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” Pretty wrong analysis: USD stayed very week and JPY strengthened. USD had a rally to 1.467, but fell on 1.435 on Greece concerns.
Trades
None.
2. Analysis.
"Fundamental analysis data"
German factory orders m/m 2.8% 2.1% -2.7%
CNY Trade Balance 13.1b 19.8b 11.4b
Unemployment Claims 427k 414k 426k
"Fundamental analysis"
Data show again slowdown in the US economy with US and all the developed economies. Political stalemate are also weight on the buck. There are two views:
1. PIMCO leading the view that the FED will be on hold for much longer, shorting the long bond.
2. Others thinking that sometime this year the economy will improve and FED will hike; Bernanke showed data pointing a recovery in H2.
Risk assets (stock and commodities) continue to slide lower.
Rising commodities prices could have slowed down the demand, suggesting that the slowdown is only temporary, but high unemployment, austerity measures and exit of fiscal stimulus point to a major slowdown.
Discussion about QE3 continues; Chuck is forecasting a QE3 in Q4.
JCT said “vigilant” meaning a hike in July (even if he said we will see next month), but Greece sovereign debt issues not settled down and revised inflation forecast for 2011/2012 weighted on EUR. Spain bonds yield spreads. ECB meeting on Thursday could signal a July rate hike.
Silver and Gold were mixed this week.
Some indicators are showing a risk off view:
- US 10YN at higher levels
- US index rebounded at 75
- Gold and Silver still strong
- most JPY crosses again around recent lows
- 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.
Long term outlook:
EUR depending on PIGS resolution, USD bearish, JPY bearish and CHF bullish.
There could be a shift in the classical paradigm “risk-off: buy USD” if the US remains decoupled from global growth (assuming that global growth will regain pace)
The actual extreme in the bearish USD sentiment can be a reversal sign, and it is starting to apply now.
| Id | Driver | Comments | Immanency |
| 1 | On-going global recovery | EZ slowing, US slowing, China slowing (risk aversion) | Yes |
| 2 | Divergence in FED and BCE monetary policy | FED will be on hold for this year; | No, wait for July |
| 3 | EZ break up | France and Germany supporting EUR | No |
| 4 | PIIGS | Greece bailout not done Germany divergence with ECB | Yes |
| 5 | QE3 | Requires: | No |
| 6 | Commodity rise | Falling prices confirming slowdown | Moderate |
| 7 | US debt | Debt ceiling | August |
| Currency | Short term view | Long term view |
| USD | Bullish, extreme short and repositioning from risk aversion | Bearish (5, 7) |
| JPY | Bearish | Bearish |
| CHF | Bullish | Bullish (until bubble burst) |
| EUR | Hold | Neutral (around 1.37 mean) |
"Technical analysis"
EURUSD stopped at the resistance is 1.47 area, now at 1.33. 1.46 support was easily broken; next support is 1.43. Strong support at 1.40; if broken is a clear downtrend, if holds a range 1.40-1.46
USDJPY tested again the 80 support, now at 80.31
AUDJPY testing 84.6 support, 85 support area; 90 resistance looks very farat the moment. Next support is 83. EURJPY has a solid base is 114, 116 support broken.
The Dollar index to 75.3
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. Commercials are again short.
COT AUD up 62k (+2k), OI 45k (+27k)
COT USD at 2.7k (-2k), OI 62k (+6k)
COT EUR at 51k (+29k), OI 296k (+25k)
COT JPY at 17k (+18k), OI 106k (+9k)
COT CHF at 16k (-6k), OI 74k (+9k)
German/Greece up to 13.7% (+0.9%)
German/Spain up to 2.5% (+0.4%)
Bunds at 2.96%. (-0.1%)
JGB at 1.14% (+0.00%)
TYN to 2.96% (-0.02%)
VIX to 18.85 (+1.0)
Gold/Oil to 15.4 (+0.1)
"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. That means short AUD, CAD and NZD against USD and JPY, from just above currents levels that offer attractive opportunities.
Very confused on; sell EURUSD at 1.445, if the double top there holds.
No buying for USDJPY, I think that 80.00 support holds.
Reverse CADJPY at 83, sell AUDJPY at 86
Key events:
Tuesday: CNY CPI y/y, USD PPI m/m, Retail sales m/m
Wednesday: US Core CPI m/m, EZ Industrial production m/m
Thursday: EZ CPI y/y, US Building permits
Friday: UoM
Median grid
EURUSD GRID 1.430 - 1.490, up bias, grid change
USDJPY GRID 80.00-84.00, neutral bias
AUDJPY GRID 82.00-90.00, neutral bias
USDCHF GRID 0.8225-0.8725, down bias
Prices
US at 1268, (-30, Q3),
GOLD to at 1531, (-10, Q4+)
Silver to at 36.1, (+0.1 Q4+)
Crude 98.8 (-2.2$)
EURUSD 1.435 (-0.035, Q1)
USDJPY 80.31 (+0.1, Q2)
AUDJPY 86.4 (+0.5 Q2)
EURJPY 115.2 (-2.0 Q4)
3. Plan
Exit long CADJPY and USDJPY long with even a small profit, trying to avoid losses.
EURUSD
Comment:< >
USDJPY
Comment:< >
AUDJPY
Comment:< >
EURJPY
Comment:< >
USDCHF
Comment:< >
CADJPY
Comment:< >
4. Trades
Positions
USDJPY +2
EURUSD 0
USDCHF 0
AUDJPY +0
EURJPY 0
CADJPY +1
No comments:
Post a Comment