decline to sustaining a strong USD. Anyway Dirk opinion is not to love too much USD beyond this Irish episode. I would agree more with this view if support holds and risk does not turn on. Then I will be long EUR is the 1.36 level holds and long USDJPY if dipping.

Median grid
EURUSD GRID 1.320 - 1.40, grid change up bias
USDJPY GRID 80.00-84.00, up bias
AUDJPY GRID 73.00-81.00, up bias

Prices
US up at 1197, (+3, Q4)
GOLD to at 1353, (-13, Q4)
Crude 81.8 (-3$)
EURUSD 1.375 (-0. 0, Q2)
USDJPY 83.56 (+1.0, Q4)
AUDJPY 82.38 (+-1.1 Q4)

3.  Plan
I will buy EURUSD +1 at these levels. 1.32/3 buffer. Still long USDJPY expecting BoJ intervention, but add stops. Buy a dip.

EURUSD
I will enter a long if support 1.355 holds and enter a long B&B on the yob level (1.3558) and another lot at 1.3707. I will hedge on a couple of level down (-100 pips). I will take profit at 50-100 pips.
Comment:< >

USDJPY
I will add a dip: I will enter a long if support 82.5 holds and enter a long B&B on the yob level (82.67) and another lot at 2 you levels. I will hedge on a couple of level down (-100 pips). I will take profit at 50-100 pips.
Comment:< >

AUDJPY
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EURNOK
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4.  Trades
4.1 open trades, their type & their value:
1 Open 05-set-10 USDJPY L 84.2600 83.2600 Q1 0.2 B&B 83.5-72.0000 -8.000
4.2 Leverage

Aggregate position size expressed as a gearing ratio (Ex = 3:1)

Total positions per currency:
USDJPY +1
EURUSD 0
AUDJPY 0
Position
USDJPY -8
EURUSD 0
AUDJPY 0

4.3  Effect of planned trades

Account summary:
Saxo live account
Starting capital: 1000
Line in the sand level:  7500
1.  Account balance (Settled trades) and growth as a percentage.  (10038=0.3%)
2.  Account equity (Including open positions) .  (10030= +0.3%)
3.  Account equity if planned trades go wrong: 1011
4.  Pip distance to line in the sand level.  6270, with gear (0.1) 12000