Weekly Briefing 121029

1.  Review.

I said: “EURUSD: October flash PMI readings are released next week. The market expects these indices to move towards 50 but not get above this crucial level. But expect the markets to react to any positive PMI surprises from the Eurozone next week (1.31highs).” PMI was bad, but the EUR rallied in mid-week.
“We could be range bound in EURUSD for the medium term unless a big event – a Spanish aid request or volatility in Spain’s bond market – gives the market some direction.” Yes, Spain bailout is more unlikely.
“US date due next week, with the key report being Friday’s advance GDP figures for 3Q. Any surprises in the economic data is likely to see the dollar respond more the impact on the risk environment rather than Fed expectations. Therefore better than expected readings may see the dollar softer on improving sentiment while misses could see dollar gains amid risk aversion.” Ok, good GDP reading and small spike of EUR
“GBPUSD: In an environment of elevated Eurozone stress we could see the dollar attract some safe haven demand this week, which could weigh on GBPUSD.” Not in short term.
“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.” Rallied on more easing expected, but retraced on Friday.
Trades
USDJPY long

2.  Analysis.

"Fundamental analysis"
Sunday:
Monday:
Tuesday: CAD Overnight Rate 1.00% 1.00%, CNY HSBC Flash Manufacturing PMI 49.1 47.9
Wednesday: EUR German Flash Manufacturing PMI 45.7 48.1 47.4, EUR German Ifo Business Climate 100.0 101.7 101.4, USD FOMC Statement
Thursday: USD Unemployment Claims 369K 366k 388K
Friday: USD Advance GDP q/q 2.0% 1.8% 1.3%
Saturday:
Both ECB and FED have pledged “unlimited” support to sort out their respective problems and for the first time since the financial crisis broke out in 2008 the Fed and the ECB have said they won’t stop until the problems are solved. This is aggressive action from the world’s most important central banks and the markets like it. If the Fed is going to keep its foot down on the accelerator until the economy recovers then QE could be with us for the long-term, which may keep dollar strength capped and the Aussie, Kiwi and Real fairly strong.
Sentiment drained from the market . The key drivers of lower markets were weak economic data out of Europe, strong data out of the US which threatens to cut QE3 short and weak Q3 corporate earnings.

USD: The S&P 500 has seen 30% of companies that have reported so far miss earnings estimate. Since the tech sector is considered a lead economic indicator the decline in Q3 earnings could precede a sharper slowdown in the broader economy.
CAD: Finance Minister Jim Flaherty said that Canada may have to revise down its economic outlook and that Canada is not immune to world economic challenges
EUR: It doesn’t look like Spain is in any hurry to apply for a bailout (see the European section for more), European data is likely to remain fairly weak for some time. The sovereign debt crisis seems to have lost some of its potency to rattle financial markets in recent months. There is a deteriorating growth picture across the currency bloc and not just in Spain. Eurozone inflation is expected to have declined to 2.5% this month from 2.7% in September when it is released this week
GBP: dealt a blow last week when Q3 GDP data rose 1%, taking the UK out of recession in style. Next week’s October PMI surveys are going to be crucial to the QE decision at the next BOE meeting on 8th November.
JPY: the Price Outlook report will show a reduction in inflation forecasts which underscores the fact that the BoJ is struggling to achieve its 1% inflation target. We expect the Bank to respond with more stimulus in the form of yet another increase to the Asset Purchase Program (APP). A drop in economic activity will weigh on prices which have been indicating deflation for some time
CNY: good data from China. The growth outlook still faces a few hurdles and should not be greeted by traders with unbridled enthusiasm
Gold: Several of the big banks are currently very bullish on gold. From $2000 to $3000 in the next year or two are their calls. And it is mainly due to the money printing is good for gold price argument. They also know if there is a serious risk off event then gold goes down. Therefore the impression is that they are not only bullish on gold but also on the absence of such a big risk off event.

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

"Technical analysis"
EURUSD: always range bound 1.28-1.31. Back towards 1.28. 1.2980 is good support ahead of 1.2850, that resisted.
GBPUSD: 1.60 , broken support at 1.6110 then 1.6050 and 1.5980.
USDJPY: back to 79.6 after breaking 80
AUDUSD: After a correction to 1.024, back to 1.037.

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	Neutral	Long

"Market dynamics”
EURUSD The sell-off in the euro last week coincided with weak PMI data from the Eurozone, thus further declines in economic data could cause more pressure on the single currency. If the data next week is truly horrible then we expect a sharp fall to 1.2800 and then 1.2750 – the low from the middle of September - in the short term. The private ADP report which is due out on Thursday may take on more importance as new enhancements have been made.
GBPUSD: is likely to remain range bound for the short-term between 1.5800 and 1.6150. It is also sensitive to overall market risk, so if we see market sentiment continue to drain then we may test the top of the 1.6065 key support zone.
USDJPY: In the long run, we would prefer to fade yen weakness as increases to the Bank’s APP have not had lasting impacts on the exchange rate. While BoJ action may result in short term yen weakness, we doubt that USD/JPY upside can last without support from higher US treasury yields.
Key events:
Sunday:
Monday: JPY Overnight Call Rate <0.10% <0.10%
Tuesday: USD CB Consumer Confidence 72.4 70.3
Wednesday: CNY Manufacturing PMI 50.3 49.8, EUR Unemployment Rate 11.4% 11.4%
Thursday: GBP Manufacturing PMI 48.1 48.4, USD Unemployment Claims 371K 369K, USD ADP Non-Farm Employment Change 139K 162K, USD ISM Manufacturing PMI 51.2 51.5
Friday: USD Non-Farm Employment Change 120K 114K , USD Unemployment Rate 7.9% 7.8%
Saturday:

Prices and Risk on/off view

Date	CRB	WTI Oil	Copper	Gold	Silver	SP500	Tnote	Bunds	VIX
22-ott	306	90.1	363	1721	32	1433	1.76	1.59	17
29-ott	296	86.1	355	1711	32.1	1411	1.74	1.53	17.8
Difference	-3.27%	-4.44%	-2.20%	-0.58%	0.31%	-1.54%	-1.14%	-3.77%	4.71%

Date	Dollar Index	AUDUSD	USDCHF	USDJPY	EURUSD	AUDJPY	Risk on/off
20/08/2012	79.6	1.034	0.92	79.3	1.302	81.9	-2.62
29/10/2012	79.9	1.037	0.934	79.62	1.293	82.5	-3.89
Difference	0.38%	0.29%	1.52%	0.40%	-0.69%	0.73%	-48.26%

RORO (30): -0.60 (0.27)

3.  Plan
Still waiting to play JPY short trades (78 should be good) and EURUSD long on pullbacks (wait for 1.29).

Briefing 121022

1.  Review.

I said: (121001) “EURUSD: the bias could be to the downside for the euro next week as fundamental and technical data continue to undermine the single currency. We believe that 1.25 will remain well supported as the ECB’s OMT programme has removed the tail risk that the currency bloc could collapse. We 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.” We settled here.
“GBPUSD: In an environment of elevated Eurozone stress we could see the dollar attract some safe haven demand this week, which could weigh on GBPUSD.” It did.
“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.” Yes, we are around 78
Bottom line - QE3 or not it won't change the current positive EUR situation materially”.
Trades
Closed EUR and AUD long.

2.  Analysis.

"Fundamental analysis"
Sunday: CNY CPI y/y 1.9% 1.9% 2.0%
Monday: USD Retail Sales m/m 1.1% 0.7% 1.2%
Tuesday: GBP CPI y/y 2.2% 2.2% 2.5%, EUR German ZEW Economic Sentiment -11.5 -14.6 -18.2
Wednesday: CNY GDP q/y 7.4% 7.4% 7.6%
Thursday: USD Unemployment Claims 388K 367K 342K, USD Philly Fed Manufacturing Index 5.7 1.3 -1.9
Friday: USD Existing Home Sales 4.75M 4.73M 4.83M
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: Data out of the US and UK surprised to the upside last week and gave some very encouraging signals that growth may have woken up from its summer slump. T-note yields at 1.8%. Earning season quite good, even with some disappointing data from Google, IBM and Intel.
CAD: Finance Minister Jim Flaherty said that Canada may have to revise down its economic outlook and that Canada is not immune to world economic challenges
EUR: The chief outcome of the EU Summit has been an agreement with Europe’s leaders that the ECB will eventually be the single body responsible for all banking supervision in the Eurozone. Germany solidifying its opposition to using the ESM (the EU500bn long term rescue fund) to directly re-capitalise the banks in Europe. Spain yield lower, Some think Spain may now wait until the next finance ministers’ meeting in mid-November before making a request for a credit line that would trigger the ECB’s OMT programme.
GBP: economic and . labour market produced a positive surprise
JPY:
CNY: good data from China. The growth outlook still faces a few hurdles and should not be greeted by traders with unbridled enthusiasm
Gold: Several of the big banks are currently very bullish on gold. From $2000 to $3000 in the next year or two are their calls. And it is mainly due to the money printing is good for gold price argument. They also know if there is a serious risk off event then gold goes down. Therefore the impression is that they are not only bullish on gold but also on the absence of such a big risk off event.

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

"Technical analysis"
EURUSD: edging back towards 1.30. 1.2980 is good support ahead of 1.2850
GBPUSD: 1.60 , broken support at 1.6110 then 1.6050 and 1.5980.
USDJPY: flat in the week
AUDUSD: was given a boost by broader risk sentiment as the pair broke above the 200-day SMA and tested above the 1.04. A correction may be due.

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: October flash PMI readings are released next week. The market expects these indices to move towards 50 but not get above this crucial level. But expect the markets to react to any positive PMI surprises from the Eurozone next week (1.31highs). We could be range bound in EURUSD for the medium term unless a big event – a Spanish aid request or volatility in Spain’s bond market – gives the market some direction.
US date due next week, with the key report being Friday’s advance GDP figures for 3Q. Any surprises in the economic data is likely to see the dollar respond more the impact on the risk environment rather than Fed expectations. Therefore better than expected readings may see the dollar softer on improving sentiment while misses could see dollar gains amid risk aversion.
GBPUSD: In an environment of elevated Eurozone stress we could see the dollar attract some safe haven demand this week, which could weigh on 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.
Key events:
Sunday:
Monday:
Tuesday: CAD Overnight Rate 1.00% 1.00%, CNY HSBC Flash Manufacturing PMI 47.9
Wednesday: EUR German Flash Manufacturing PMI 48.1 47.4, EUR German Ifo Business Climate 101.7 101.4, USD FOMC Statement
Thursday: USD Unemployment Claims 366k 388K
Friday: USD Advance GDP q/q 1.8% 1.3%
Saturday:

Prices and Risk on/off view

RORO (30): 0.27 (-0.21)

3.  Plan
Still waiting to play JPY short trades (78 should be good) and EURUSD long on pullbacks (wait for 1.29).

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