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