1. Review.
I said “Short term is to keep USD biased on the downside (FED hold, budget problems, S&P downgrade and the heavy sell). I still maintain bullish view on EURUSD with ECB and FED on divergence, probably we will stay in the new grid for a month or two and I am expecting the 1.44/2 as support ; USD resell area for a dip can be only for some risk off, even if it would affect more CHF. I will buy a dip in the 1.44 area in search of a break of recent highs, looking for a move to 1.5 level.” EUR dipped very short at 1.449 and then rallied to 1.487, where is a short term double top. “Dips in USDJPY are a buying opportunity. I will buy USDJPY if back in the 81 area (FED stance will probably make USDJPY under perform in respect of other JPY crosses).” I entered a dip at 81.5, now at 81.2 level.
“I will buy JPY crosses, like AUDJPY and CADJPY that are now retracing. I will buy dips. AUDJPY has 90 level to break and USDJPY 85.5 that holds. “ Dips are forming, but still higher levels.
“Anyway we can be in a “final rally and sell off” mode. We should carefully watch silver (like the canary in a coal mine) and now is telling that we are like at the end of this risk on period.” Very volatile sessions for silver, but after a huge dip at 44.6 pullback was at highest 49.1, now 47.9
Trades
USDJPY long at 81.5. Closed with profit AUDJPY and EURJOPY
2. Analysis.
"Fundamental analysis data"
Core Orders 1.3% 1.7% 0.6%
USD GDP 1.8% 1.9% 3.1%
Unemployment Claims 429k
German Consumer Climate 5.7 5.9 5.9
EZ CPI y/y 2.8% 2.7% 2.7%
"Fundamental analysis"
Key event FED speech was QE2 will continue till the end of June, no sooner than later rate hikes and “extended period” words remained. Remembering again PIMCO people is suggesting that US is going back to a lower growth, but not recession. FED confirmed this and policy is on hold.
EURUSD sovereign debt issues are regaining strength, spreads and CDs are at higher values this week too, but EUR is gaining strength..
I maintain this big picture view, where there is:
- an on-going global recovery, EZ positive, US less moderate positive, China under control
- commodities and risk asset positive
- divergence in FED and BCE monetary policy; US growth is slowing and QE2 is ongoing and the FED will be on hold for this year; then I believe that the USD will be under pressure in the coming weeks and months.
Long term outlook changes to USD bearish, JPY bearish and definitely CHF bullish. The actual extreme in the bearish USD sentiment can be a reversal sign, but it does not apply for now..
ECB in a tough position for rate hikes because of surging inflation at 2.8%; if in the next ECB Trichet will use “strong vigilance” we will expect a rate hike in the next June meeting.
China growth is not in discussion; they government will make it work at the right pace.
AUDUSD broke the 1.1 level and as a risk on proxy risk should be on for the next week.
Silver and Gold at highs, because of USD weakness but also for EZ debts, looking for safety. Anyway a gold and silver are still not bought by institutional; a strong fundamental move would need large institutional buying and a strong dollar.
Silver demand is supported by its industrial usage, expecting to rise because of Australia, New Zealand and Japan reconstruction. We can consider Silver as the new indicator of risk-ok and buying real stuff (instead of fiat currencies);
"Technical analysis"
The Dollar index now 3 at to 73.83 and it is at historical low versus AUD, Gold and CHF, close at all times low at 70.70 .
COT data suggest that is time for a reversal for the dollar. This can take many weeks and should be considered a medium term view. We have to wait for a clear sign of rebound and commercial go again to negative.
EURUSD ranged around the 1.43 and the resistance at 1.45, COT data are below. Dollar index tested the76 support . EUR long are very high and increasing. USDJPY at 85. GOLD/Oil ratio stable to 13.6; VIX down at 15.3 (risk on).
COT USD up to -9k (-1k)
COT JPY up at -36k (+14k)
COT EUR at 68k (+4k)
COT AUD up 80k (-11k)
COT CHF up 18k (+4k)
TYN to 3.4% (-0.17%)
JGB at 1.29% (-0.03%)
Bunds at 3.36%. (-0.1%)
German/Greece up to 10.4% (+1.1%)
VIX to 14.7 (-0.5)
Gold/Oil to 13.6 (+0.0)
"Market dynamics”
Long term view:
- EUR going up (EZ and global economic growth and interest rate hikes), and this is going on now. All anti dollar will stay strong or increase in the next couple of months
- USD is definitely going down. Our view that sooner than later US has changed. This will affect the USDJPY long. USD can have a short term pullback due a excessive short squeeze, and G20 could intervene to support the USD to avoid a commodities rally
- CHF, is going exponentially up because of picking up the JPY lost safe heaven status (new all times high versus the USD this week too); if risk on buy CHF, if risk off buy more CHF
- JPY, is going to go down (bad economic slump and lost safe heaven status); US bond bubble is not yet coming and this does not will favor this play; but a non hike policy can slow down the play.
Next week view:
USD is biased on the downside after FCOM meeting a GDP data I still maintain bullish view on EURUSD with ECB and FED on divergence, probably we will stay in the new grid for a month or two and I am expecting the 1.44/45 as support ; I will buy a dip in the 1.44 area in search of a break of recent highs, looking for a move to 1.5 level.
We have not rush to sell USD at these levels and we will wait for dips at these levels:
EURUSD 1.4450/1.450, AUDUSD 1.045/1.050, USDCHF 0.8950/0.990, USDCAD 0.980/0.985
Dips in USDJPY are a buying opportunity. I will buy USDJPY if back in the 81 area (FED stance will probably make USDJPY under perform in respect of other JPY crosses).
JPY crosses failed this week to extend gains: I will buy AUDJPY and CADJPY that are now retracingat these low levels, hoping for a pullback to higher levels (AUDJPY has 90 level to break and USDJPY 85).
This “final rally and sell off” mode can have a rally that could last this June. We should carefully watch silver (like the canary in a coal mine) and now is telling that we are like at the end of this risk on period.
Key events:
Wednesday: USD ADP, ISM
Thursday: ECB rate and press conference
Friday: NFP
Median grid
EURUSD GRID 1.440 - 1.500, up bias €, grid change
USDJPY GRID 80.00-84.00, up bias
AUDJPY GRID 82.00-90.00, up bias
USDCHF GRID 0.8725-0.925, neutral bias
Prices
US at 13577, (+40, Q4),
GOLD to at 1544, (+60, Q4+)
Crude 113.0 (+4.0$)
EURUSD 1.4830 (+0.04, Q4)
USDJPY 81.11 (-0.0, Q1)
AUDJPY 88.81 (+1.0 Q4)
EURJPY 120.5 (-1.0 Q4)
3. Plan
EURUSD
I will buy long dips, like longs at 1.44.
Comment:< >
USDJPY
No trades
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AUDJPY
I will buy a big dip, like longs at 87.5/7
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AUDJPY
I will buy a big dip, like longs at 119.3/5
Comment:< >
USDCHF
No trades planned
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4. Trades
Positions
USDJPY +2
EURUSD 0
USDCHF 0
AUDJPY 0
EURJPY 0
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