20120519 EZ Greek exit

There is a strong EU political will to keep the whole project including every aspect of the EZ project in tact, navigate these troubled times (caused by and exacerbated by the Wall Street Oligarchs) and in the process leave a much stronger crisis management infrastructure in place.

A Greek exit will be pretty damaging for the euro and I would probably begin to consider the sensibility of basically defaulting to a long EURUSD bias .

Just because the issue is so important on the highest and deepest level of the EU project and as such it is on a level of competing philosophies between the EU and the US approaches to the structuring of societies, and it will be seen as a failure of the EU view of how a society can work they will probably pull out all stops to prevent that (without for one moment suggesting or creating the impression it is on the above level).

The only way they can do that I guess is to throw a lot of money at the problem.  This implies the ECB does something big, that generally resolve the issue almost in the same way as the Fed rescued all the US too big to fail banks in 2008.

If that happens we should see the same as in 2010.  ECB entered the fray on the weekend just after the flash crash (May 6th, 2010).  EUR spiked from multi moon lows and sold off from the spike high to even worse lows and then recovers.

20120515–Bottom picking

A measure that seldom fails to determine a bottom during noise is that if you get data / event that should support the noise based short term price action, but then the price action reverse directly after the data / event.  I.e typical buy the rumour, sell the fact price action

Weekly Briefing 110926

1.  Review.

A risk off week with USD and JPY gaining and AUD and EUR loosing.
Trades
Short AUDUSD, AUDCAD, NZDUSD

2.  Analysis.

"Fundamental analysis"
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
Unless there is something substantially and tragically new it is wholly unlikely that EURUSD will move below the January lows (1.26)
Things are going to stay risk off until the Greeks decide on a unity government
Demand for safety as European politics raises uncertainty has resulted in lower US Treasury yields and a stronger buck. Despite softer U.S. data, Fed officials have indicated their reluctance to engage in further QE.
GBP: we believe the focus will be on the downward revision to growth, however we expect the report to reaffirm the sticky inflation problem in the UK, which may stop the Bank from re-starting its QE program.

Id	Driver	Comments	Immanency
1	On-going global recovery	Germany is in good economic shape. EZ growth low. US growth uncertain	Yes
2	Divergence in FED and BCE monetary policy	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”	Yes
4	PIIGS	Greece government and Spain banks in focus	Yes
5	QE3	Not off the table; PIMCO says yes	Yes
6	Commodity rise	Falling prices are confirming slowdown	Yes

"Technical analysis"
Morgan Stanley says, at least 1.2700 for now, but in case its EURO to HERO eat your losses at 1.3100 (as reported by fxlive.)
EURUSD broke the key support level of 1.300
Constructive for the dollar as the dollar index is trading above the 80.00 level

Median grid
EURUSD GRID 1.2800-1.3400, neutral bias (grid change)
USDJPY GRID 76.00-80.00, neutral bias
AUDJPY GRID 76.00-80.00, down bias (grid change)
USDCHF GRID 0.9250-0.8750, up bias (grid change)

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

"Market dynamics”
At this stage the USD reacts positive / negative in the very short term (intraday to intra week) mainly versus JPY on US based events / data.
We expect the yen to be range bound.
GBPUSD looks well supported above 1.6060, however we are more wary of potential strength in this pair due to 1, the sharp rejection of 1.6300 – a key resistance level , - last month, and 2, the safe haven status of the dollar.
We continue to see EURUSD move lower, but we think it will be an incremental decline rather than a prolonged downtrend

Key events:
Monday: US pending home sales
Tuesday: US CB Consumer Confidence
Wednesday: US ADP, CAD GDP m/m
Thursday: US Unemployment Claims, ISM PMI
Friday: US NFP, Unemployment rate

Prices and Risk on/off view

RORO (30): -1.05

3.  Plan

4.  Trades

Positions
USDJPY +2
EURUSD 0
USDCHF 0
AUDJPY +0
EURJPY 0
CADJPY 0
EURAUD 0

4.1 open trades, their type & their value:
Leverage

4.3  Effect of planned trades

Account summary:
Starting capital: 1000
Line in the sand level:  7500

1.  Account balance (Settled trades) and growth as a percentage.  (10186=+2%)
2.  Account equity (Including open positions) .  (9951=-1%)
3.  Account equity if planned trades go wrong: 0
4.  Pip distance to line in the sand level. 

100509 Euro move

For a big EUR south move you need
1.  EU trouble and
2. 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

People like PIMCO's Bill Gross and Jan Hatzius at Goldman Sachs are telling their customers to prepare for QE3, to combat a slowing U.S. economy

The Chinese are buying all this Gold so that when they finally allow their currency to be backed by Gold, in some percentage. It may not be 100%, but a 25% backing of Gold, would the renminbi the most attractive currency in the world.

120424 Range-bound trading in the currency markets could be ending

"Looking back over the last 12 years, there have only been five episodes where a lack of trend across all 42 G-10 crosses has persisted for more than the current period,"

So how do you play this potential shift?

The strategists are bearish on the euro, [EUR=X 1.3196 0.0042 (+0.32%) ] dollar, [.DXY 79.18 -0.19 (-0.25%) ] and the yen, [JPY=X 81.13 -0.03 (-0.04%) ] expecting their year-to-date underperformance to continue. So they suggest selling those against other currencies, like the British pound, [GBP=X 1.6131 0.0007 (+0.04%) ] Canadian dollar, [CAD=X 0.9885 -0.0021 (-0.21%) ] and Swedish krona. [SEK=X 6.7417 -0.0073 (-0.11%) ] In emerging markets, they like the Mexican peso, [MXN=X 13.1579 -0.0128 (-0.1%) ] South Korean won, [KRW=X 1137.15 -4.35 (-0.38%) ] and South African rand. [ZAR=X 7.79 -0.0473 (-0.6%) ]

That means:

• Short EUR, USD, YEN
• Long GBP, CAD, SEK
  

120423 Base Case Review

Indicators supported our base case:
* Spanish bond auctions auction on Thursday was well supported.
* Bank of Canada begins to sound bullish.
* IMF upgrades global growth expectation.
* Bundesbank says German economy is in good shape.
* some bullishness out of the UK.

Strong US data May - July may change things enough to keep USD from weakening on the election season turmoil.

It is our view that it is essentially short term speculation and noise flow that is pressuring EURO currently.
It is also our view that commentators are too positive in spinning US data and too negative in spinning China and other data.
Since the real bigger drivers are solid in neutral mode, the shorter term drivers will dominate.

Bottom line: Will the Fed cause an imminent material change in the direction of EURUSD in favour of the USD?

120419 Base Case

#1.  Our base case is that "fear" noise levels mask a more bullish (relative to the expected outcome of "fear noise levels" for risk in general and anti-dollars in particular).

Potential crises:

• #1.1  EU sovereign debt --> Spain --> EURO to ZERO (taking anti dollars along on the ride down)
• #1.2  China economic slowdown --> hard landing --> AUD to ZERO (taking anti dollars along on the ride down)
• #1.3  Global economic slowdown --> crisis for EU --> EURO to ZERO (taking anti dollars along on the ride down)

#2. The other aspect of our base case is that instead of a "fear driven" USD rally we can expect a USD rally in response to "positive economic growth indicators from the US".

• #2.1  The big question is:  Will the US economy beat the Fed in terms of its sustainable out performance and return to a real normal growth speed sooner than what the Fed said ("2014, maybe").  (In order to return to the normal ('good') growth speed it will have to over shoot on the upside.  The whole point then is that short term data that overshoots will in typical "dumb down" market style be extrapolated to mean, this is a trend and they will run away with this idea.)
• #2.2  We think the process will be as follows:
• Convincing data --> USD UP --> Indications no further QE --> USD UP --> Interest rate hike expectations UP --> USD UP followed by the actual happening of these expectations (sustained good data --> definitely not further QE --> actual tightening of interest rate conditions (this will lead hikes with a few months).