It seems to me the market discounted the German Export miss this morning at 2am EST. If anything could throw German support (albeit behind closed doors) behind perceived looser policy it would be a threat to their prized export economy. It seems this could open the door to more openness to "talking down" the currency.
The pair has come within 1 pip of 1.31, rallying strongly through the end of the London session. Being cautious of tomorrow's FOMC minutes, I'm starting to get short EURUSD again in anticipation of a sub 1.30 weekly close.
Tuesday, April 9, 2013
Monday, April 8, 2013
BOJ Minutes Release
Feels like USDJPY will head up to 100 and bounce off that after the BOJ minutes release. The minutes can only show that there is some trepidation by some on the bank's committee to the grand plan (god I hope so!). Maybe back to 97.50 for a while. Pure technical conjecture at this point, but I think we'll hit 100 before tonight's minutes are released.
Sunday, April 7, 2013
EURUSD, 4/7/2013
Recap
The pair opened last week around 1.2800 and muddled around about a 50 pips north and south until the ECB meeting on Thursday. The initial reaction to Draghi's somewhat dovish prepared statement was a headfake to the week's low at about 1.2740, but it then slowly crept back as Draghi answered questions and eventually skyrocketed for an impressive 210 pip reversal to close the day close to 1.2950. Specific talking points that triggered upward movement:
Outlook
The market's QE ending and long dollar index sentiment looks to be under fire given last Friday's alarming NFP number. The market will be on edge for any signs of slowing economic news/data out of the US. I favor going long other pairs vs USD. I will however get long EURUSD on a short term basis.
Mon
The risks from Portugal's weekend repeal of austerity measures seems muted so far. There was a minor gap on the Asia open that has since been filled. Will have to continue to monitor this, but it again opens up the downside risk possibilities, so I want to keep any long positions on a short leash.
Light data day. EZ investor confidence and German industrial production. Expectations are already low. No US data releases. Bernanke will speak at 7:15pm EST. My feeling is that any of the EZ data coming in even slightly better than expected will push the pair higher toward 1.31, whereas inline data and slightly worse data shouldn't have much affect given the ECB's last meeting.
Tue
Another light data day. Trade balance data for Germany and France. US Redbook Index. Barring anything major out of Europe, we could see a continuation upwards of the EUR here. Continue to keep long positions tight.
Wed
One of the week's big USD events will be the relase of the FOMC minutes on Wednesday at 2:00pm EST.
<more details to come Monday>
The pair opened last week around 1.2800 and muddled around about a 50 pips north and south until the ECB meeting on Thursday. The initial reaction to Draghi's somewhat dovish prepared statement was a headfake to the week's low at about 1.2740, but it then slowly crept back as Draghi answered questions and eventually skyrocketed for an impressive 210 pip reversal to close the day close to 1.2950. Specific talking points that triggered upward movement:
- PIs show no risks to price stability
- discussion of the broken monetary transmission to peripheral SMEs and how further rate cuts would be ineffective at fixing this
- strong reaffirmation that the Cyprus bailout will not be a template
- strong reaffirmation that pundits/blogosphere underestimate the political capital invested in the EU and that a member exit is not considerable - "there is no plan B"
The upward movement continued to 1.3040 on Friday after the big US NFP miss, before settling to close the week slightly under 1.30. This close brings the pair back to 75 pips of where it was trading prior to the Cyprus debacle.
Other interesting developments during the were a somewhat softening of the contraction in EZ PMIs (speaking very broadly here) and the plunge in Italian debt yields. One cannot help but wonder about Draghi's role here given his tight-lippedness over his conversation with Italian PM Napolitano coupled with his continued efforts to keep OMT criteria vague (call me a conspiracy theorist I guess).
Outlook
The market's QE ending and long dollar index sentiment looks to be under fire given last Friday's alarming NFP number. The market will be on edge for any signs of slowing economic news/data out of the US. I favor going long other pairs vs USD. I will however get long EURUSD on a short term basis.
Mon
The risks from Portugal's weekend repeal of austerity measures seems muted so far. There was a minor gap on the Asia open that has since been filled. Will have to continue to monitor this, but it again opens up the downside risk possibilities, so I want to keep any long positions on a short leash.
Light data day. EZ investor confidence and German industrial production. Expectations are already low. No US data releases. Bernanke will speak at 7:15pm EST. My feeling is that any of the EZ data coming in even slightly better than expected will push the pair higher toward 1.31, whereas inline data and slightly worse data shouldn't have much affect given the ECB's last meeting.
Tue
Another light data day. Trade balance data for Germany and France. US Redbook Index. Barring anything major out of Europe, we could see a continuation upwards of the EUR here. Continue to keep long positions tight.
Wed
One of the week's big USD events will be the relase of the FOMC minutes on Wednesday at 2:00pm EST.
<more details to come Monday>
Sunday, March 24, 2013
EURUSD, Euro Saved Again
Recap
Cyprus's week of fame is over. The pair dipped down briefly to 1.2850 and closed the week by recovering about half of it's opening gap at 1.2988. It's currently quoting 1.3040 and has nearly touched 1.3050 on the Cyprus bailout package news, as of midnight Sunday EST.
Cyprus's week of fame is over. The pair dipped down briefly to 1.2850 and closed the week by recovering about half of it's opening gap at 1.2988. It's currently quoting 1.3040 and has nearly touched 1.3050 on the Cyprus bailout package news, as of midnight Sunday EST.
The week was dominated by Cyprus, but there was some key data points that should not be glossed over. The EZ service PMIs all came in well below estimates - France's economy continues it's stunning contraction, and even Germany's service PMI was barely expansionary. Manufacturing indicators across the EZ were also dismal and price indices continue to show less inflation than projected. Rate cut anyone...?
Where From Here
As we called the neutral positioning on Friday for a weekend gap/break to the upside on positive Cyprus news, we are sitting long and looking for a spot to close out and return to shorting the pair based on the poor fundamental situation and the likelihood of an ECB rate cut. I'm favoring 1.3125 as a reversal point, but I feel the relief rally risks running out of steam before then. This week is relatively light on EZ data, so watch USD data releases for possible catalysts. I will be looking to find a decent exit by Tuesday's USD durable goods release.
As we called the neutral positioning on Friday for a weekend gap/break to the upside on positive Cyprus news, we are sitting long and looking for a spot to close out and return to shorting the pair based on the poor fundamental situation and the likelihood of an ECB rate cut. I'm favoring 1.3125 as a reversal point, but I feel the relief rally risks running out of steam before then. This week is relatively light on EZ data, so watch USD data releases for possible catalysts. I will be looking to find a decent exit by Tuesday's USD durable goods release.
Mon
Everyone's favorite PhD economist, Benny Bernanke is on the docket for a speech on Monday at the London School of Economics at 13:15 EST. I can't see anything new happening here, except maybe more of a discussion of Benny's new QE Tool: the ratchet. In case anyone missed last week's Fed monetary policy event, the Fed will employ use of the ratchet to dial down QE as conditions improve (or dial up if they headfake... hmmm). I'd expect the EURUSD to close NY somewhere within 25 pips of the session high.
Everyone's favorite PhD economist, Benny Bernanke is on the docket for a speech on Monday at the London School of Economics at 13:15 EST. I can't see anything new happening here, except maybe more of a discussion of Benny's new QE Tool: the ratchet. In case anyone missed last week's Fed monetary policy event, the Fed will employ use of the ratchet to dial down QE as conditions improve (or dial up if they headfake... hmmm). I'd expect the EURUSD to close NY somewhere within 25 pips of the session high.
Tue
USD durable goods for Feb at 8:30 EST is the big USD data release for the week. Given the extreme recent volatility in this figure over the past 6 months, plus the sharp decline in Jan, it seems like this release has potential to create waves. Expectations are for a 2.5% increase. Given the govt spending reductions, the recent FedEx earnings miss and the Walmart February "disaster" situation, I would favor a miss here. But on the other hand, retail sales, which are more of a lagging indicator beat estimates soundly last week, so I remain cautious with my bearish sentiment. If these numbers come in line or better, I think this is a solid signal to short EURUSD.
USD durable goods for Feb at 8:30 EST is the big USD data release for the week. Given the extreme recent volatility in this figure over the past 6 months, plus the sharp decline in Jan, it seems like this release has potential to create waves. Expectations are for a 2.5% increase. Given the govt spending reductions, the recent FedEx earnings miss and the Walmart February "disaster" situation, I would favor a miss here. But on the other hand, retail sales, which are more of a lagging indicator beat estimates soundly last week, so I remain cautious with my bearish sentiment. If these numbers come in line or better, I think this is a solid signal to short EURUSD.
Wed
<too tired to finish right now>
Friday, March 22, 2013
EURUSD, Weekend Trade
EURUSD looks to be positioned pretty neutrally after a day of covering in anticipation of Cyprus news. My weekend trade will be to get long a few small lots around 1.2975-1.2990 before today's close. Then when Asia opens on Sunday, watch for the following:
- If Cyprus situation resolved -> there should be a relief gap up, maybe as high as 1.3150. I'll sell into this gap, selling out of my position and reversing all the way to a short position. This relief rally is bound to be beat down early in the week, due to the market's refocus on the dismal fundamental situation in EZ (recession + Italy)
- If Cyrpus situation not resolved -> stay long and flatten out at discretion. Depending on the news flow, there may be a small gap up, or no gap at all. Unless Cyprus decides over the weekend to leave the EZ (seems much less possible given the reports of the last few days) this is a low risk trade.
Monday, March 18, 2013
EURUSD, Cyprus
EURUSD Trading Gameplan, Cyprus + Fed
So far
Pair was trading around 1.3050 prior to weekend announcement of depositor haircut. Gapped 130 pips down Monday and touched almost 1.2875. Started rebounding at London open towards 1.2975. Hit almost 1.3000 at London close. Consolidated back to 1.2950 at US close and quoting there currently.
Cyprus
Cypriot parliamentary vote on bail-in postponed Tuesday indefinitely. Banks tenatively set to re-open Thursday, so ostensibly this makes Wednesday seem like the deadline. It is unclear if the government has enough support to pass this. Shifting the burden mainly onto 100K+ and 500K+ depositors would alleviate some of the mass outcry against it, and may allow enough parliamentary support for passage. Bail-in outcome:
So far
Pair was trading around 1.3050 prior to weekend announcement of depositor haircut. Gapped 130 pips down Monday and touched almost 1.2875. Started rebounding at London open towards 1.2975. Hit almost 1.3000 at London close. Consolidated back to 1.2950 at US close and quoting there currently.
Cyprus
Cypriot parliamentary vote on bail-in postponed Tuesday indefinitely. Banks tenatively set to re-open Thursday, so ostensibly this makes Wednesday seem like the deadline. It is unclear if the government has enough support to pass this. Shifting the burden mainly onto 100K+ and 500K+ depositors would alleviate some of the mass outcry against it, and may allow enough parliamentary support for passage. Bail-in outcome:
- Passed
- Cyprus EZ exit avoided
- Precedent set for peripheral bank capital flight - WATCH SOVEREIGN YIELDS for an indication of this over the longer term
- Buy Euro short term, but assess capital flight
- Not Passed
- Cyprus banking system collapse
- Cyprus EZ exit, redenomination to Lira.
- Sell EUR to at least 1.2650 and re-assess.
Action: I can see the pair testing the bottom again around 1.2875 on Tuesday, but I can't see any catalyst for it breaking thru. Sell rallies up to around half of the weekly gap, say 1.3025. Cover close to the short term bottom at 1.2875, keep a little on to see if it breaks beneath, pending the news out of Cyprus. Cover most prior to the Fed's 2:30 EST monetary policy release.
Fed
Since the timing of the Fed's monetary policy release is set to closely follow action in Cyprus, watch for a reversal on dovish tone. I personally expect the same language from the Fed about assessing risks of QE, blah blah blah, but the reality is that Benny and the FOMC NY open market desk are not going to be selling anytime soon. How could they POSSIBLY sell treasuries/mortgage backed securities into the market right now and expect real buyers? Sorry, but it's a complete fcking joke. And forget selling, I can't even see the current buying binge coming to an end in 2013.
Last Thursday, it looked like the market was starting to unwind its long dollar index trades after the US CPI came in over expectations and there was no trend continuation. The unwinding appeared to be continuing into Friday. And then the EZ/Cyprus situation happened, so it's hard to get a feel for real positioning.
Action: I'm favoring getting out of my EUR shorts prior to the FOMC announcement and getting long another currency like CAD or possibly even MXN. CAD appears to be slightly oversold at this point and would seemingly benefit from dovish tone.
Sunday, March 10, 2013
USDCAD, 3/10/2013
Recap
The Canadian dollar has spent most of February and March tightly correlated to the EUR. While Canadian data hasn't been overwhelming for much of the year (excluding last Friday's employment and housing data), it's far from the EUR. My guess is that this is due to 1) dollar index (DXY) buying on the back of the strong dollar trade and 2) low CAD volume. The pair hit 1.0336, its highest mark in 9 months on Wed after the Bank of Canada published slightly more dovish language on removing monetary stimulus from the economy. The retreat from this high was swift back to 1.0315 and then comfortably back below 1.0300 for the rest of the week.
Outlook
There is very little in the way of data releases from Canada this week. There appears to be significant selling interest at 1.0300, so it will be interesting to see if there is a divergence from the EUR at this level if DXY starts taking off again this week. I will watch this correlation and possibly enter short for a quick 10 or 20 pips if it breaks. I am very short this pair on a long term basis, but it may take another few good data releases before any significant reversal to the downside emerges. That said, if advances above 1.0300 are consistently resisted in the London/NY sessions, I may put some more short on for the long-term.
The Canadian dollar has spent most of February and March tightly correlated to the EUR. While Canadian data hasn't been overwhelming for much of the year (excluding last Friday's employment and housing data), it's far from the EUR. My guess is that this is due to 1) dollar index (DXY) buying on the back of the strong dollar trade and 2) low CAD volume. The pair hit 1.0336, its highest mark in 9 months on Wed after the Bank of Canada published slightly more dovish language on removing monetary stimulus from the economy. The retreat from this high was swift back to 1.0315 and then comfortably back below 1.0300 for the rest of the week.
Outlook
There is very little in the way of data releases from Canada this week. There appears to be significant selling interest at 1.0300, so it will be interesting to see if there is a divergence from the EUR at this level if DXY starts taking off again this week. I will watch this correlation and possibly enter short for a quick 10 or 20 pips if it breaks. I am very short this pair on a long term basis, but it may take another few good data releases before any significant reversal to the downside emerges. That said, if advances above 1.0300 are consistently resisted in the London/NY sessions, I may put some more short on for the long-term.
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