Daily Briefing 110606

1.  Review.

I said “Because of the risk off sentiment, where the dollar is late to get stronger, I will use this USD weakness as a buying opportunity, looking if technical levels hold. EURUSD at 1.433, if the double top there holds.
USDJPY at 80.30, if 80.00 support holds. CADJPY should be a buy at these level because of expected rate increase, if 82.35 support holds” Despite risk-off sentiment USD remained weak. Selling risk asset in remaining strength did not played well this week.
Trades
Exited AUDJPY and one USDJPY.

2.  Analysis.

"Fundamental analysis data"
EZ CPI y/y 2.7% 2.8% 2.8%
CNY PMI 52.0 51.6 52.9
US ISM PMI 53.5 58.1 60.4
US NFP change 54k 161k 232k

Unemployment rate 9.1% 9.0% 9.0%
Unemployment Claims 422k 416k 428k
"Fundamental analysis"
Data show again an increasing sluggishness especially in the US economy with US poor PMI and employment data. Political stalemate are also weight on the buck. Rumors of QE3
Greece sovereign debt issues is settled down. IMF inspection was positive. Spain bonds yield spreads. ECB meeting on Thursday could signal a July rate hike.
Silver and Gold were mixed this week.
All indicator, expect the USD weakness, are showing a risk off view:
- US 10YN at higher levels
- Gold and Silver strong
- most JPY crosses around recent lows, especially after NFP
- CHF at new fresh historical highs versus EUR and USD
I maintain this big picture view, where there is:
- commodities and risk asset less positive; but we should consider this sell off as assets repositioning and therefore a short term negative
- US growth is slowing; I believe that the USD will relief in the coming weeks because of the QE2 end, but it will be on pressure in the next months, because of a QE3 announcement.
Long term outlook has USD bearish, JPY bearish and CHF bullish.
The actual extreme in the bearish USD sentiment can be a reversal sign, and it is starting to apply now.

Driver	Comments	Immanency
On-going global recovery	EZ slowing, US mire slowing, China slowing: moderating pace	Yes, causing risk aversion
Divergence in FED and BCE monetary policy	FED will be on hold for this year; QE3 fears	Yes
EZ break up	France and Germany still determined to hold on	Moderate
PIIGS	Greece bailout done	Yes
QE2/QE3	QE3 talk; FED speaking	Yes
Commodity rise	No	No

Long term view	Short term view	Long term view
USD	Bullish, extreme short and repositioning from risk aversion	Bearish (QE3, fiscal problems)
JPY	Bearish	Bearish
CHF	Bullish	Bullish (until bubble burst)
EUR	Bullish to 1.5	Neutral (around 1.37 mean)

"Technical analysis"
EURUSD broke the resistance is 1.44 area, now at 1.465. If 1.46 is supported, next resistance is May high at 1.49
USDJPY after tested again the 80 support, now at 80.26
AUDJPY same level 86, has 85 as support to the 90 resistance. Next support is 83.
EURJPY has a solid base is 114, 116 test failed, basically flat week to week.
The Dollar index back to 73.8, support at 73.0.
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 60k (+7k), OI 117k (+7k)
COT USD up to 4.7k (+2k), OI 55k (-6k)
COT EUR at 22k (+2k), OI 270k (+12k)
COT JPY at -1.6k (-10k), OI 95k (-5k)
COT CHF up 21k (+6k), OI 67k (+1k)
German/Greece up to 12.9.4% (-0.5%)
German/Spain up to 2.1% (-0.2%)
Bunds at 3.08%. (+0.2%)
JGB at 1.14% (+0.01%)
TYN to 2.98% (-0.02%)
VIX to 17.95 (+2.0)
Gold/Oil to 15.3 (+0.2)

"Market dynamics”
Long term view:
- EUR staying up (EZ and global economic growth and interest rate hikes), depends how Greece will end up plus the stress test for banks. If nothing worse, I see 1.4 at three month (after QE2 ends)
- USD is going down. We can have a short term rebound for risk off appetite
- 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. CHF bubble will burst not immediate
- 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; a non hike policy can slow down the play.
Next week view:
Because of the risk off sentiment, where the dollar is late to get stronger, I will use this USD weakness as a buying opportunity, looking if technical levels hold.
EURUSD at 1.433, if the double top there holds.
USDJPY at 80.30, if 80.00 support holds.

CADJPY should be a buy at these level because of expected rate increase, if 82.35 support holds
Key events:
Tuesday: Chicago Consumer confidence
Wednesday: CNY manufacturing, US ADP
Thursday: CAD interest rate statement, US unemployment claims
Friday: NF Employment change, unemployment rate

Median grid
EURUSD GRID 1.410 - 1.460, 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 1295, (-35, Q4),
GOLD to at 1541, (+15, Q4+)
Silver to at 36, (-2, Q4+)
Crude 100.4 (-0.2$)
EURUSD 1.465 (+0.035, Q1)
USDJPY 80.26 (-0.45, Q2)
AUDJPY 86.0 -0.5 Q2)
EURJPY 117.4 (+2.0 Q4)

3.  Plan
Review...

EURUSD
Comment:< >

USDJPY
Add a long at 80
Comment:< >

AUDJPY
Comment:< >

EURJPY
Comment:< >

USDCHF
Comment:< >

CADJPY
Add long at 82.25
Comment:< >

4.  Trades

Positions
USDJPY +1
EURUSD 0
USDCHF 0
AUDJPY +0
EURJPY 0
CADJPY +1