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)

Weekly Briefing 120526

1.  Review.

Euro is down 2% this week. Uncertain remains high due to lack of clarity about Eurobond, Greek elections and bank capitalization.
Trades
Edged AUDUSD, USDGBP, short AUDUSD

2.  Analysis.

"Fundamental analysis"
Monday: Nothing
Tuesday: GBP CPI y/y 3.0% 3.1% 3.5%
Wednesday: JPY Overnight Call Rate <0.10% <0.10% <0.10%
Thursday: CNY HSBC Flash Manufacturing PM 48.7 49.3, EUR German Ifo Business Climate 106.9 109.5 109.9, USD Unemployment Claims 370k 374K 370K
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
Economic releases have suggested that the Euro zone may experience negative growth again in Q2 as disappointing May PMI figures out of Germany, France, and the EZ as well as poor German IFO survey readings indicate the potential for contraction.
With the lack of anything from the EU summit and resulting price action it seems like the 1.25 / 1.30 buffer is not going to stop this train.
German 10-year and 30-year bund yields hit record lows as did Netherland’s 10-year bond yields. US 10-year Treasury yields traded near record lows. Spread between EU and US favors US and weights on EURUSD
China's Premier Wen said China would prevent the economy from slowing down rapidly and would be both timely and decisive in adjusting monetary and fiscal policies.

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; PIMCO says yes	No
6	Commodity rise	Falling prices are confirming slowdown	No

"Technical analysis"
EURUSD trading at the lowest level in 22-months
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".
We would view and countertrend corrections as opportunities to look to establish positions with the outlook for USD strength to continue.
EURUSD: The technicals suggest that a longer term decline is likely, however oscillators indicate that the euro may be oversold which point to a period of consolidation or possible correction. As such we would be hesitant to establish fresh shorts at current levels and would prefer to fade any euro strength.
I think the best approach currently is to look to sell in the upper grid and take profits in the lower grid. Not convinced dip-buying (long EUR) is a good idea before we have some more clarity about the Greek political situation: are the Greek people going to be forced to make a decision between to total extremes during the election, or are they going to simply make a decision as to who the managers of a "known outcome" will be? This is the kind of thing the market is going to trade on. We are going sub 1.25 because instead of some less uncertainty we have more in the next weeks.
Trade the grid with a short bias and expecting some southward adjustment unless the powers that be put a floor under the euro here.
Key events:
Monday: Nothing
Tuesday: USD CB Consumer Confidence 69.6 69.2
Wednesday: EUR Italian 10-y Bond Auction
Thursday: USD ADP Non-Farm Employment Change 139K 119K, USD Prelim GDP q/q 1.9% 2.2%
Friday: USD Non-Farm Employment Change 152K 115K, USD ISM Manufacturing PMI 54.1 54.8, GBP Manufacturing PMI 49.7 50.5

Prices and Risk on/off view

RORO (30): -1.2 (-1.8)

20120525 Week

Succinct summation of week’s events:

Positives:

1) With all the fears of Spanish and Italian spillover from Greece, both stocks and bonds in each are little changed on week.
2) French feel good with new Pres as consumer confidence rises to best since Nov ’10.
3) German consumer confidence holds at just .2 pts from highest since Mar ’11.
4) April New Home sales total 343k annualized, above expectations and the 2nd best over the past 2 yrs.
5) Apr Existing Home sales a touch above estimates but months supply rises to 6.6 from 6.2.
6) With mortgage rates hitting another new low, refi’s up 5.6% to 14 week high.
7) UoM confidence rises to most since Oct ’07 in May as one yr inflation expectations fall to 3.0%, the lowest since Dec ’10 in response to a 3 month low in gasoline prices.
8) KC region mfr’g rises to 9 from 3.

Negatives:

1)Greek stocks fall another 12%, down 91% from the high in ’07, a greater fall top to bottom than during the US Great Depression.
2) German IFO business confidence falls to 6 month low, mfr’g PMI drops to lowest since June ’09 at 45, French PMI at 44.4.
3) Euro zone mfr’g and services composite index declines to lowest since June ’09.
4) UK Q1 GDP contraction revised even lower.
5) Italian consumer confidence falls to new low.
6) China’s HSBC flash mfr’g index remains below 50 for 7th straight month falling .6 pts, Shanghai index loses at 5 1/2 week low.
7) US Durable Goods fall .6% ex transports and 1.9% at the core vs an expected gain for both.
8) Initial Jobless Claims total 370k, in line but declining trend over past yr has stopped for now.
9) Richmond mfr’g falls to 4 from 14.
10) Notwithstanding new low in mortgage rates, purchase apps fall 3% to 4 week low.
11) Fitch downgrades Japan’s credit rating to A+, not a surprise but Japan continues its path to its European moment.

Weekly Briefing 120519

1.  Review.

Unless something clearly noticeable happens, something like some ECB action or maybe more FED & Central bank swap lines to alleviate potential credit crunch risks we are going to be in a bad situation with regards to Greece noise until the outcome of the election or until valuable polls suggests Greece won't exit
EU markets are at 2012 lows. The US markets not, but they are well below their recent highs.
The interesting thing is that EUR for instance scarcely lost 2% over the last week. Open at 1.2920, means 2% is about 260 pips is 1.2660 = the low. That doesn't compare too bad with AUD and GBP.
The Bundesbank's Dombret said German banks are prepared for any fresh problems in Greece
Trades
Edged AUDUSD, NZDUSD, short USDGBP, AUDUSD

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
The minutes noted that the recovery would have to falter in order for more stimulus to be warranted. Though our base scenario is for no additional QE, this past week’s data showed a slight deterioration in economic activity (in April, retail sales softened, weekly jobless claims showed no sign of improvement, and the Philadelphia Fed index showed contraction for the first time since Sept. 2011)
GBP: . It expects inflation to under-shoot its 2% target in the next two years, which suggests the Bank will keep the door open to more QE (May 22 . GBP CPI (YoY) 3.1% 3.5%) Last week the pound broke its inverse relationship with Gilt yields. In the past few months it has strengthened as Gilt yields have fallen, leading the pound to be called a “safe haven”

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”; Greece exit	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"
The euro managed to recover slightly at the end of last week after dipping below 1.2650 at one stage. The key support level to watch is 1.2624 – the January low. Below here there isn’t much support before 1.20. Although the situation is grave in the Eurozone, the volatility in the options market is not as high as it was in November. This suggests that the markets may be expecting the politicians and the ECB to step in if things get critical.
Constructive for the dollar as the dollar index is trading above the 80.00 level (81.9).. The rally may be running out of steam for now as negative external factors stemming from the Euro zone haven been largely priced in and as domestic concerns keep the prospect of additional Fed stimulus in sight.

Median grid
EURUSD GRID 1.2400-1.3000, south 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”
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".
With expectations of strong action from the BoJ low, the yen is likely to remain firm as traders avoid risky assets . We expect the yen to be range bound.
We think the pound is vulnerable especially against the yen and the Aussie dollar. Weak inflation data could push GBPUSD below 1.6.
We continue to see EURUSD move lower, but we think it will be an incremental decline rather than a prolonged downtrend. 1.26 as strong support.
We lowered our AUDUSD forecasts overnight, taking the 1m down to 1.00 (prev. 1.05) and the 3m to 0.97 (prev. 1.00). The lower currency forecast profile reflects downgraded UBS China growth forecasts as well as our anticipation that risk aversion is likely rise further on the back of continued political paralysis in Greece.
Key events:
Monday: Nothing
Tuesday: GBP CPI y/y 3.1% 3.5%
Wednesday: JPY Overnight Call Rate <0.10% <0.10%
Thursday: CNY HSBC Flash Manufacturing PM, EUR German Ifo Business Climate 109.5 109.9, USD Unemployment Claims 374K 370K
Friday:

Prices and Risk on/off view

Date	CRB	WTI Oil	Copper	Gold	Silver	SP500	Tnote	Bunds	VIX
13/05/2012	291	96.1	364	1584	28.9	1353	1.83	1.51	19.9
20/05/2012	290	91.4	346	1591	28.7	1295	1.72	1.42	25.1
Difference	-0.34%	-4.89%	-4.95%	0.44%	-0.69%	-4.29%	-6.01%	-5.96%	26.13%

Date	Dollar Index	AUDUSD	USDCHF	USDJPY	EURUSD	AUDJPY	Weekly Risk on/off
06/05/2012	80.2	1.003	0.93	79.92	1.292	80.1	-5.64
13/05/2012	81.3	0.98	0.94	79	1.277	77.6	-12.17
Difference	1.37%	-2.29%	1.08%	-1.15%	-1.16%	-3.12%	-115.71%

RORO (30): -1.8

3.  Plan

4.  Trades

Positions
USDJPY +2
EURUSD -1
USDCHF 0
AUDJPY +0
EURJPY 0
CADJPY 0
EURAUD +1

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.