EurAnalysis

Thank you CM.

115k than

All entries have to be submitted by or before 12:25GMT (13:25 London / 8:25 NY) which is 5 mins before release.

To make it easier for me to copy and paste your entry onto a list in my notepad, please format your entry with your handle, followed by your guess

Example:

DaBestTradaEva 100K

Thanks

Official List

CurrencyMan 65K
FXSwissTrader 90k
mka_78 93k
PipTrapper 97K
granty 98k
salt 112K
letscry 115K
balanced2012 117 k
Sftyler 118k
Gofer Pips 123K
PipsMaster23 135k

87k for me please

The long and short of it
03/08/12 @ 10:24 GMT by Simon Smith, Chief Economist
After the drama of yesterday’s session, FX markets are relatively subdued in the run-up to the US employment data later today. It’s actually bond markets where the interesting moves are and FX markets should take careful note. This is because, whilst the more closely-watched 10yr yields in Italy and Spain have moved higher (Spain now around 7%), the yields on short-dated paper have fallen substantially. Spanish 2yr yields are below 4.50%, having been up to nearly 7% in July.

The reason is the ECB’s statement of yesterday that any revised bond-buying on its part would be concentrated on shorter-dated bond maturities, the reasoning being that this fits more closely with its mandate. Traditionally 2yr yields correlate better with FX rates, compared to 10yr bonds. Of course, for the eurozone, there is no such thing as a single bond market. If we use swap rates (i.e. money market rates) instead of bonds, the correlation between EUR/USD and 2yr rates (US vs. eurozone) has averaged around 0.33 compared to almost flat for the 10yr. That said, the inverse correlation between movements in peripheral yields and EUR/USD (euro rising as yields in Italy and Spain etc. fall) has been pretty strong, averaging -0.50 so far this year. If we do the same for the 2yr, the figure is -0.43. Not a massive difference, but notable that it is not as strong. What it means is that FX is more sensitive to interest rates at the short end of the curve (2yr), but more sensitive to sovereign risk at the longer end (10yr). This makes sense from the perspective that governments do issue a greater proportion nearer to 10yr maturity than 2yr on average. But it’s worth keeping an eye on, especially if governments shift to issuing more shorter-dated bonds as a result.

All entries have to be submitted by or before 12:25GMT (13:25 London / 8:25 NY) which is 5 mins before release.

To make it easier for me to copy and paste your entry onto a list in my notepad, please format your entry with your handle, followed by your guess

Example:

DaBestTradaEva 100K

Thanks

Official List

CurrencyMan 65K
knomoneey 87K
FXSwissTrader 90k
mka_78 93k
PipTrapper 97K
granty 98k
salt 112K
letscry 115K
balanced2012 117 k
Sftyler 118k
Gofer Pips 123K
PipsMaster23 135k

Expecting nothing major here

sisse 105K

Seems to be a Swiss thing! My Swiss friend here is OCD!

We´ll be trading the US NFP (Nonfarm Payroll) Employment Change, it is the focus news release for the week. Here´s the forecast:

8:30am (NY Time) US NF Employment Forecast 100K Previous 80K
8:30am (NY Time) US Unemployment Rate Forecast 8.2% Previous 8.2%
Deviation: 70K (BUY USD 170K / SELL USD 30K)

The Trade Plan
Todays NFP Employment Change release is forecasted at 100K. The Unemployment Rate is expected to remain at 8.2%. If we get a significantly lower release on the NFP (30K or worse) and slightly higher Unemployment Rate (8.3% or more), I´d be looking to SELL the USD against stronger currencies. On the other hand, if we get a strong NFP release (160K or better) and the Unemployment Rate remains at or below 8.2%, USD should strengthen immediately and I would BUY USD against other weaker currencies (use CSM or recommended pairs above)

If we get a conflicting release, then well wait and see how the market reacts first. If there is an overwhelming sentiment driving the market, well get plenty of opportunities for an entry if we just wait for 5 minutes after the release; you´ll get a much clearer view. Note that this is the first NFP release for the new quarter which will hold some symbolic significance if we get a surprise. With the Feds chalking up last quarter’s weak Employment to “Seasonal”, this release will be viewed as confirmation to the seasonal argument or confirmation to the broader economic slow down.

CurrencyMan:

PLEASE MAKE YOUR OWN DECISIONS - Just For Another Opinion Purpose

What part of format with handle then prediction do you people not get?

If you trade your plan this way, you'd be bombing accounts! Geez!

I'm gonna say 120k

sorry

gnomoneey 87k

For pete sake, READ THE F' ING INSTRUCTIONS people!

OCD is the order of the day

August 3, 2012
The Bernanke Put is a Lie


Now, about that Bernanke Put.

Many people believe that because Bernanke once talked about dropping money out of helicopters to fight deflation that he literally meant that he would do this if push came to shove. He didn't. The whole thing was a bluff meant to prop up the markets: the famed Bernanke Put.

Truth be told, this bluff is probably the smartest thing Bernanke ever did. By threatening to leave a paperweight on the "print" button, he convinced the market and all of Wall Street that the Fed would always be there to step in and save the day.

Let's say the Fed just hits "print" and prints TRILLIONS of dollars to monetize everything under the sun. If this happens then the bond market will implode taking down the US financial system with it (85% of the $224 trillion in derivatives sitting on US bank balance sheets are related to interest rates).

Moreover, it's not as though "printing" solves a solvency crisis. Instead it results in a loss of faith in the underlying currency, which causes hyperinflation (this is exactly what happened in Weimar). Most people forget that hyperinflation is the SAME as defaulting: in both situations the underlying currency becomes worth much less if not worthless.
So printing is ultimately a useless concept. But what about debt monetization? Couldn't the Fed just print tons of money to buy Treasuries and other debt instruments?


The answer here is ALSO a resounding "NO."
The reasons are three-fold:
1) Inflation
2) Political consequences
3) Draining Treasuries from the banks

The last time the Fed instigated QE, food prices went through the roof resulting in riots and civil unrest around the globe. Today, food prices are already soaring due to severe droughts. The Fed's hands are tied here.
If the Fed engages in QE, the political consequences would be severe. QE 2 alone made the Fed front page news in a BAD way, resulting in the Fed going into major damage control mode: op-eds about Bernanke being a regular guy, town hall meetings, etc.

Finally, one has to question... does the Fed really want to be draining Treasuries and Agencies from the banks' balance sheets? After all, the big banks, which sit on over $200 TRILLION worth of derivative trades, only have $7.12 trillion in assets.


If the Fed were to engage in QE it would suck some of these assets out of the banking system resulting in the banks being even more leveraged and susceptible to collapse.

Bernanke knows this. He even admitted it recently, saying, "If the Fed owned too much TSYs and Agencies it would hurt the market."

So the Bernanke Put is a lie. The markets will be realizing this in the coming months if not sooner. When they do, we'll see the REAL Collapse: the one to which 2008 was just a warm-up.

LUIS CARLOS 60K

my mistake, my mistake

Dagoot 120k if it snot too late!

All entries have to be submitted by or before 12:25GMT (13:25 London / 8:25 NY) which is 5 mins before release.

To make it easier for me to copy and paste your entry onto a list in my notepad, please format your entry with your handle, followed by your guess

Example:

DaBestTradaEva 100K

Thanks

Official List

LUIS CARLOS 60K
CurrencyMan 65K
knomoneey 87K
FXSwissTrader 90k
mka_78 93k
PipTrapper 97K
granty 98k
sisse 105K
AlwayLost 110 K
salt 112K
letscry 115K
balanced2012 117 k
Sftyler 118k
Dagoot 120K
Gofer Pips 123K
PipsMaster23 135k


CONTEST NOW CLOSED

92k

NFP for August +163k. WOW!