Cross Market Analysis

Game plan tomorrow from the london spot prop desk...

Keeping short AUDNZD

Buying EURUSD (at mkt 1.3431) looking for a squezze thru intraday highs (1.3445), stops at 1.3450 look vulnerable from the levered shorts that have built past few weeks. Use USD weakness to build longs ahead of FOMC tho. (somewhere just south of 1.35 in EURUSD)

something like this... Remember, the market is *very* short, so susceptible to squeezes

* I should say, I won't be doing this as I'm not at my desk tomorrow, but seems like a decent play to me.

Tech desk also sees potentially large CAD weakness, and quickly... 1.0950 area...

Difficult to argue for EUR outperformance going forward but knowing that the whole street has turned bearish gives me the creeps.

Wouldn't surprise me if we get the full roundtrip tomorrow.
I have no clue about the route though.

sent to mailing list just now... posting here as well.

From Deutsche bank:

The FOMC statement falls into the realm of low probability high impact event – i.e. unlikely to surprise, but if it does, it has some obvious capacity to have considerable market fall-out. Watch for any changes to the prior statement that “the unemployment rate, though lower, remains elevated.” Janet Yellen in her semi-annual testimony watered down the FOMC view a little by saying “Even with the recent declines, the unemployment rate remains above Federal Open Market Committee (FOMC) participants’ estimates of its longer-run normal level.” Take this as one example of how to make a very mild shift in the post FOMC statement language, that at the margin will support the USD.

From Goldman Sachs:

We expect that this week’s FOMC statement will show very little change. The FOMC might choose to upgrade the language on growth in economic activity somewhat, and it might also strengthen the language on labor market indicators a touch in recognition of the strong June employment report. For the most part, however, recent data have supported the characterization of current conditions in the June statement. In particular, the softer June CPI print likely reinforced the Committee’s decision to downplay the firmer inflation prints seen from March to May, and weak housing starts and new home sales reports have likely reinforced concern about the housing sector.

From barclays:

We expect the Fed to acknowledge improving labor market and announce another tapering of $10bn, in line with consensus. But we see no major changes in terms of forward guidance in the accompanying statement, so any market impact should be limited.

// You get the idea, USD strongly supported on great US GDP (4%), but I start to feel that market may be getting ahead of itself into FOMC. I'm looking to fade this USD move (against higher beta FX, not EUR etc)

Anyway, as always, doing a daily webinar this afternoon (free), in the run-up to FOMC

for the newer people on the mailing list, link is here - http://tinyurl.com/o7ua46p

1700GMT.

Good luck and helmets on my friends.

indeed, Goldman just put out a sell recommendation at 1.3375... down here at the lows!!

so we know how this is going to end...

man it means, it will go up or we should trust Goldman,,???

well, its more of a joke amongst people who follow goldman trade ideas, because a lot of the time they are perfectly wrong.

The exact wording from them was this - GS: EUR from NY trading - EURUSD down 30 pips post GDP to a low so far of 1.3370. We haven't seen a lot of flow but we are once again seeing RM and equity/credit HF selling of euros, a theme that plays into our idea that the flow picture for European assets/hedging has changed. We've added to our short going into the Fed later on today with barrier interest at 1.3350 and 1.3295 (low post Nov rate cut) the next key levels to watch. Short term resistance now back at 1.3400.

So take it as you will

I was thinking and you only confirm my idea that a lot of time they are wrong. And what is your plan?
Yesterday you told that you desk will start buying EU in 1,3431 and hat is your plan for today ?

our spot desk is still long (I'm less sure they should be given the move today, but hey)

but their rationale is that this is all one big fakeout and currently being priced into the market is a very hawkish Fed, which is unlikely according to our econ department.

USDJPY above 102.80 > 103.00

it certainly looks that way.

USDJPY will just follow whatever the US 10 year yield will do... so keep an eye on that.

G10 Daily
THIS IS A PRODUCT OF THE FX TRADING DESK AND IS NOT RESEARCH MATERIAL
er

JPY – Big breakout for Usd/Jpy yesterday. GDP helped and the rise in US Yields was exactly what the trade needed. There were offers all the way up, mainly from locals repatriating JPY for month-end, but these have been cleared out. The market is now much more open to a move higher from here. The gamma has been taken out and we’re exposed to a move through 103. We will need a good payroll number, that is for certain. I don’t believe we need a stand-out one, but a shocker will get those Usd bulls running for the hills. There has been some consolidation after the FOMC, and some Usd selling for more month-end rebalancing from the Japanese community.

Stay long, buy dips. 102.10 is big support now and I don’t want to see this anywhere near it.

https://mail.google.com/mail/u/0/?ui...=emb&zw&atsh=1



r

EUR - A good day for the USD as the GDP number came in at a healthy 4%. Eur eventually held in the 60’s and did so again after the FOMC. We are still bullish the USD and Jens and his team have added to their long Usd basket (see piece ‘After FOMC – Get Ready for Dollar Acceleration’). We do have some short-term risks we need to be aware of though as there is data and month-end to contend with.
- EU CPI at 10am shouldn’t hurt the short Eur trade.
- The month-end fixes are predicted to be a buy EUR in our models. (medium buy vs Usd, Aud and Cad)
- The Daily RSI’s on Eur/Usd have not been this low for many years.
- Payrolls tomorrow. A weak number will shake those who have put on long Usd at poor levels

So, the potential is there for a squeeze, but we do believe that squeeze should be sold into. First resistance is 1.3430, then 1.3480 is a big one for me. I still have the core short, but am looking to add on the squeeze.

CHF – We burst through the 0.9080 level as the USD took off after a strong GDP. The cross went with it and all was well for the CHF shorts. A small amount of consolidation is likely, but dips in Usd/Chf should be bought . First support 0.9080. then 0.9050.



GBP – another session of consolidation ahead, look for cable to hold between the 50 and 100 DMA channel (see chart) , watch possible end of month Eur/gbp demand which may give as a chance to sell 0.7940-60, PMI series starts tomorrow . Overall I’m looking to re-establish sterling longs nothing has really changed for me. If anything position have been scaled back which is always health within a long term trend.

https://mail.google.com/mail/u/0/?ui...=emb&zw&atsh=1



ce

After yesterday’s move in the dollar , I suspect today we will see some consolidation and maybe a retracement which will offer a chance to add to dollar longs .
Overnight mixed data for AUD has kept the range muted. Today I’ll use rallies to 0.9360 to add to current shorts and support comes in at 0.9280. Keep an eye on the close tonight as we could be below the ichimoku cloud.
Kiwi positioning (overly short) has helped the bird, but I still favour selling a squeeze to 0.8550 , support should come in at 0.8480.
$cad should also be a buy on dips today maybe the GDP data later will offer this later , 1.0868 is the top of the ichimoku cloud I will buy into that level ( 1.0892 100 day ). I do have a few offers around 1.0930 which should hold ahead of the data .

https://mail.google.com/mail/u/0/?ui...=emb&zw&atsh=1

Morgan stanley G10 desk commentary.

Desk still short AUDNZD, but looking to take some off going into weekend.

Doing well currently, +70points, and the odd one or two in swaps.

Important to note this Employment costs number.

Big move higher, confirming that wages are starting to pick up (at a faster rate) as the unemployment rate is dropping.

important because, if we see a sizeable pick-up in inflation in the second half of the year, and the U/E rate is close to the NRU, then it will be hard for the fed *not* to hike...

Also, the fed did not know this number yesterday! It will change things.

Emailed out just now... but posting here also

webinar today at the usual time, looking forward to it (here http://tinyurl.com/ma75ozk) at 1700GMT

BNP Paribas: COMMODITY CCYS

=> CAD
GDP out this am with market expecting 0.4%. I have reduced long USDCAD position into this number and will look to buy dips on a stronger number. 1.0845/50 should be well supported. next level topside 1.0965/70.
=> AUD
The weakness in AUD overnight has pushed AUDNZD back to support here 1.0940/50 area. I like buying this dip but leaving room to add lower 1.0880 (breakout after RBNZ).

SocGen FX Trade Idea - Buy USD/JPY

Rationale
Higher USD/JPY is a longstanding view we have had, but we took profit in January as the upward trend petered out and the market appeared to be overly short yen. With the US recovery moving onto a firmer footing, and the US 10-year yield poised to move higher, we believe this is an opportune time to re-enter the long USD/JPY trade.

Expression
We express the view through a simple spot trade. In our FX Weekly dated 31 July we will investigate how to reduce the cost of going long USD/JPY calls.

Mechanics

Buy USD/JPY spot at 102.60 targeting 105.00 on an interim basis, with a stop on a daily close below 101.70.

Goldman Sachs now believes the first hike in the U.S. federal funds rate will come in the third quarter of 2015, rather than in the first quarter of 2016. The changed forecast comes in response to "the cumulative changes in the job market, inflation, and financial conditions over the past few months," chief economist at Goldman Sachs, Jan Hatzius, said in the note. The revised forecast is close to current market expectations, but Hatzius said the change is important because it's the first time since the crisis that Goldman Sachs has moved forward its rate-hike expectations. "We view this as an illustration of the substantial progress that the U.S. economy has made in overcoming the fallout from the housing and credit bubble," he said. Goldman Sachs now expects the funds rate to rise gradually back to 4% by 2018.

US equity futures are down 1.3% (ES)

Looking at high yield spreads, they are also wider... bit of selling going thru the markets it seems.

US 10 year price... incredible v-shaped recovery, and looking very strong indeed...

Mostly, these moves are month end rebalancing, but even still. quite dangerous.

JPY – A small consolidation yesterday ahead of the main event today. Usd/Jpy should be the purest trade here, and above 103.30 the market seems to get a little nervous and short gamma so with a decent print (260+) we should go there pretty fast. Flows have been mixed but there has been decent demand on the dip. We will need a sub 200 number for 102.50 to be threatened, and I would still buy the dip down to 102.10 as I think we have now broken the multi-month stagnation and we should be drifting higher into September. This number is obviously a risk, as well as the fact that the USD has topped out on Payroll day every month for the past 5 months. I think the environment has changed this time as more of the US drivers are in place.

Slight concern about stocks, although Usd/Jpy and cross JPY performed well in the face of the 2% sell-off in equity markets. Support zone around the MA cluster, and Usd/Jpy playing catch-up on the Nikkei.

https://mail.google.com/mail/u/0/?ui...=emb&zw&atsh=1



r

EUR - I was a decent buyer of Eur yesterday, both for the macro and the real money community, but the currency just couldn’t rally. Month-end flows were light. EU CPI was a little weaker, but so was the US data. Yesterday was always going to be a holding or squeezing day before the main event of the payrolls today. Now we are here the theme is the same. Be a little long USD into the number, and add if EUR spikes to 1.3430-50 on a weak number. Although expectations are a little high, I think we’ll need a sub 200 number for the USD to get hit, and stay hit, on the day. Support at 1.3360, then 1.3300. A strong number (260+) we go straight through the first one and grind to the second.

European PMIs earlier in the day, but they’ll give us 20 pips, especially as they’re final numbers. RSIs still extremely oversold, although some sideways trading for a few sessions would unwind this.

CHF – We burst through the 0.9080 level as the USD took off after a strong GDP and the small dipped stalled there. The cross went with it and all was well for the CHF shorts. A small amount of consolidation is likely, but dips in Usd/Chf should be bought . First support 0.9080. then 0.9050. Big event with the payroll, but still buy the dip, if there is one.


GBP – have used yesterdays end of month Eur/gbp rally to re-instate a short position. For me nothing has changed in the UK the trend is still in place and positions have been reduced on the basis of a rallying US dollar , if the data remains strong beginning with the PMI series over the next few days and you believe in the strong dollar story being short Eur/gbp will give bigger % move than Eur/Usd. Place stops 0.7980 + looking for a move in to fresh lows . Cable holding its 50-100DMA band.


l Lawrence

overnight a better China PMI print (51.7 agst 51.4 expected) saw a brief blip higher in the aussie, although I still think you fade the moves to 0.9325 (ichimoku cloud base and the 100 day) . I’ll keep my powder dry today and react to NFP later , support still for now comes in at 0.9275/80.
Nzd$ continues to consolidate around 0.8500 as gamma and market positioning seems to be dominating , 0.8470/0.8525 are the levels there .
$cad took out some short term stops yesterday , looks like cad/Jpy selling overnight has taken back any gains the loonie made , so I’ll retain my bias to add into dips to the 1.0880 level ( 1.0880- 100 day m/a . Ichimoku support comes in at 1.0856 ( cloud top ) .

https://mail.google.com/mail/u/0/?ui...=emb&zw&atsh=1

A goldilocks number serves as a great way to load up on risk and leverage to the max!

hence risk FX is bid well... could be the turning point for the Summer until sept 17th or so.