Weekly Briefing 120924

1.  Review.

I said: ”Post the QE3 announcement the dollar is looking extremely oversold, so a pullback in risky assets in the coming days would not be unusual. However, we believe that the sell-off, especially in EURUSD could be fairly shallow due to the ECB action to reduce credit risk in the currency bloc (see more below). We believe this pair could trade in a 1.28- 1.35 range until the end of the year”. There was a pullback for risky assets.
EURUSD sitting at 1.297
“USDJPY: It is natural for USDJPY to react to a move in Treasury yields, also as market and sovereign risk levels have dropped then the yen tends to get sold off. Thus, the move higher in USDJPY is perfectly normal at this stage.” T notes dropped and pair is at the same level.
It seems like the fundamental winds are at the back of the euro which should support the euro on dips as there is still an overhang of euro shorts.
Trades
None

2.  Analysis.

"Fundamental analysis"
Tuesday: EUR German ZEW Economic Sentiment -18.2 -19.4 -25.5
Wednesday: USD Building Permits 0.8M 0.79M 0.81M, CNY HSBC Flash Manufacturing PMI 47.8 47.6
Thursday: EUR German Flash Manufacturing PMI 47.3 45.4 44.7, USD Philly Fed Manufacturing Index -1.9 -4.1 -7.1
Friday:
Saturday:
Sunday:
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.
Fed: its QE3 programme will last until the unemployment rate drops to a level acceptable to the Fed (probably be somewhere south of 7%) or inflation rises above 3%. Lockhart indicated that the “immediate outlook for jobs” is the focus of the Fed and said that the potential risks associated with QE3 are “manageable”. Dallas Fed President Fisher who said that he sees a sharp rise in inflation expectations and long-term inflationary fears.
EUR: OMT is not yet triggered. There is hope that Spain will apply for a bailout after reports on Friday that Spanish officials were in negotiations with the EU. A sovereign bailout for Spain also has significance for the wider market as it would trigger the ECB’s OMT programme. Once this happens the ECB becomes a lender of last resort for the currency bloc
GBP:
JPY The BOJ surprised some by adding to their QE programme. With Qe3 in play, the JPY is emerging as a more attractive haven. Recent economic data that showed continued contraction in Europe and in China’s manufacturing sector spurred risk aversion which saw the JPY outperform the US
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	Yes
5	QE3	Until unemployment < 7% or inflation > 3%	No
6	Commodity rise	Falling prices are confirming slowdown	No

"Technical analysis"
EURUSD: 1.30, at top of the grid. Need a grid adjustment. Golden cross of the 200 sma
GBPUSD: testing the extreme of the trading range 1.54-1.60, at 1.62
USDJPY: broken the top of a recent range and broke above the 79.00 figure.

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	Short	Short
AUD	Long	Long
EUR	Long	Long

"Market dynamics”
EURUSD: we believe this pair could trade in a 1.28- 1.35 range until the end of the year. We expect to trade in a 1.2830 (200-day sma) – 1.3100 range in the coming days.
Practicalities will cause euro dips but they will be short and shallow. Spain is the biggest concern for euro markets at the moment. If it applies for a bailout in the next couple of weeks we could see the single currency and euro-based assets start to rise, if we don’t then they could just as easily sell off sharply.
Buy the dips if they are there. You can also sell the tops, but be aware that the train is going UP.
I think there is still a lot negativity in the Euro that needs to be priced out. We are not returning soon to mid-low 1.20s, maybe mid-high 1.20s but more likely we settle above 1.30.
GBPUSD:
USDJPY: we believe we are seeing bottoming behavior in USDJPY and it won't go lower. The USDJPY will move on what happens in the US and not in the Yen side of the equation. ,The JPY will remain sensitive to broader risk sentiment as well as US Treasury yields.
Bottom line - QE3 or not it won't change the current positive EUR situation materially.
Key events:
Monday: EUR German Ifo Business Climate 102.7 102.3
Tuesday: USD CB Consumer Confidence 62.9 60.6
Wednesday: USD New Home Sales 381K 372K
Thursday: USD Unemployment Claims 378K 382K
Friday:
Saturday:
Sunday:

Prices and Risk on/off view

RORO (30): +0.39 (1.21)

3.  Plan
Play JPY short trades and EURUSD long on pullbacks

Weekly Briefing 120917

1.  Review.

In the last 10 days EURUSD is up 600 points, the S&P 500 is comfortably above 1,450 and Brent crude oil is testing $117 per barrel and may test $120 in the coming days. Chief drivers have been stimulative monetary policies from the Federal Reserve in the US and the European Central Bank in the Eurozone
Trades
None

2.  Analysis.

"Fundamental analysis"
Monday: CNY Trade Balance 26.7B 18.9B 25.1B
Tuesday:
Wednesday : USD Trade Balance -42.0B -44.2B -41.9B
Thursday: EUR German Constitutional Court Ruling, USD PPI m/m 1.7% 1.1% 0.3%, USD FOMC Press Conference
Friday: USD Core CPI m/m 0.1% 0.2% 0.1%, USD Retail Sales m/m 0.9% 0.7% 0.6%, USD Prelim UoM Consumer Sentiment 79.2 74.1 74.3
Saturday:
Sunday:
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.
Fed: its QE3 programme will purchase $40bn per month of mortgage backed securities until the unemployment rate drops to a level acceptable to the Fed (probably be somewhere south of 7%).
EUR: : there has been a significant reduction in the tail risk of 1, the Eurozone falling apart and 2, the fear of Spain applying for a sovereign bailout as the ECB‘s bond-buying programme won’t actually get triggered until Spain or Italy apply for either a bailout or a precautionary credit line.
GBP:
JPY: 1, the threat of intervention risk from the Japanese authorities and the prospect of the Bank of Japan significantly boosting the size of its Asset Purchase Programme when it meets on Wednesday and 2, the rise in the Treasury yields tends to be positive for USDJPY
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	Yes!	No
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.
Bottom line - QE3 or not it won't change the current positive EUR situation materially.
Buy the dips if they are there. You can also sell the tops, but be aware that the train is going UP.
I think there is still a lot negativity in the Euro that needs to be priced out. We are not returning soon to mid-low 1.20s, maybe mid-high 1.20s but more likely we settle above 1.30.

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	Long	Short
JPY	Neutral	Short
AUD	Short	Long
EUR	Long	Long

"Market dynamics”
Post the QE3 announcement the dollar is looking extremely oversold, so a pullback in risky assets in the coming days would not be unusual. However, we believe that the sell-off, especially in EURUSD could be fairly shallow due to the ECB action to reduce credit risk in the currency bloc (see more below). We believe this pair could trade in a 1.28- 1.35 range until the end of the year
EURUSD
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: It is natural for USDJPY to react to a move in Treasury yields, also as market and sovereign risk levels have dropped then the yen tends to get sold off. Thus, the move higher in USDJPY is perfectly normal at this stage..
Key events:
Monday
Tuesday: EUR German ZEW Economic Sentiment -19.4 -25.5
Wednesday: USD Building Permits 0.79M 0.81M, CNY HSBC Flash Manufacturing PMI 47.6
Thursday: EUR German Flash Manufacturing PMI 45.4 44.7, USD Philly Fed Manufacturing Index -4.1 -7.1
Friday:
Saturday:
Sunday:

Prices and Risk on/off view

RORO (30): +1.21 (0.63)

Weekly Briefing 120819

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)

Weekly Briefing 120701

1.  Review.

“Until we get a clear picture on the outlook for Europe and the fate of the currency bloc then it’s hard to pick a direction for stocks and other risky assets.
USD: We will be looking for a weekly close above 80.10 in USDJPY to get constructive on this pair. Added to that a successful outcome of the EU Summit next week could give the green light to dollar bulls to push this pair even higher.” USDJPY still capped at 80
“EURUSD: Next week is mainly going to be about this summit. Lots of noise beforehand. I think there is a good chance that they will make big decisions and as such after next week there might be cause for a EUR relief rally. The outcome of this summit could be critical for financial markets in the medium-term. A disappointing outcome could see EURUSD break below 1.2450 and head back towards the recent 1.2350 lows then towards 1.20. However, if decisive, bold action is taken then a march higher above the temporary top at 1.2750 towards 1.30 maybe possible” True, rally to 1.2680
“GBPUSD: We think that GBPUSD will end up being moved more by overall risk appetite rather than by policy actions from the Bank of England. Thus we expect it to consolidate between 1.5500 and 1.5750 in the lead up to the EU summit later this week”. True, rally to 1.570, to see if holds
Trades
Sell and covered EURUSD

2.  Analysis.

"Fundamental analysis"
Monday: USD New Home Sales 347K 343K
Tuesday: USD CB Consumer Confidence 62.0 64.0 64.9
Wednesday: USD Core Durable Goods Orders m/m 0.4% 1.0% -0.9%
Thursday: EUR EU Economic Summit, USD Unemployment Claims 386K 385K 387K
Friday: CAD GDP m/m 0.3% 0.2% 0.1%
Saturday:
Sunday: CNY Manufacturing PMI 50.2 49.9 50.4
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:
EUR: EU President announced that there had been a breakthrough. The positives: these decisions help to break the link between sovereigns and bank, severing the link between bailout loans and growth-destroying austerity, reduces the chance of political risk. Negatives: The sovereign crisis may not be over just yet, rescue funds won’t be able to re-capitalise banks or sovereigns until a Eurozone banking authority has been set up (2013). it’s too early to declare victory on the Eurozone sovereign debt crisis and the financial markets still need more action from Europe.
The market expects the ECB to cut interest rates by 25 basis points to a euro-era record low of 0.75%, as German inflation has fallen sharply in recent months and is currently at 1.7% annual pace
JPY:
GBP: The Bank of England also meets on Thursday and the market expects a further GBP50bn of quantitative easing. Bad GDP reading last week.
Growth: the Eurozone summit may have eased credit fears but it hasn’t addressed growth issues in the currency bloc, which threatens China’s economy since the currency bloc is a major trade partner. , the US economy has seen economic confidence get most affected by the Eurozone debt crisis along with a weak jobs outlook.

Id	Driver	Comments	Immanency
1	On-going global recovery	Germany is in good economic shape. EZ growth low. US growth uncertain	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	Yes
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 back 1.256
USDCHF flat at 0.95
Dollar index back from 20-month highs.
- Hans Rudeke from (these days) Morgan Stanley says 1.15.
- Citigroup says: Greek to leave early 2013. EUR to go to 1.20 and below
- Citi man: What if it is a structured Grexit before 2013? Then we can see somewhat of a rally in EURUSD.

- Asharf EURUSD forecast "1.20 ... "If you want to be academic, then 1.23"

- What about USD strength (too strong). Citi man: There is a good chance that the Fed will do QE if the USD strengthen "too much" on this. BUT, that will not be bad for the USD. So what he says is, well 1.20 OK, parity - completely and absolute out of the question

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”
Until we get a clear picture on the outlook for Europe and the fate of the currency bloc then it’s hard to pick a direction for stocks and other risky assets.
USD: We will be looking for a weekly close above 80.10 in USDJPY to get constructive on this pair. Added to that a successful outcome of the EU Summit next week could give the green light to dollar bulls to push this pair even higher.
EURUSD: we believe EURUSD is likely to be range bound into the ECB meeting on Thursday, stocks may extend recent gains. EURUSD gains may be capped around 1.2750 – the high post the Greek election, while we believe 1.2550 is good support for the time being. US Treasury yields rise at a faster pace than German bond yields as rate cuts by the ECB may anchor the front-end of the German rate curve at a very low level. This would give the dollar the yield advantage and could weigh on EURUSD (1.2400 then 1.2250)
GBPUSD: we don’t think that we will see much of an impact on sterling because of QE. GBPUSD is likely to move in line with overall risk appetite, 1.5730 is the near-term resistance level while 1.58 is another level that could be sticky. 1.5530 remains good support.
Key events:
Monday CNY HSBC Final Manufacturing PMI 48.1 , USD ISM Manufacturing PMI 52.1 53.5
Tuesday: AUD Cash Rate 3.50% 3.50%
Wednesday: AUD Retail Sales m/m 0.3% -0.2%
Thursday: EUR Spanish 10-y Bond Auction 6.04|3.3, GBP Official Bank Rate 0.50% 0.50%, EUR Minimum Bid Rate 0.75% 1.00%, USD ADP Non-Farm Employment Change 101K 133K, USD ISM Non-Manufacturing PMI 53.1 53.7,
Friday: USD Non-Farm Employment Change 92K 69K, USD Unemployment Rate 8.2% 8.2%
Saturday:
Sunday:

Prices and Risk on/off view

Date	CRB	WTI Oil	Copper	Gold	Silver	SP500	Tnote	Bunds	VIX
24-giu	267	79.7	331	1566	26.7	1335	1.67	1.58	18.1
01-lug	284	84.9	349	1604	27.6	1362	1.64	1.58	17.1
Difference	6.37%	6.52%	5.44%	2.43%	3.37%	2.02%	-1.80%	0.00%	-5.52%

Date	Dollar Index	AUDUSD	USDCHF	USDJPY	EURUSD	AUDJPY	Risk on/off
17/06/2012	82.2	1.006	0.95	80.4	1.257	80.96	2.39
01/07/2012	81.6	1.02	0.947	79.8	1.267	81.9	6.58
Difference	-0.73%	1.39%	-0.32%	-0.75%	0.80%	1.16%	1.75

RORO (30): +0.59 (-0.6)

Weekly Briefing 120624

1.  Review.

“USD: QE not off the table for now . We expect all options to remain on the table, but no drastic measures taken just yet. This may disappoint investors that are looking for another dose of QE and could see risky assets move lower and a knee-jerk higher in USD yields. If there is no indication of additional purchases, the dollar is likely to benefit” . Ben Bernanke and co. decided to extend the Operation Twist programme until the end of the year rather than embark on more quantitative easing. The market reaction was to sell stocks and buy the dollar.
“EURUSD. In the week ahead, we will see the release of the June flash PMI’s, EZ consumer confidence, and key surveys due out of Germany. The German ZEW and IFO surveys are set for release on Tuesday and Friday, respectively. All PMI are expected to print below the 50 threshold and indicate contraction. This would be consistent with declining GDP growth and suggests that Europe may fall back into negative growth in 2Q.”IFO Better than expected, generally not bad in light of weak PMI's. Market ignores.
GBPUSD: more QE from BoE, This is pound negative in the long-term in our view, especially since the ECB and the Fed may remain on hold unless there is an adverse outcome to the Greek election this weekend. 1.5350 is a key support zone for this pair, below here opens the way for a sharper decline to 1.50. A positive outcome to the election would make safe havens like the dollar less attractive and could cause a rally back towards 1.5750”
Trades
Closed everything

2.  Analysis.

"Fundamental analysis"
Monday: Nothing
Tuesday: EUR German ZEW Economic Sentiment -16.9 3.8 10.8 %
Wednesday: JPY Trade Balance -0.66T -0.36T -0.51T
Thursday: CNY HSBC Flash Manufacturing PMI 48.1 48.4; EUR German Flash Manufacturing PMI 44.7 45.3 45.2; USD Philly Fed Manufacturing Index -16.6 0.7 -5.8
Friday: EUR German Ifo Business Climate 105.3 106.1 106.9
Saturday:
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: .decided to extend the Operation Twist programme until the end of the year rather than embark on more quantitative easing. This extension shouldn’t impact the size of the Fed’s balance sheet, and thus should only have a marginal impact on the dollar. Although the Fed may not give in to the markets’ wails for more liquidity right now, it left the QE card on the table to use on an even rainier.
EUR: There is also an immense amount of pressure on Merkel to widen the remit of the ECB so that it can act as a lender of last resort. This would give the ECB the power to print euros. Essentially if Europe’s leaders can agree on a compromise between providing more support for troubled economies and centrally managing national budgets then we could come to some sort of compromise resolution.
JPY: USDJPY was a big mover as the market priced in the prospect of the Bank of Japan doing more stimulus compared to the Fed
GBP: . the market is now expecting GBP50bn of QE from the Bank at its meeting on 5th July. What has been interesting is the relative resilience of sterling to this news. Rather than cause it to drop off a cliff as some would expect, the reaction in GBP was fairly muted
Growth: It was the sharp decline in global growth indicators that caused stocks, especially in the US, to really sell off last Thursday. China, Germany and the US all registered weak manufacturing growth in recent weeks

Id	Driver	Comments	Immanency
1	On-going global recovery	Germany is in good economic shape. EZ growth low. US growth uncertain	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	Yes
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 back 1.256
USDCHF flat at 0.95
Dollar index back from 20-month highs.
- Hans Rudeke from (these days) Morgan Stanley says 1.15.
- Citigroup says: Greek to leave early 2013. EUR to go to 1.20 and below
- Citi man: What if it is a structured Grexit before 2013? Then we can see somewhat of a rally in EURUSD.

- Asharf EURUSD forecast "1.20 ... "If you want to be academic, then 1.23"

- What about USD strength (too strong). Citi man: There is a good chance that the Fed will do QE if the USD strengthen "too much" on this. BUT, that will not be bad for the USD. So what he says is, well 1.20 OK, parity - completely and absolute out of the question

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”
Until we get a clear picture on the outlook for Europe and the fate of the currency bloc then it’s hard to pick a direction for stocks and other risky assets.
USD: We will be looking for a weekly close above 80.10 in USDJPY to get constructive on this pair. Added to that a successful outcome of the EU Summit next week could give the green light to dollar bulls to push this pair even higher.
EURUSD: Next week is mainly going to be about this summit. Lots of noise beforehand. I think there is a good chance that they will make big decisions and as such after next week there might be cause for a EUR relief rally. The outcome of this summit could be critical for financial markets in the medium-term. A disappointing outcome could see EURUSD break below 1.2450 and head back towards the recent 1.2350 lows then towards 1.20. However, if decisive, bold action is taken then a march higher above the temporary top at 1.2750 towards 1.30 maybe possible
GBPUSD: We think that GBPUSD will end up being moved more by overall risk appetite rather than by policy actions from the Bank of England. Thus we expect it to consolidate between 1.5500 and 1.5750 in the lead up to the EU summit later this week
Key events:
Monday: USD New Home Sales 347K 343K
Tuesday: USD CB Consumer Confidence 64.0 64.9
Wednesday: USD Core Durable Goods Orders m/m 1.0% -0.9%
Thursday: EUR EU Economic Summit, USD Unemployment Claims 385K 387K
Friday: CAD GDP m/m 0.2% 0.1%
Saturday:
Sunday: CNY Manufacturing PMI 50.4

Prices and Risk on/off view

RORO (30): -0.59 (-1.15)

3.  Plan

Weekly Briefing 120617

1.  Review.

“Considering the sentiment is anti EUR and thus USD positive on "risk off", good US data should further support the USD. Weak US data will probably go unnoticed as long as the focus is stuff like "will the Greek exit be orderly or disorderly USD: QE off the table for now; If core prices for May fall below the 2.2% expected then the market may ignore the prior comments from Bernanke and price in the prospect for more QE” Weak US data went noticed suggesting more QE on the table next week.
“EURUSD, If the aid request for Spain is approved and deemed big enough we could see a sharp relief rally in the markets, that could even trump Greek election fears. EURUSD could break above 1.2625 (a double top from last week) and head back towards 1.30.” Aid request was approved but EUR stalled at 1.2657
“Stocks and commodities to recover also; . It would also cause the dollar to fall and the yen and other safe havens like German Bunds and US Treasuries to come under pressure.” Yes for bonds, not for commodities.
“if the outcome of the call doesn’t end up with Spanish banks being recapitalised or if funds fall short there could be blood on the street, and EURUSD could head back towards 1.20, while Spanish bond yields may surge.” Not this happened.
“GBPUSD: we believe that the uncertain will keep cross range bound.” Broken the short term range to 1.57
“While the Eurozone crisis remains the focus then in the short to medium term we think the dollar could strengthen further. However, in the second half of this year the outlook for the dollar is less clear. “
If the RBA cuts rates then we could see AUDUSD initially dip to 0.9500. However, the Eurozone crisis is likely to have a larger impact on the Aussie in the medium-term. If there is continued stress then we could see it fall back towards 0.9120” Instead the opposite, at 1.008
Trades
Closed everything

2.  Analysis.

"Fundamental analysis"
Monday: Nothing
Tuesday: GBP Manufacturing Production m/m -0.7% 0.1% 0.9%
Wednesday: USD PPI m/m -1.0% -0.6% -0.2%, USD Retail Sales m/m -0.2% -0.1% 0.1%
ThursdayUSD Core CPI m/m 0.2% 0.2% 0.2%, USD Unemployment Claims 386K 378K 377K
Friday: AUD USD Prelim UoM Consumer Sentiment 74 77.5 79.3 USD Capacity Utilization Rate 79.0% 79.2% 79.2%
Saturday: Greek election
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
We expect the Fed to remain accommodative as recent data deterioration indicates the economic recovery. is faltering. In our view, conditions are not likely to warrant an expansion of quantitative easing, although the probability of QE3 has been increasing as the Fed struggles to achieve its mandate of maximum employment and as a decline in consumption points to slower growth. . Markets are effectively doing the work for the Fed in keeping yields down as Lockhart said and he further indicated that that this “takes the pressure off to do something”.
GBP: More QE from the BOE, reports suggest it will be somewhere between GBP80-100bn. There is some skepticism that it will work. . Due to the dramatic nature of the announcement we now expect the Bank of England to announce more QE at its policy meeting in July, potentially GBP50bn worth.
appears to be picking up by more than originally anticipated.

Id	Driver	Comments	Immanency
1	On-going global recovery	Germany is in good economic shape. EZ growth low. US growth uncertain	No
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	Yes
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 back at the Monday opening gap at 1.26, failing to break 38.2 Fibonacci level
USDCHF back from highest level in 15-months
Dollar index back from 20-month highs.
- Hans Rudeke from (these days) Morgan Stanley says 1.15.
- Citigroup says: Greek to leave early 2013. EUR to go to 1.20 and below
- Citi man: What if it is a structured Grexit before 2013? Then we can see somewhat of a rally in EURUSD.

- Asharf EURUSD forecast "1.20 ... "If you want to be academic, then 1.23"

- What about USD strength (too strong). Citi man: There is a good chance that the Fed will do QE if the USD strengthen "too much" on this. BUT, that will not be bad for the USD. So what he says is, well 1.20 OK, parity - completely and absolute out of the question

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”
USD: QE not off the table for now . We expect all options to remain on the table, but no drastic measures taken just yet. This may disappoint investors that are looking for another dose of QE and could see risky assets move lower and a knee-jerk higher in USD yields. If there is no indication of additional purchases, the dollar is likely to benefit
EURUSD. In the week ahead, we will see the release of the June flash PMI’s, EZ consumer confidence, and key surveys due out of Germany. The German ZEW and IFO surveys are set for release on Tuesday and Friday, respectively. All PMI are expected to print below the 50 threshold and indicate contraction. This would be consistent with declining GDP growth and suggests that Europe may fall back into negative growth in 2Q.
GBPUSD: more QE from BoE, This is pound negative in the long-term in our view, especially since the ECB and the Fed may remain on hold unless there is an adverse outcome to the Greek election this weekend. 1.5350 is a key support zone for this pair, below here opens the way for a sharper decline to 1.50. A positive outcome to the election would make safe havens like the dollar less attractive and could cause a rally back towards 1.5750
Key events:
Monday: Nothing
Tuesday: GBP Manufacturing Production m/m 0.1% 0.9%
Wednesday: USD PPI m/m -0.6% -0.2%, USD Retail Sales m/m -0.1% 0.1%
ThursdayUSD Core CPI m/m 0.2% 0.2%, USD Unemployment Claims 378K 377K
Friday: AUD USD Prelim UoM Consumer Sentiment 77.5 79.3
Saturday: Greek election

Prices and Risk on/off view

RORO (30): -1.15 (-1.4)

Weekly Briefing 120610

1.  Review.

“EURUSD, the markets are deeply oversold, especially risky FX and European equities. if there is remedial action by the ECB or other European authorities then there could a powerful relief rally . If it can make its way back to 1.2510 then we may see a deeper pullback towards 1.2710. However, below 1.2350 opens the way to retest 1.2290 then 1.2150 and eventually 1.20. Without remedial action from the ECB or EU authorities it is hard to see how this pair can resist further downward pressure”. No action from ECB, with EURUSD at 1.251
“GBPUSD: We believe that a breach of this important support zone would be a very bearish development for this cross, and may open the way to 1.50 and then potentially to the 1.45 lows from 2010. However, this pair is starting to look oversold, so any remedial action from the European authorities to sort out the sovereign debt crisis could boost sterling, and negate any of the negative impact from more QE from the BOE.” Same see-saw as EURUSD, almost unchanged at 1.547
“While the Eurozone crisis remains the focus then in the short to medium term we think the dollar could strengthen further. However, in the second half of this year the outlook for the dollar is less clear.
If the RBA cuts rates then we could see AUDUSD initially dip to 0.9500. However, the Eurozone crisis is likely to have a larger impact on the Aussie in the medium-term. If there is continued stress then we could see it fall back towards 0.9120” Rate cut by 0.25%, no dip, AUDUSD gained thanks to the risk-on sentiment that prevailed in the week, now at 0.995
Trades
Long AUDUSD, GBPUSD

2.  Analysis.

"Fundamental analysis"
Monday: Nothing
Tuesday: AUD Cash Rate 2.50% 3.75% 3.75%, ISM Non-Manufacturing PMI 53.6 53.7 53.5
Wednesday: EUR Minimum Bid Rate 1.00% 1.00% 1.00%
Thursday: AUD Employment Change 39k 0.9K 15.5K, USD Unemployment Claims 377K 385K 383K
Friday: AUD Trade Balance -0.2B -0.92B -1.59B
Saturday: CNY CPI y/y 3.0% 3.2% 3.4%
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
The rating agency Fitch cut Spain’s credit rating to BBB from A on Thursday, which is just three steps away from junk. Fitch estimated that Spain’s banks need between EU 60 and 100 billion of capital. There is an announcement on Saturday and we will look for two things 1, how much money will be given to the banks and is it close to Fitch’s estimate (i.e., above EU 60bn). 2, When will the money be dispersed (the sooner the better to help placate the markets.)
The European Central Bank, the Federal Reserve and the Bank of England all seem unwilling to extend more stimuli at this stage, preferring instead to stay on the side lines. This is significant for a couple of reasons: 1, markets tend to react strongly to official liquidity injections, and 2, investors may have to navigate a very uncertain few weeks without the support of central banks.
Draghi was very clear: governments need to step up to the plate and forge greater fiscal unity and sort out the troubled banking sector; there is little now that the ECB can do.
As US Treasury rates are so low already it’s hard to see how more QE could have much of an impact on the US economy.
GBP: The BOE may have remained on hold last week but the prospect of more QE from the Bank is not ruled out completely and we could see another injection of cash in the coming months. This is due to the deteriorating picture for the UK economy (better than expected service sector PMI for May, the manufacturing sector survey was deep in contraction territory).
CNY: The market has interpreted the surprise rate cut from the PBOC last Thursday as a way to cushion the blow from a potential bout of weak data. The first rate cut in three years is significant since it suggests a shift in focus from Beijing from inflation to growth going forward. If they combine this with expanded stimulus then we could see the AUDUSD start to recover
AUD: , data released after the announced easing measures showed that Australia reported strong GDP and labor growth. Therefore domestically, the outlook may have been understated as economic activity appears to be picking up by more than originally anticipated.

Id	Driver	Comments	Immanency
1	On-going global recovery	Germany is in good economic shape. EZ growth low. US growth uncertain	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	Yes
4	PIIGS	Greece government and Spain banks in focus	Yes
5	QE3	Not off the table, but almost yes	No
6	Commodity rise	Falling prices are confirming slowdown	No

"Technical analysis"
EURUSD trading back from at the lowest level in 22-months (1.228) to 1.251
USDCHF reaching its highest level in 15-months
Dollar index reaching 20-month highs.
- Hans Rudeke from (these days) Morgan Stanley says 1.15.
- Citigroup says: Greek to leave early 2013. EUR to go to 1.20 and below
- Citi man: What if it is a structured Grexit before 2013? Then we can see somewhat of a rally in EURUSD.

- Asharf EURUSD forecast "1.20 ... "If you want to be academic, then 1.23"

- What about USD strength (too strong). Citi man: There is a good chance that the Fed will do QE if the USD strengthen "too much" on this. BUT, that will not be bad for the USD. So what he says is, well 1.20 OK, parity - completely and absolute out of the question

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”
Considering the sentiment is anti EUR and thus USD positive on "risk off", good US data should further support the USD. Weak US data will probably go unnoticed as long as the focus is stuff like "will the Greek exit be orderly or disorderly".
USD: QE off the table for now; If core prices for May fall below the 2.2% expected then the market may ignore the prior comments from Bernanke and price in the prospect for more QE
EURUSD, If the aid request for Spain is approved and deemed big enough we could see a sharp relief rally in the markets, that could even trump Greek election fears. EURUSD could break above 1.2625 (a double top from last week) and head back towards 1.30.
Stocks and commodities to recover also; . It would also cause the dollar to fall and the yen and other safe havens like German Bunds and US Treasuries to come under pressure.
if the outcome of the call doesn’t end up with Spanish banks being recapitalised or if funds fall short there could be blood on the street, and EURUSD could head back towards 1.20, while Spanish bond yields may surge.
GBPUSD: we believe that the uncertain will keep cross range bound.
While the Eurozone crisis remains the focus then in the short to medium term we think the dollar could strengthen further. However, in the second half of this year the outlook for the dollar is less clear.
If the RBA cuts rates then we could see AUDUSD initially dip to 0.9500. However, the Eurozone crisis is likely to have a larger impact on the Aussie in the medium-term. If there is continued stress then we could see it fall back towards 0.9120
Key events:
Monday: Nothing
Tuesday: GBP Manufacturing Production m/m 0.1% 0.9%
Wednesday: USD PPI m/m -0.6% -0.2%, USD Retail Sales m/m -0.1% 0.1%
ThursdayUSD Core CPI m/m 0.2% 0.2%, USD Unemployment Claims 378K 377K
Friday: AUD USD Prelim UoM Consumer Sentiment 77.5 79.3
Saturday: Greek election

Prices and Risk on/off view

RORO (30): -1.4 (-1.8)