Positioning with Medium Term Fundamentals

China lowers growth tgt to 7.5% for 2012. Probby will see them move towards a theme of slower growth but more stable. That's their way of saying we grew too fast, and some people need to catch up. It's smart, prevents social instability.

Either way, mkts sold slightly on the news. Nothing major, though AUD and NZD tanked. In particular NZD. Might be a possible oppty to sell NZD/XXX on rallies. Will this be a large case of risk aversion? That's the key qn for a lower NZD. Honestly a tad skeptical right now since there are no firm signs.

KIV to see how things go. More time needs to be given to risk on/off @ e moment. Need a firm move in order to make decent bux.

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On pure technicals, AUD/CAD looks prime for a BOT (sell) if < 1.06.
Want to see how EUR/NZD reacts to 1.62. No major views on these, so probably will be slightly shorter term plays of 1 to 2 days if these get initiated. Thing is that the pair looks like it's going bid, breaking out of a base. Seems like a Kiwi side move for now.
GBPNZD is getting very close to an uber massive confluence of PPZ @ 1.9500, Pitchfork trendline, 38.2% 23.6%, all on the weekly. Gonna be keeping an eye on this one to see if there's opptys to put on some shorts.

Not much time to post. Work's busy.

With w yesterday's drop off in S&P 500 and risk going down the drain, I am looking to sell risk related ccys.

Greece debt swap thing is tomorrow w NFP on friday. Greece being Greece, it's NEVER, not even once been a st fwd deal. This in addition to the risk off could send risk sharply lower. Just my 2cents that there might be some decent downside.

The rally was a st line up since Jan as well, so means there's loads of longs who are going to need to cover if the risk off is sharp enough.

All my remaining JPY shorts got taken @ BE. Looking for oppty to take some shorter term trades (2, 3 days?) for NZD, AUD, and perhaps long USD. Let's see what lines up.

Trends in risk markets are conflicting through, telling of disagreement between differing markets. Dollar momentum is gradually turning upwards, the commodity (CRB) market down. The S&P 500 remains poised upwards, though MSCI Asia Ex-Japan shows signs of turning lower. This suggests the possibility of a near term dip, perhaps on profit taking given the neigh straight line run up since Jan.

Being cautious and nimble now given that so many markets are at cross currents.

Dollar strength is expected in the near term. However, improving US economic data, the aversion of a messy Greek default and abundant liquidity provided by central banks will likely weigh on the Dollar in the medium term.

Dollar strength is anticipated in the short term, but weakness in the medium term.

The Dollar has continued to strengthen in Mar and the global equity markets generally trending higher. This is rather unusual, given that the usual inverted correlation between the Dollar and equity markets. US 10 yr treasury yields have been steady above the 2.00% mark, and pushed above the 2.10% mark for the first time since Oct 2011.

These are telling signs of bullish behavior, indicative of money rotating out of treasuries into equities in search of higher yields.

Economic data and an accommodative Fed stance should continue to fuel risk appetite. US economic data has been showing signs of the world’s largest economy gaining traction. In brief, ISM Non-Manufacturing picked up to 57.3 in Feb. New orders which are reflect underlying business demand lifted to a 1yr high at 61.2. The key Non-Farm Payrolls number showed the third consecutive month of more than 200k jobs created.

Fed Stress test results also show that 15 of the 19 largest US banks could maintain capital adequacy ratios even in a severe recession, with the built in assumption that dividends and stock buy backs continue. The pledge to keep rates “exceptionally low” until 2014 was also reiterated.

The market also interpreted “moderate” growth in Feb’s FOMC statement to be an upgrade from Jan’s “modest” growth, which is likely why bonds have been selling off.

On the international front, Eurozone is perceived to be “safe” (or safer) for now, given that a messy Greek default has been averted. While Eurozone as a whole is not out of the woods, the worst case scenario has been sidestepped.

The lack of mention of QE3 should now be seen as market positive, IE: "we don't need QE3 guys. things are decent".

Am looking for oppty to start selling USD. However, in the interim, the trends are for USD strength, so looking for them low risk entries there, before we see some weakness.

Am hoping to see AUD and NZD pullback big time. Hopefully, price action will be decent and medium term lows put in for position trading longs.

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keep up good work!

Been freakkin' busy...

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In the medium term,
with US data stair stepping its way up the improvement ladder,

a eurozone debt crisis contained (at least for now) with an EUR700bn firewall to sooth any market jitters, and

the rest of Asia seeming to pick up steam,

we could see broad risk appetite pick up in the medium term.

The main source of uncertainty in the interim is China. The market has been pricing in a slowing China, which is justified, though we believe markets will adjust to the “new normal” of moderate Chinese growth especially if data comes out within expectations.

COT data for AUD/USD showed signs of accumulation this week with a build up of net longs off the 1.0300 region where there was heavy support. Price has transitioned from down to sideways for now. Am watching for a breakout of the downward channel that has been dominant in the pair for Mar.

EUR/USD... I'm curious. Cause the higher the pair goes, the more net shorts build. I think there could be a short term move upwards of 1.3375/1.3400 which should wash out a buncha stops, and fuel a short term move towards 1.3450 - 1.3500. Will be looking to position short around there. Ideally the move is a straight line of sorts, so there's plenty of room to fall. Perhaps this is due to terrible eurozone data and positive US data.

This scenario would be a tad odd though since +AUD/USD and -EUR/USD would be conflicting as anything for risk.

.... we'll have to KIV.

Scenario 1:
EUR/USD flips off 1.3500 --> watch AUD/USD for sells around confluenced resistance

#2:
Breakout (BOT) > 1.3500 for EUR/USD, shorts are WRONG AS HELL, and begin to cover en mass. Want to see COT data reflect this if so.
AUD/USD pushes higher.

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Nothing _definitive_ of course. But considerations in the mean time.

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Data & Implications:

UK PMI was decent yesterday at 52.1, 10mth highs. Further +ve UK data would be gd for GBP. Means UK might avert 1Q12 recession. Probby short term. Cus UK is SHITE in the long term w 2012 growh estimates < 0.5%.

Australian inflation, gauged by TD Securities came in at 1.8% (y/y), lower than the previous 2.0%. Building Approvals came in at -7.8% sequentially, the lowest in three years. This reinforces the argument that soft Australian data could RBA could have scope to cut rates this quarter. Am almost certain they will. BUT, @ 4.00%, still the highest yielding currency in the G7 world, not to mention motherloads of liquidity. So what does that change? Not very much... though Glen Steven's is gg to have a real bitch of an economy to deal with.

Eurozone Manufacturing continues to be lackluster, shrinking for the eighth month in a row, printing 47.7. France, German and Italian Manufacturing PMI all continue to languish in sub-50 contraction levels.

Elsewhere, South Korea and Taiwan joined Japan in seeing Manufacturing PMI rise yesterday coming in at 52.0 and 54.1 yesterday. Japan printed 51.1 last week.

Asia’s manufacturing engine seems to be chugging along fine, building the case for medium term risk appetite if confirmed by other key manufacturing countries.

Spain says "no prob bros!"

If they be lying, and say, "err, sorry we need a bailout", me thinks, BYE BYE EUR round #3.

Spanish and Italian yields continue to rise, even as the rest of bond yields dip from inflows (including Greece's!).

We'll see. I continue to hold the view that growth differential btw EUR and US will continue to weigh on EUR/USD.

Though THE main question is, how/where to begin positioning short, barring 300pip stop size.

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Australian markets price in high chance of rate cut in coming RBA meeting.
Interesting to note, for the first time since 31Oct, Australia’s 3-mth bill fixed at 4.242% this morning, below the 4.25% cash rate.
Swaps are also pricing in a 90% probability of RBA cutting the cash rate by 25 basis points during the next meeting on 1May.
The AUD-OIS curve currently trades 3.61 for the 1yr tenor, implying that the market is pricing in at least another 2 basis point cuts within the next year. Though in the interim, this Thurs’ Australian unemployment number will be watched closely. Home Loans came out negative again (m/m), continuing to tell of pain, in addition to consumer confidence still -ve.
Due to the 2 speed economy, RBA will eventually be pressured to cut their benchmark rate.

Though China's GDP this Fri could give AUD a net boost. USD side... well, growth differentials btw US and the rest-of-G10 world is likely to cause USD to outpace most other currencies.
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JPY slid as BOJ meeting concluded with no mention of added stimulus. JPY slid partially due to no one proposing an expansion of stimulus at the conclusion of yesterday’s BOJ meeting. Market dynamics also poise JPY for strength in the short term. The 27Apr BOJ meeting could see a proposal for additional easing measures, and in particular, the details of BOJ’s quarterly outlook will be assessed. It is highly unlikely for the Japanese to back down from their commitment towards aggressive easing and their inflation target, putting the medium term view for JPY on the weakening path.
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Net net, the view that is clearest in the mid term is still to long USD/JPY... from where? that's the key question..

80.00 on USDJPY could be a great place to accumulate positions.

Technicals lining up with mid term fundamentals here.

Let's see how that goes. Not THAT far off. the region of 80.10 to 79.55 is eyed.

Positioning shows net short JPY positions still heavy, in the 66k region where it has been in the past 3 weeks. This is despite JPY strength.

Medium term market participants are possibly accumulating short JPY positions on the commitment by BOJ to continues its aggressive easing policy and inflation target.

I'd watch for a possible squeeze of JPY shorts that have been hanging on tight for the past 3 big figs down though.

Subbed.

Not had the time to post lately. Shows how imbalanced my trading-work-rest of life was.

Have trimmed down to AUD, USD, EUR, GBP vs USD and JPY only. Watching DJIA futures as a risk on/off gauge only. Less is more! I need to focus and know my stuff in depth before I can trade profitably...

Realized there's that TIME balance needeed to trade while balancing work. The more aggressive (smaller TF/style) the more babysitting needed, the more time needed.

Given that my main constraint is time. I am trimming back e number of pairs I trade and confining myself to trades that I know that I can at least hold for the next 2 to 3 days, minimum.

The ideal for me is when the weekly sets up and/or there is a clear sign of risk on/off like now. Those decently sized moves, I believe I can manage easier.

Wait for a trend and ride it hard, so they say.
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Story from yesterday still panning out.

Bullish divergence seen on JPY side and AUD/USD, NZD/USD.

DJIA futures showing signs of bottoming. Inability to dip despite the bad UK GDP and GE PMIs might be signs of a bottom?

See if there’s a turn around. Greek nego with EU summit coming up this weekend. Mention the drachma, and I we are likely to go risk off, EUR/USD < 1.2500 = sell on rallies. Buy JPY. so EUR/JPY would be nice nice place to be short.

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AUD apt to be in several mths of downtrend given that RBA and aussie govt plan to drive AUD down. RBA has "maximum room" to cut rates and aussie govt enacting the largest budget cuts in 25yrs.
China is slowing so with Aussie's 2 speed economy, if mining slows down. Australia's quite fucked.

So, Aus govt pre-empting this by driving AUD lower.

Action Plan:
Now seeing bullish divergences. CFTC data and weekly oscils show super oversold levels. Nice build up of shorts could promot a sizeable rally.
Ride that rally up if it happens. Lookout for 50% / 61.8% and other confluences w resistance... look to sell again.
USD should be strong on general risk aversion from Europe as those stupid polly's cant decide what to do. PMIs of the region continue to contract like crazy.

NZD... usually follows AUD, but could outperform it due to rebuilding from quakes. _THEORETICALLY_ meaning, I dont bloody know. LOL.

Action Plan:
Same and AUD.

Japan... well. Unless BOJ does somethign damn aggro, no changes are expected with regard to additional easing measures. Bond buying by Japan has been ongoing since 2010, but nothing's really happened until inflation target was mentioned.

Markets are apt to continue buying JPY unless an aggressive inflation stance is mentioned.

Aggressive inflationary measures however, would hurt bond holders, of which more than 90% are domestic. On the other hand, the stronger JPY continues to hurt exporters. Toyota’s estimated breakeven level is USD/JPY 85.00, and other major Japanese companies such as Sony, Panasonic and Nintendo have continued to report losses. The situation is a catch-22 for BOJ, and given the conservative Japanese culture, I think BOJ might take longer than expected to adopt such policies.

Would be careful as it approaches recent lows. Though I think they realize this massive intervention thing, throwing a few billion @ the market is kinda useless...

Action Plan:
If "drachma" comes out this weekend, EUR/JPY would be a great sell. Weak EUR, strong JPY on risk aversion.
Risk is another BOJ intervention, but unless you've got real jackass luck, prob not.
Would watch USD/JPY as it approaches 76/75 levels for risk of intervention.
Though inverventions have been lower and lower. Not seen 1 intervention @ the same level before.
EUR/USD --> same plan as EUR/JPY. Though price action alot messier.

UK is in a sorry state. Low growth decently high inflation. Looking out for mention of quantitative easing. Tricky now... not clear. No solid bias.
EUR/GBP in weekly downtrend though. Could be nais...