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.