HUGE KRACKER FIND!
Forex Trading Discussion Points
Weekend Edition
13 November 2009
The latest week was difficult for those trying to trade on the fundamentals. The G20 meeting ended a week ago with nary a whimper about USD weakness. There was some talk about the need for some Asian currencies to adjust and that theme has carried through into the nine-day Obama trip to the Far East . Traders took the G20 lack of concern about USD weakness as a green light to sell the U.S. unit. Nevertheless EURUSD buyers ran into a stone wall above 1.50. It seemed that those who had loaded up on short USD positions early in the week got blown out in the mid-week period.
Economic news out of the U.K. , Germany and the Euro-zone has been mixed at best, but mostly was negative. The volatile German ZEW survey early in the week disappointed, and then word got out Thursday that the government was going to have to inject a massive amount of capital into a major bank. The episode raised questions about what other problems in the German financial system have not been disclosed. The U.K. had a mixed week as well, with the BOE inflation report initially misinterpreted and then seen as negative for the GBP. Also the fiscal problems of Japan were raised in light of the magnitude of its public debt and an aging population. Our point is that alternatives to the USD do not appear to be as solid as they once were.
The Obama trip to Asia could prove to be significant for the forex markets as China appears ready to bow to international pressure to allow its currency to drift higher. Some speculate about a modest revaluation of the currency against the USD followed by a pegging of the unit to a basket of currencies. Such a policy would provide China with some political breathing room.
Looking ahead, our view of the markets has changed. A week ago we had expected to see the USD start to trade lower. Now we feel the unit has less downside potential against the majors because of THEIR vulnerabilities. We now are expecting to see more USD short covering followed by dull range work into the end of year period.
Forex Trading Discussion Points
Daily Edition for 13 November 2009
11:00 GMT- TRADING SCENARIO: Forex markets are consolidating the USD gains achieved yesterday on what appeared to be a short-covering rally after headlines hit the tapes that a large German bank was to get a significant government cash infusion to cover massive portfolio losses. Many are hoping now just to get to the weekend. EZ advance 3Q09 GDP today was positive Q/Q but was a mild disappointment vis a vis street estimates.
This is an important weekend with the APEC summit underway in Singapore. President Obama is making his first Asian trip as U.S. leader. This will be a nine-day tour. There has been a lot of chatter about the need for Asian currency adjustments against the rest of the world. A main focus is China. Many feel Beijing is close to taking action on the renmimbi. There was speculation about a 3% revaluation of the unit vs. the USD and then pegging it a basket of currencies, rather than the USD. This would be a logical first step on the road to a more flexible currency regime.
Key data from the U.S. Friday will be October trade deficit (see -$31.8bn vs. $-31.7bn in September). The University of Michigan sentiment survey will be closely followed as well. It is seen improved.
EQUITIES & INTEREST RATES
Click on Chart to Enlarge
Equities 21:02
NIK 9770 -34 DAX 5687 23 DJIA 10276 85
HSI 22554 156 FTSE 5296 20 S&P 1093 6
SSEC 3188 15 SMI 6351 -5 NAS 2166 19
ASX 4706 -42 TSE 11403 58
Far East equity markets closed mixed, as possible currency adjustments are awaited. European bourses are mixed as well. U.S. equity futures are higher at this hour. Dow 10,000 remains a major psychological support level.
The U.S. 10-yr note is 3.44%, -1 bp. Fed Funds will be low for a long time.
FOREX
CHARTS: Forex pairs vs 2-yr note spreads
Click on Chart to Enlarge
Forex EUR vs. GBP vs. 21:02
EUR 1.4920 85 JPY 133.74 -34 JPY 149.60 -23
GBP 1.6689 111 GBP 89.40 -9 CHF 168.88 10
CHF 1.0119 -62 CHF 1.5098 -6 CHF vs.
JPY 89.64 -74 JPY 88.59 -19
EUR/USD is higher. The equity correlation trade is working later in the day. 1.50 remains pivotal. The EUR is mixed to lower on its major crosses.
EUR/CHF is lower. USD/CHF is down. EUR/CHF 1.50-1.53 SNB band. SNB forex policy in flux?
USD/JPY is lower, and the EUR/JPY is lower. Mixed signals on Japanese forex policy continue. Await Obama visit.
GBP/USD is higher. EUR/GBP is down. The U.K. economic statistics have been mixed to disappointing. The mixed data have been triggering GBP instability.
COMMODITIES and Commodity Currencies
Click on Chart to Enlarge
Commodity 21:02
CAD 1.0503 -55 AUD 0.9338 116 Gold 1118 14.60
CNY 6.8270 -7 NZD 0.7438 122 WTI 76.36 -0.28
The CAD is stronger. October trade data are due today.
The AUD and NZD are higher. Risk trades keep going in and out of fashion. The RBA is on offense heading into its December rate decision after strong October employment data. There is no January RBA meeting.
Gold and Oil are higher. Gold, oil, equities and the commodity currencies are all carry trades vs. USD. Gold is another anti-dollar. Gold has been pivoting $1,100. Natural Gas inventory data due were delayed until today after Wednesday Veteran's Day government holiday.
Forex Trading Discussion Points
Weekend Edition
13 November 2009
The latest week was difficult for those trying to trade on the fundamentals. The G20 meeting ended a week ago with nary a whimper about USD weakness. There was some talk about the need for some Asian currencies to adjust and that theme has carried through into the nine-day Obama trip to the Far East . Traders took the G20 lack of concern about USD weakness as a green light to sell the U.S. unit. Nevertheless EURUSD buyers ran into a stone wall above 1.50. It seemed that those who had loaded up on short USD positions early in the week got blown out in the mid-week period.
Economic news out of the U.K. , Germany and the Euro-zone has been mixed at best, but mostly was negative. The volatile German ZEW survey early in the week disappointed, and then word got out Thursday that the government was going to have to inject a massive amount of capital into a major bank. The episode raised questions about what other problems in the German financial system have not been disclosed. The U.K. had a mixed week as well, with the BOE inflation report initially misinterpreted and then seen as negative for the GBP. Also the fiscal problems of Japan were raised in light of the magnitude of its public debt and an aging population. Our point is that alternatives to the USD do not appear to be as solid as they once were.
The Obama trip to Asia could prove to be significant for the forex markets as China appears ready to bow to international pressure to allow its currency to drift higher. Some speculate about a modest revaluation of the currency against the USD followed by a pegging of the unit to a basket of currencies. Such a policy would provide China with some political breathing room.
Looking ahead, our view of the markets has changed. A week ago we had expected to see the USD start to trade lower. Now we feel the unit has less downside potential against the majors because of THEIR vulnerabilities. We now are expecting to see more USD short covering followed by dull range work into the end of year period.
Forex Trading Discussion Points
Daily Edition for 13 November 2009
11:00 GMT- TRADING SCENARIO: Forex markets are consolidating the USD gains achieved yesterday on what appeared to be a short-covering rally after headlines hit the tapes that a large German bank was to get a significant government cash infusion to cover massive portfolio losses. Many are hoping now just to get to the weekend. EZ advance 3Q09 GDP today was positive Q/Q but was a mild disappointment vis a vis street estimates.
This is an important weekend with the APEC summit underway in Singapore. President Obama is making his first Asian trip as U.S. leader. This will be a nine-day tour. There has been a lot of chatter about the need for Asian currency adjustments against the rest of the world. A main focus is China. Many feel Beijing is close to taking action on the renmimbi. There was speculation about a 3% revaluation of the unit vs. the USD and then pegging it a basket of currencies, rather than the USD. This would be a logical first step on the road to a more flexible currency regime.
Key data from the U.S. Friday will be October trade deficit (see -$31.8bn vs. $-31.7bn in September). The University of Michigan sentiment survey will be closely followed as well. It is seen improved.
EQUITIES & INTEREST RATES
Click on Chart to Enlarge
Equities 21:02
NIK 9770 -34 DAX 5687 23 DJIA 10276 85
HSI 22554 156 FTSE 5296 20 S&P 1093 6
SSEC 3188 15 SMI 6351 -5 NAS 2166 19
ASX 4706 -42 TSE 11403 58
Far East equity markets closed mixed, as possible currency adjustments are awaited. European bourses are mixed as well. U.S. equity futures are higher at this hour. Dow 10,000 remains a major psychological support level.
The U.S. 10-yr note is 3.44%, -1 bp. Fed Funds will be low for a long time.
FOREX
CHARTS: Forex pairs vs 2-yr note spreads
Click on Chart to Enlarge
Forex EUR vs. GBP vs. 21:02
EUR 1.4920 85 JPY 133.74 -34 JPY 149.60 -23
GBP 1.6689 111 GBP 89.40 -9 CHF 168.88 10
CHF 1.0119 -62 CHF 1.5098 -6 CHF vs.
JPY 89.64 -74 JPY 88.59 -19
EUR/USD is higher. The equity correlation trade is working later in the day. 1.50 remains pivotal. The EUR is mixed to lower on its major crosses.
EUR/CHF is lower. USD/CHF is down. EUR/CHF 1.50-1.53 SNB band. SNB forex policy in flux?
USD/JPY is lower, and the EUR/JPY is lower. Mixed signals on Japanese forex policy continue. Await Obama visit.
GBP/USD is higher. EUR/GBP is down. The U.K. economic statistics have been mixed to disappointing. The mixed data have been triggering GBP instability.
COMMODITIES and Commodity Currencies
Click on Chart to Enlarge
Commodity 21:02
CAD 1.0503 -55 AUD 0.9338 116 Gold 1118 14.60
CNY 6.8270 -7 NZD 0.7438 122 WTI 76.36 -0.28
The CAD is stronger. October trade data are due today.
The AUD and NZD are higher. Risk trades keep going in and out of fashion. The RBA is on offense heading into its December rate decision after strong October employment data. There is no January RBA meeting.
Gold and Oil are higher. Gold, oil, equities and the commodity currencies are all carry trades vs. USD. Gold is another anti-dollar. Gold has been pivoting $1,100. Natural Gas inventory data due were delayed until today after Wednesday Veteran's Day government holiday.