Weekly Briefing 121126

1.  Review.

I said: “EURUSD: . At the weekly London close EURUSD was just holding onto the 1.27 handle. 1.2653 is key support as below here is the start of a technical downtrend. This level has so far held, suggesting that there is buying interest down here; however, if we get a negative shift in the macro back drop then we could see the bears take control once more. Thus, we would look to sell EURUSD on rallies. We believe that strength will be capped above 1.28 due to a cluster of daily moving averages between 1.2750 and 1.3000 and also the top of the daily Ichimoku cloud at 1.2925 acting as stiff resistance.” Completrly wrong. Good economic data make the euro rally to 1.30

GBPUSD:

“USDJPY: We anticipate profit taking to slow the JPY’s sharp decline, however it appears as though a shift in the policy response may be forthcoming. As such, we favor JPY downside and would view dips in USD/JPY as potential long opportunities. Key levels to the upside are the 61.8% Fibonacci retracement around 81.50 and 76.4% Fib retracement that is around 82.50. The 80.00 big figure may be supportive as well as the 200-day SMA just below at around 79.70.” No dip this week with the pair rally above 82.5.
Trades
None

2.  Analysis.

"Fundamental analysis"
Sunday:
Monday: USD Existing Home Sales 4.79M 4.76M 4.75M
Tuesday: JPY Overnight Call Rate <0.10% <0.10%, USD Building Permits 0.87M 0.87M 0.89M
Wednesday: USD Unemployment Claims 410K 415K 451K
Thursday: CNY HSBC Flash Manufacturing PMI 50.4 49.5, EUR German Flash Manufacturing PMI 46.8 45.9 46.0
Friday: EUR German Ifo Business Climate 101.4 99.6 100.0
Saturday:
Both ECB and FED have pledged “unlimited” support to sort out their respective problems and for the first time since the financial crisis broke out in 2008 the Fed and the ECB have said they won’t stop until the problems are solved. This is aggressive action from the world’s most important central banks and the markets like it. If the Fed is going to keep its foot down on the accelerator until the economy recovers then QE could be with us for the long-term, which may keep dollar strength capped and the Aussie, Kiwi and Real fairly strong.
USD: The dollar index fell more than 1% as the US gave up ground verses the euro, the yen and the Aussie. There was no single fundamental driver for the dollar weakness and better tone to risk. Next week we see some meaty data releases from the US including durable goods for October and house price data.
CAD:
EUR: The big news in the FX market last week was the ease with which EURUSD broke above a number of key resistance levels to close the European session within touching distance of 1.30 – the highest level for a month.
Looking at the political backdrop first, Greece is likely to receive its next tranche of bailout funds on Monday 26th November. This removes a cause of near-term anxiety for traders as it means that Greece is not going to default any time soon.
The political back-drop in Spain, at least in the near-term, is showing signs of stabilisation into year-end, which could help the euro to rally in the medium-term.
The Fed’s policy stance appears more accommodative than the ECB. This could be positive for EURUSD in two ways. Firstly, the rate differential may start to move in the Eurozone’s favour, which is euro positive. Secondly, the Fed’s commitment to QE3 helps to depress volatility, which is good for risky assets like the euro and can cause selling pressure on safe havens like the dollar.
The PMI data in Europe remains very weak, but the GDP data was not as bad as the surveys suggest. There were some good signs from Germany.
GBP:
JPY: At its latest meeting the BoJ’s board unanimously voted to leave policy unchanged, which included keeping interest rates on hold and not increasing the size of its asset purchase program (APP) or credit loan facility.
CNY: PMI above 50, more than expected..
Gold: With both the Fed and Bank of Japan engaging in balance sheet expansion, gold has also regained its safe haven appeal and has performed strongly this week

Id	Driver	Comments	Immanency
1	On-going global recovery	EZ growth low but recovering. 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	Yes
5	QE3	Until unemployment < 7% or inflation > 3% (maybe 2 years)	No
6	Commodity rise	Falling prices are confirming slowdown	No
7	US	Fiscal cliff and risk off	Yes

"Technical analysis"
EURUSD: broke easily lot of technical resistances closing near 1.30
GBPUSD:
USDJPY: broke the critical resistance of 82
AUDUSD:

Median grid
EURUSD GRID 1.2400-1.3000, neutral bias
USDJPY GRID 76.00-80.00, long bias

Currency	Short term view(technical)	Long term view (fundamentals)
USD	Short	Short
JPY	Short	Short
AUD	Long	Long
EUR	Long	Long

"Market dynamics”
EURUSD: If the S&P/ Case Shiller prices do increase in September it would be the eighth consecutive month of house price growth in the US. This may boost expectations for a deeper recovery in 2013, and we could see stocks and other risky assets start to price in a recovery in this important sector of the US economy. If fiscal negotiations continue to make progress and house prices are positive then we may see the SPX 500 drift higher next week.
The break above 1.2805 – the 200-day sma – keeps us constructive on the outlook for EURUSD in the medium-term. We think that a break above 1.30 could be on the cards, but we would expect the 1.3175 level – the high from September – to be a major stumbling bloc.
GBPUSD:
USDJPY: Given the possibility of more easing, and the shear aggressiveness of current easing, further JPY weakness may be on the horizon, at least until the election on December 16. A buy on dips
Key events:
Sunday:
Monday:
Tuesday: USD Core Durable Goods Orders m/m -0.6% 2.0%
Wednesday: USD New Home Sales 387K 389K
Thursday: USD Unemployment Claims 404K 410K, USD Pending Home Sales m/m 0.9% 0.3%
Friday: EUR German Ifo Business Climate 99.6 100.0
Saturday: CNY Manufacturing PMI 50.8 50.2

Prices and Risk on/off view

RORO (30): -0.31 (-0.50)

3.  Plan
Still buy EURUSD and USDJPY on dips.

Weekly Briefing 121119

1.  Review.

I said: “EURUSD: As we start a new week EURUSD is hovering close to 1.2650. Below here is the start of a technical downtrend “ Not yet, despite bad EZ data.
“GBPUSD: 10-year Gilt yields have trended lower this week as risk sentiment drained from the market, but the Inflation Report could see a reversal back towards the 200-day sma at 1.86%. This could benefit GBPUSD. 1.60 remains key near term resistance.” Not happened, the pair traded lower 1.59
“USDJPY: If communications indicate that the Fed is likely to engage in further balance sheet expansion to buy treasuries, the dollar could weaken and treasury yields may decline. This would likely weigh on USD/JPY as it traditionally has a close relationship to US treasury yields.” USDJPY jumped at 81.3 because of political issues.
Trades
None

2.  Analysis.

"Fundamental analysis"
Sunday:
Monday:
Tuesday: EUR German ZEW Economic Sentiment -15.7 -10.1 -11.5
Wednesday: USD PPI m/m -0.2% 0.2% 1.1%
Thursday: USD Core CPI m/m 0.2% 0.1% 0.1%, USD Unemployment Claims 439K 362K 355K,
Friday: USD Industrial Production m/m -0.4% 0.3% 0.4%, USD Capacity Utilization Rate 77.8% 78.4% 78.3%
Saturday:
Both ECB and FED have pledged “unlimited” support to sort out their respective problems and for the first time since the financial crisis broke out in 2008 the Fed and the ECB have said they won’t stop until the problems are solved. This is aggressive action from the world’s most important central banks and the markets like it. If the Fed is going to keep its foot down on the accelerator until the economy recovers then QE could be with us for the long-term, which may keep dollar strength capped and the Aussie, Kiwi and Real fairly strong.
USD: The November NAHB housing market index and weekly mortgage applications are also due next week. These data releases are becoming increasingly important as the Fed appears more concerned with the housing market to seek improvement in economic activity and the labor market. , “a number” of FOMC participants favored more QE after the end of the Maturity Extention Program (aka Operation Twist). The market impact of additional QE would likely be a weaker US dollar, lower UST yields, and a boost to equities. We note that each subsequent round of balance sheet expansion tends to have a diminishing impact and significant risks exist (i.e. US fiscal cliff, EU debt crisis) that can move markets.
Regarding the fiscal cliff, our main scenario is for protracted negotiations, however if headlines suggest the two parties are moving closer to an agreement then sentiment is likely to be given a boost which could see the USD trade softer.
CAD:
EUR: For the last few months Spain has been the biggest headache for the currency bloc, but as we move towards the final few weeks of the year Greece is once again coming back to take centre stage. , there are two things to look out for in Tuesday’s meeting: 1, If Greece gets its next tranche of cash and 2, if the finance ministers’ agree on how to reduce Greece’s debt load to 120% of GDP by 2020 as the IMF has requested. Seemingly never-ending sovereign debt problems combined with weak growth, the Eurozone slipped into a recession in Q3 after the economy contracted by 0.1%, could weigh on the euro in the long term.
GBP: Last week’s Inflation Report left the door wide open to more QE from the BOE.
JPY: will announce policy at the conclusion of a 2-day meeting on Tuesday November 20. With increases to its Asset Purchase Program (APP) in 2 out of the last 3 meetings, we expect the Bank to remain on hold for now before it resumes balance sheet expansion over the coming months. A changing political landscape is increasing speculation of more aggressive measures to come from the BoJ in efforts to weaken the currency as a December 16 election looms.
CNY: good data from China.
Gold: With both the Fed and Bank of Japan engaging in balance sheet expansion, gold has also regained its safe haven appeal and has performed strongly this week

Id	Driver	Comments	Immanency
1	On-going global recovery	EZ growth low but recovering. 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	Yes
5	QE3	Until unemployment < 7% or inflation > 3% (maybe 2 years)	No
6	Commodity rise	Falling prices are confirming slowdown	No
7	US	Fiscal cliff and risk off	Yes

"Technical analysis"
EURUSD:
GBPUSD:
USDJPY:
AUDUSD:

Median grid
EURUSD GRID 1.2400-1.3000, neutral bias
USDJPY GRID 76.00-80.00, neutral bias

Currency	Short term view(technical)	Long term view (fundamentals)
USD	Short	Short
JPY	Neutral	Short
AUD	Long	Long
EUR	Neutral	Long

"Market dynamics”
EURUSD: . At the weekly London close EURUSD was just holding onto the 1.27 handle. 1.2653 is key support as below here is the start of a technical downtrend. This level has so far held, suggesting that there is buying interest down here; however, if we get a negative shift in the macro back drop then we could see the bears take control once more. Thus, we would look to sell EURUSD on rallies. We believe that strength will be capped above 1.28 due to a cluster of daily moving averages between 1.2750 and 1.3000 and also the top of the daily Ichimoku cloud at 1.2925 acting as stiff resistance.
GBPUSD:
USDJPY: We anticipate profit taking to slow the JPY’s sharp decline, however it appears as though a shift in the policy response may be forthcoming. As such, we favor JPY downside and would view dips in USD/JPY as potential long opportunities. Key levels to the upside are the 61.8% Fibonacci retracement around 81.50 and 76.4% Fib retracement that is around 82.50. The 80.00 big figure may be supportive as well as the 200-day SMA just below at around 79.70..
Key events:
Sunday:
Monday: USD Existing Home Sales 4.76M 4.75M
Tuesday: JPY Overnight Call Rate <0.10% <0.10%, USD Building Permits 0.87M 0.89M
Wednesday: USD Unemployment Claims 397K 439K
Thursday: CNY HSBC Flash Manufacturing PMI 49.5, EUR German Flash Manufacturing PMI 45.9 46.0
Friday: EUR German Ifo Business Climate 99.6 100.0
Saturday:

Prices and Risk on/off view

Date	CRB	WTI Oil	Copper	Gold	Silver	SP500	Tnote	Bunds	VIX
29-ott	296	86.1	355	1711	32.1	1411	1.74	1.53	17.8
10-nov	292	86.7	344	1730	32.6	1379	1.6	1.34	18.6
Difference	-1.35%	0.70%	-3.10%	1.11%	1.56%	-2.27%	-8.05%	-12.42%	4.49%

Date	Dollar Index	AUDUSD	USDCHF	USDJPY	EURUSD	AUDJPY	Risk on/off
29/10/2012	79.9	1.037	0.934	79.62	1.293	82.5	-3.89
10/11/2012	81	1.038	0.948	79.4	1.271	82.5	-6.01
Difference	1.38%	0.10%	1.50%	-0.28%	-1.70%	0.00%	-54.49%

RORO (30): -0.50 (-0.60)

3.  Plan

Weekly Briefing 121112

1.  Review.

I said: “EURUSD The sell-off in the euro last week coincided with weak PMI data from the Eurozone, thus further declines in economic data could cause more pressure on the single currency. If the data next week is truly horrible then we expect a sharp fall to 1.2800 and then 1.2750 – the low from the middle of September - in the short term. The private ADP report which is due out on Thursday may take on more importance as new enhancements have been made.” EUR stayed above 1.28 but broke it definitely on Wednesday reaching 1.2702.
“GBPUSD: is likely to remain range bound for the short-term between 1.5800 and 1.6150. It is also sensitive to overall market risk, so if we see market sentiment continue to drain then we may test the top of the 1.6065 key support zone.”
“USDJPY: In the long run, we would prefer to fade yen weakness as increases to the Bank’s APP have not had lasting impacts on the exchange rate. While BoJ action may result in short term yen weakness, we doubt that USD/JPY upside can last without support from higher US treasury yields.” Also JPY gained on risk off reaching 79.07 low.
Trades
USDJPY long closed flat

2.  Analysis.

"Fundamental analysis"
Sunday:
Monday:
Tuesday:
Wednesday:
Thursday:
Friday:
Saturday:
Both ECB and FED have pledged “unlimited” support to sort out their respective problems and for the first time since the financial crisis broke out in 2008 the Fed and the ECB have said they won’t stop until the problems are solved. This is aggressive action from the world’s most important central banks and the markets like it. If the Fed is going to keep its foot down on the accelerator until the economy recovers then QE could be with us for the long-term, which may keep dollar strength capped and the Aussie, Kiwi and Real fairly strong.
USD: many policy details need to be ironed out and we anticipate rhetoric to pick up ahead of the December FOMC meeting which is the last of the year before voting members rotate. Specific targets are not likely to be agreed upon any time soon and the current stimulus program is expected to remain in place for some time.
CAD:
EUR: President Draghi was very clear that there will be no bond purchases through the OMT programme without conditionality. Madrid still managed to sell a 20-year bond, the first bond with this maturity that it has sold in over a year. This doesn’t suggest stress in Spain’s bond market. The real problem begins on 18th January when its first major bond redemption of 2013 is due.
While we think that Greece will manage to stay in the Eurozone for the medium-term, the power balance appears to be shifting away from Athens and towards Brussels.
GBP: growth signals for October suggest that the economy is growing at a flat to weak rate of approx. 0.1-0.2%. Inflation pressures are also starting to rise. We believe the Bank will continue to expect inflation to fall throughout next year, which could open the way for more policy support in 2013. There is a chance that the Bank may ditch QE altogether next year and concentrate on yet more unconventional policy measures that target the economy directly. We will be watching for is any sign of who has the upper hand at the BOE – the QE supporters, or those who view QE as ineffective.
JPY:
CNY: good data from China.
Gold: With both the Fed and Bank of Japan engaging in balance sheet expansion, gold has also regained its safe haven appeal and has performed strongly this week

Id	Driver	Comments	Immanency
1	On-going global recovery	EZ growth low but recovering. 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	Yes
5	QE3	Until unemployment < 7% or inflation > 3% (maybe 2 years)	No
6	Commodity rise	Falling prices are confirming slowdown	No
7	US	Fiscal cliff and risk off	Yes

"Technical analysis"
EURUSD: always range bound 1.28-1.31. Back towards 1.28. 1.2980 is good support ahead of 1.2850, that resisted.
GBPUSD: 1.60 , broken support at 1.6110 then 1.6050 and 1.5980.
USDJPY: back to 79.6 after breaking 80
AUDUSD: After a correction to 1.024, back to 1.037.

Median grid
EURUSD GRID 1.2400-1.3000, north bias
USDJPY GRID 76.00-80.00, neutral bias

Currency	Short term view(technical)	Long term view (fundamentals)
USD	Short	Short
JPY	Neutral	Short
AUD	Long	Long
EUR	Neutral	Long

"Market dynamics”
EURUSD: As we start a new week EURUSD is hovering close to 1.2650. Below here is the start of a technical downtrend
GBPUSD: 10-year Gilt yields have trended lower this week as risk sentiment drained from the market, but the Inflation Report could see a reversal back towards the 200-day sma at 1.86%. This could benefit GBPUSD. 1.60 remains key near term resistance.
USDJPY: If communications indicate that the Fed is likely to engage in further balance sheet expansion to buy treasuries, the dollar could weaken and treasury yields may decline. This would likely weigh on USD/JPY as it traditionally has a close relationship to US treasury yields.
Key events:
Sunday:
Monday:
Tuesday: EUR German ZEW Economic Sentiment -10.1 -11.5
Wednesday: USD PPI m/m 0.2% 1.1%
Thursday: USD Core CPI m/m 0.1% 0.1%, USD Unemployment Claims 362K 355K,
Friday: USD Industrial Production m/m 0.3% 0.4%, USD Capacity Utilization Rate 78.4% 78.3%
Saturday:

Prices and Risk on/off view

Date	CRB	WTI Oil	Copper	Gold	Silver	SP500	Tnote	Bunds	VIX
29-ott	296	86.1	355	1711	32.1	1411	1.74	1.53	17.8
10-nov	292	86.7	344	1730	32.6	1379	1.6	1.34	18.6
Difference	-1.35%	0.70%	-3.10%	1.11%	1.56%	-2.27%	-8.05%	-12.42%	4.49%

Date	Dollar Index	AUDUSD	USDCHF	USDJPY	EURUSD	AUDJPY	Risk on/off
29/10/2012	79.9	1.037	0.934	79.62	1.293	82.5	-3.89
10/11/2012	81	1.038	0.948	79.4	1.271	82.5	-6.01
Difference	1.38%	0.10%	1.50%	-0.28%	-1.70%	0.00%	-54.49%

RORO (30): -0.50 (-0.60)

3.  Plan
Still waiting to play JPY short trades (78 should be good) and EURUSD long on pullbacks (wait for 1.29).