1. Review.
EURUSD in a tight range, nothing much happened.
Sell-off in US Treasury securities and USDJPY from advancing. Crucially, the 10y yield has yet to break above 1.86% and so the yen may find a near-term foothold at these levels.
Next week things will probably pick up a bit with Greece / German heads of state meeting
Trades
None
2. Analysis.
"Fundamental analysis"
Monday:
Tuesday: USD Core Retail Sales m/m 0.8% 0.4% -0.8%; USD PPI m/m 0.3% 0.3% 0.1%:
Wednesday : USD Core CPI m/m 0.1% 0.2% 0.2%
Thursday: USD Unemployment Claims 366K 365K 364K
Friday: USD Prelim UoM Consumer Sentiment 73.6 72.5 72.3
Saturday:
Sunday:
For a big EUR south move you need EU trouble and US economic growth and normality. If you don't have both, no big euro south side and potential for euro upside due to the structural improvements and the long term USD diversification
Fed: The Fed will release its meeting minutes from the July 30/Aug; changing its language to suggest it is moving closer towards providing more accommodation. With the improvement in economic data since the FOMC meeting concluded, markets have reduced expectations of action at the September Fed policy meeting. Data: job growth has surprised to the upside, retail sales grew significantly, and housing data continues to improve, Treasury yields have backed up.
EUR: Eurozone crisis continued to show signs of stabilization. , as long as their bond yields are falling it is unlikely that Madrid will pre-emptively apply for bailout funds when it can still fund itself in the capital markets. While stocks have staged a sharp recovery the euro, although off its recent lows, hasn’t shared the stellar gains and still looks vulnerable. But if the Eurozone crisis flares up again then it is unlikely that stocks will be able to sustain their current rally
GBP: Bank of England has put QE on hold for now. the labour market data for June and July showed that 201,000 extra people were in employment in Q2 compared with Q1. Retail sales also surprised on the upside for July, adding to the good run of economic data for the UK.
JPY: Climbing US Treasury yields on the back of improving economic data and reduced monetary easing expectations from the Federal Reserve have been a boon for the USD/JPY
CNY:
| Id | Driver | Comments | Immanency |
| 1 | On-going global recovery | Germany slow down. EZ growth low. US growth may be picking up | Yes |
| 2 | FED and BCE | FED will be on hold for until 2015; | No |
| 3 | EZ break up | EU dynamic is a longer term dynamic of "putting the structures in place”; Greece exit | No |
| 4 | PIIGS | Greece government and Spain banks in focus | Many Yes! |
| 5 | QE3 | Not off the table | Yes |
| 6 | Commodity rise | Falling prices are confirming slowdown | No |
"Technical analysis"
EURUSD we are stuck in a range between 1.2250 and 1.2450 although a surprise reading for the August’s PMIs or if the German Finance Ministry’s monthly report suggests that the German economy is deteriorating then we may break out of this range.
GBPUSD managed to get above 1.57 and even test 1.5740– its 200 day moving average.
USDJPY: broken the top of a recent range and broke above the 79.00 figure.
Dollar index:
Median grid
EURUSD GRID 1.2400-1.3000, south bias
USDJPY GRID 76.00-80.00, neutral bias
| Currency | Short term view(technical) | Long term view (fundamentals) |
| USD | Long | Short |
| JPY | Neutral | Short |
| AUD | Short | Long |
| EUR | Short | Long |
"Market dynamics”
EURUSD: brings the initial estimates of August PMI surveys for the currency bloc. Although they are likely to remain mired in negative territory they are expected to come off their recent lows. Any positive surprises could unleash another leg higher in European asset markets that could even push the euro higher
GBPUSD: GDP reading: But if the data follows retail sales and the labour market higher then we could see sterling have another stab at 1.5740.
USDJPY: we expect the USD/JPY to remain within the top around 80.45 and base around 78.40. A pending break out is expected at the end of September. Until this occurs and while US yields continue to grind higher, we favor a move higher in USD/JPY and look for a potential retest of the 80.45 top.
Key events:
Monday
Tuesday:
Wednesday: USD FOMC Meeting Minutes
Thursday: CNY HSBC Flash Manufacturing PMI 49.3, EUR German Flash Manufacturing PMI 43.6 43.0, USD Unemployment Claims 365K 366K, USD New Home Sales 362K 350K
Friday: USD Core Durable Goods Orders m/m 0.5% -1.4%
Saturday:
Sunday:
Prices and Risk on/off view
RORO (30): +0.63 (1.06)
