1. Review.
I said “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.” No rush to enter; now at 1.315. See if these levels hold. “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).” I did this time.
JPY crosses failed this week to extend gains: I will buy AUDJPY and CADJPY that are now retracing at these low levels, hoping for a pullback to higher levels (AUDJPY has 90 level to break and USDJPY 85). “ I bought AUDJPY and EURJPY. “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.
Trades
USDJPY long at 81.5. AUDJPY, EURJPY Closed USDJPY hedged
2. Analysis.
"Fundamental analysis data"
ISM declined 53 58 57 
NFP 244k 185k 221
Unemployment claims 474k 415k 431k
Unemployment Rate 9.o% 8,8% 8.8%
EZ rate unchanged, message dovish than expected.
"Fundamental analysis"
ISM decline was interpreted as a danger for the US recovery, but it is usually a volatile number . Other data points instead to an apace recovery, even if fragile. 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..
ECB leaved rate as now. Trichet did not used “strong vigilance” terms, we will expect a rate hike not earlier than next July meeting. This caused a heavy EURUSD sell off.
Silver and Gold still very sold this week, they should have reached a pause. This sell off shows that gold and silver are still not bought by institutional; a strong fundamental move would need for large institutional buying and a strong dollar. Silver drop is a asset repositioning, due a excessive speculation. We can consider Silver as the new indicator of risk-ok and buying real stuff (instead of fiat currencies);
I maintain this big picture view, where there is:
- commodities and risk asset positive
- US growth is slowing and; 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.
| Driver | Comments | Immanency |
| On-going global recovery | EZ positive, US less moderate positive, China under control | Yes |
| Divergence in FED and BCE monetary policy | QE2 is ongoing and the FED will be on hold for this year | Yes |
| EZ break up | France and Germany still determined to hold on | Not |
| PIIGS | Greece bailout | Tbd next week |
| QE2/QE3 | QE2 priced in | Mid June |
| Commodity rise |
| Long term view | Bias | Comments |
| USD | Bearish | Bullish after QE2 end, then still bearish |
| JPY | Bearish | 80 is lone in the sand |
| CHF | Bullish | Safe heaven |
| EUR | Bullish | Depends on PIIGS immanency |
"Technical analysis"
EURUSD failed to break the 1.49 resistance and 1.44 is tested.
USDJPY tested the 80 support but it looks it holds. AUDJPY has 86 as support to the 90 resistance.
EURJPY stopped at 122; mid support at 116 looks broken, a solid base is 114.
The Dollar index rebound at 75 from historical low versus AUD, Gold and CHF.
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.
COT AUD up 73k (-7k)
COT USD up to -7k (-2k)
COT EUR at 99k (+33k)
COT JPY up at -18k (+18k)
COT CHF up 18k (+0k)
TYN to 3.14% (-0.3%)
JGB at 1.14% (-0.1%)
Bunds at 3.16%. (-0.2%)
German/Greece up to 12.4% (+0.1%)
VIX to 18.3 (+4.5)
Gold/Oil to 15.3 (+2.0)
"Market dynamics”
Long term view:
- EUR going up (EZ and global economic growth and interest rate hikes), and then back to medium levels. All anti dollar will stay strong or increase in the next couple of months; I agree with UBS view, that sees 14.8 at one month view and 1.4 at three month (after QE2 ends)
- 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
- 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 recovering because of the heavy commodities selling and a risk-off sentiment
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
Spiegel article about Greece restructuring can cause EUR dips. Dips in USDJPY are a buying opportunity; I will watch closely is 80.00 is still the line in the sand, waiting for a BoJ intervention. I will wait to buy other AUDJPY and CADJPY to see if these low levels hold, hoping for a pullback to higher levels (AUDJPY has 90 level to break and USDJPY 85).
Silver (like the canary in a coal mine) and now is telling that we re like at the end of this risk on period.
Key events:
Wednesday: CNY CPI
Thursday: US PPI, Unemployment claims
Friday: German GDP, US CPI and UoM Sentiment
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 1495, (-40, Q4+)
Crude 95.2 (-15.0$)
EURUSD 1.4315 (-0.30, Q1)
USDJPY 80.61 (-0.0, Q1)
AUDJPY 86.21 (-2.4 Q2)
EURJPY 115.5 (-5.0 Q4)
3. Plan
Determine if current levels are dips opportunity or a rocky fall.
EURUSD
I will buy long dips, like longs at 1.44, if levels hold.
Comment:< >
USDJPY
No trades, wait BoJ
Comment:< >
AUDJPY
I will buy a big dip, like longs at 87.5/7
Comment:< >
EURJPY
I will buy a big dip, like longs at 119.3/5
Comment:< >
USDCHF
No trades planned
Comment:< >
4. Trades
Positions
USDJPY +2
EURUSD 0
USDCHF 0
AUDJPY +1
EURJPY +1
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