Cross Market Analysis

EM is always Emerging markets. I can understand why that specific one could be confusin tho, but always emerging markets

but srsly, I will eventually get around to answering any question, regardless of how complex etc

cool, thanks

Thoughts on the upcoming ECB press conference? Hope I can repeat last time's success!

I've been readying and most euro will keep falling as there's nothing fundamental which indicates it could be strengthening

hmm...

-JPM cut German growth forecast to -0.5% from 0.5% (annualized)
-Italian recession confirmed
-Slowing of EUR area PMIs
-Peristently weak labor markets
And in the last few days, inflation rates (as per market expectations) on the "medium term" have dropped hugely. (chart)

BUT

EUR has weakened (as they've wanted) and recoveries never go in a straight line, so maybe expect some rhetoric about the "downside risks" but all in all pretty balanced imho

Market likely to move of course, risks to the downside given the moves in inflation the last few days.. but EVERYONE is still short the EURUSD so a short squeeze seems most likely if the ECB says nothing new (<- this is our game plan)

if that's what you're doing - taking on event risk as is, is sheer madness

regardless, welcome to casino royale

Not really sheer risk when I can let profits run and cut losses short quick smart.

You have no control in a casino - edge is in their favor. Trading, the edge is in my favor.

agreed. this isn't really the same as an NFP number (which is as good as random)

We know roughly what Draghi will talk about, what his tone will be... the only thing is to try and predict how the market will react to his rhetoric.

We are live my friends

http://www.ecb.europa.eu/press/tvser...140807.en.html

*draghi says ecb intensified prep work related to abs purchases

*draghi says tltros enhance accommodative stance

*draghi says inflation expectations firmly anchored

*DRAGHI SAYS ECB WILL CLOSELY MONITOR IMPACT OF GEOPOLITICS, FX

Haha the way he words the sentences influence traders haha

All I keep hearing is inflation medium to long term blah blah - I want to know about now!

I'm out with profit anyway

What chart is that you're showing us? the EUIL2YF2Y=R one...

that is medium term market inflation expectations... i.e. its been dropping a lot!

07 Aug 2014
Europe Economic Research
No panic at the ECB



The ECB did not send a strong policy signal today. The central bank is clearly watching geopolitical risks and the mixed economic data closely, but more time is needed to assess both of these and their impact on the macroeconomic outlook was judged to be modest for now. Should downside risks materialise, the ECB is ready to act, with sovereign QE an option. But, for now, the focus is on the measures already taken and announced. Draghi noted that the June policy package had led to an “easing” of the policy stance and that the upcoming TLTROs will “enhance” it further, and that preparatory work for possible ABS purchases is still continuing. Draghi also did his best to get even more out of the currency by emphasising repeatedly the differences in the “monetary policy cycles across the major advanced economies.”

On growth, Draghi did not sound panicked by the recent data. He noted that the survey data have been better than the hard data, which have been impacted by calendar effects. But, even among the hard data, he noted that some of these have been okay (retail sales, monthly unemployment flows). Overall, he felt that there may have been some slowing in momentum recently, but not enough to change the overall outlook. He was particularly encouraged by credit developments, with loans to nonfinancial corporate showing some stabilisation and the bank lending survey showing improvements in credit supply and demand. He linked the pickup in loan demand to the upcoming TLTROs, saying that these were coming at exactly the right time. Asked about the Italian GDP contraction, he argued that countries that have done more on structural reforms are doing well and that monetary policy has limits when structural problems are impeding investment, business start-ups and economic rebalancing. Overall, the ECB seems to be taking a balanced approach to interpreting the recent data. And if 3Q14 will be better also at the level of GDP, as we expect, then the data should provide further reassurance in the coming months.

On inflation, Draghi said that the July outturn of 0.4%oya was expected, suggesting that the low prints that are likely in August and September may not come as a new shock (even though they are below the staff’s June projections). This still suggests a significant tolerance of low inflation outturns and declines in shorter-term inflation expectations. The focus remains on the medium/longer horizon, over which Draghi still saw expectations as firmly anchored. He added that this would be confirmed by next week’s Survey of Professional Forecasters.

On the TLTROs, Draghi quoted a market survey, which suggested that expectations were for TLTRO take-up of €450-€850bn in total over all of the operations. He was not asked specifically about the first operation, where take-up is more uncertain, but his comment may suggest an inclination to at least wait for the second tender in December before drawing strong conclusions about its success. On the possible ABS purchases, he gave a few more details about the preparatory work, without shedding much light on how large this programme could be.


Greg Fuzesi

@jpmorgan.com
JPMorgan Chase Bank N.A, London Branch

JPY – Risk-aversion in Asia triggered by Obama’s authorization of air strike in Iraq, Nikkei trades below 15,000, US 10y breaks 2.4% and USD/JPY takes out a key pivot at 101.75 which are all important levels. Market retains long $ positions, I think we are going to see a heavy session for USD/JPY from here while we remember how supportive the 101 was before. I am short USD/JPY to see few more dips into 101.30/35 as an intraday. Resistances are 101.90/102.20. BoJ was a really non-event today which left its policy unchanged as fully expected.




EUR - Draghi was pretty balanced but didn’t stop driving home the point that the monetary policies of the different trading blocks are diverging, with the ECB on the dovish side of the scales. So, Eur/Usd is miles lower, right? Economic text books are thrown in the fire as a risk-off dash to square positions has meant we have rallied all the way up to 1.3408 this morning. The announcement of Iraq airstrikes themselves are the catalyst, not the reason, for this rally. Positions are the cause.

Even yesterday the price-action at 1.3340 was very poor for EUR shorts. We sold a good amount there, but it appears that the market is already limit short and I cut any last shorts I had. This squeeze is understandable but given Mario’s chat yesterday you cannot argue anything other than short EUR in the medium term, or selling the rally. So, sell the rally. First sell is 1.3425 and I will start scaling into shorts again up there. I wouldn’t want to see this above 1.3505 at any stage.

I will return in a few weeks as I am on annual block leave from Saturday. Good luck to you all.

CHF – Iraq situation and a large over-hang in Usd Long positions has made the CHF very attractive. 0.9000 is the big level on the downside.

EUR/CHF has broken a trend line, but there is now support at 1.2100. I do not advocate shorts at all unless this level goes and the geopolitical situation really spirals out of control.
https://mail.google.com/mail/u/0/?ui...=emb&zw&atsh=1



GBP – gbp/Jpy the big mover lower overnight losing 100 pips 171.80 to 170.80 these may continue in a risk off environment . All eyes will now be on next Wednesdays inflation report for the next pure sterling move , until then it’s at the mercy of the global markets in terms of risk on risk off. Eur/Gbp risk is towards 0.8000 now as market was happy to reinstate shorts this week , I have cut my sterling longs.



The commonwealth is opening weaker as geopolitical concerns grow. China recorded record trade data, but the RBA stifled any aussie rally by lowering growth forecasts .
With the risk aversion taking control it’s going to weigh on commonwealth crosses which should cap any rallies, but the DXY is heavy and testing important supports through 81.35 which will offer some support against the dollar .
So it’s a confused call today as positions make the price action very choppy. I prefer to sell into strength 0.9280/85 offer resistance in the aussie with support coming in at 0.9220 .
For the kiwi 0.8430/80 are the initial levels .
Better data has helped the loonie recently , we get the unemployment report today , ahead of that 1.0910/60 .

From CitiFX Wire.. 48 Hours of Risk G10 FX (320 words)

USD: Geopolitics is muscling out the Fed as the primary market focus. In very short term USD vulnerable on positioning, but ‘pure’ risk off trade spells USD strengthening, with NZD, NOK, CAD and EUR among the most vulnerable currencies Link. 1Q productivity (8:30) unlikely to be market-moving. Given geo-political risks, this weekend unlikely to be as low vol as usual.

EUR: Mainly second tier data today, so focus is on geopolitical developments. Monday dead as a doornailGBP: Overnight UK trade data surprisingly weak and could subtract from Q2 growth.

GBP remains vulnerable to USD appreciation, but should continue to outperform on the crosses, particularly if expectations for a hawkish inflation report next week start to rise.

JPY: Balance of payments data showed underlying appetite for foreign securities is building among Japanese investors. However, more immediate focus is on geopolitics and risk aversion is supporting JPY. Modest changes in BoJ language not enough to shift market expectations. JPY short-term a bet on geo-political developments.

CAD: Employment data (8:30) the main focus. Could have more impact since the July reading does not come immediately ahead of equivalent US data. Market is at 20K vs. -9.4K on the headline change in employment. Pressure points below 10k or above 25K. Unemployment rate below 7.2% could be CAD negative.

AUD: AUD hit by weak employment and downgraded RBA forecasts but supported by strong China numbers. Lower interest rate expectations leave AUD more vulnerable to USD appreciation. Second tier housing and confidence data Monday PM.

NZD: Likely to be among the heaviest hit by risk-off USD strengthening.

NOK and SEK: Favor long USD vs. Scandies more broadly with risk aversion and rate differentials a key determinant. Sweden industrial and service production on the weaker side of expectations. Look for NOKSEK higher heading into the inflation numbers next week.

CHF: USDCHF could continue to move higher as EURUSD grinds lower ahead of ECB. Sell on rallies.

Main G10 data of the day was a huge disappointment!

200 jobs vs 20,000 jobs added, with huge Full time loss.

Participation rate plummeted too!

Goldman sachs G10 thoughts

EUR
Last week’s risk sell off seems to have been consigned to history and from an FX perspective the main impact has been to squeeze out a decent amount of the long dollar positioning that had built up. Short EURUSD will still be a significant market position but I think rather lighter than before the wobble. Overall EURUSD has been very well behaved (from a shorts perspective) with rallies well contained and key levels respected. I tend to think the slow dribble lower will continue into Jackson hole and probably September when the market will be more engaged and keen to ramp up its pursuit of the downside. I continue to hold a core short, will look to add if we get a rally back to 1.3400/20 with a stop above 1.3450. First support is at the YTD low (1.3333) followed by 1.3295 (Nov ’13 low) and see scope towards 1.3250 into Jackson hole.
Spot reference: EURUSD – 1.3367 View from: Jon Pierce

JPY
With a lack of further developments on the political stage over the past 24 hrs, the financial markets have taken no news as good news and with the front end of the US curve settling down, the Dollar once again has rallied within the G10 space, helped by some idiosyncratic data releases overnight. We have received a number of enquiries regarding the GPIF story over the weekend and the removal of the % cap on the purchase of domestic equities – it would appear from this article in the Nikkei that the GPIF are close to or have reached their upper band for their domestic equity allocation and do not wish to wait until Sept, when the new allocation is introduced – and hence have given themselves flexibility over the interim period to continue purchases. This is worth noting and the first time since April 2013 we have seen a pro-active approach by the GPIF. We get 2Q GDP released this evening from Japan and given the slew of poor activity data over the past month, the market is looking for -7.0%, with the downside possibilities. Once again this figure will add further political pressure on Abe and in turn the BOJ. We have re-established USDJPY long cash positions overnight, leaving room to fade a dip below 102.00, with a stop now below 101.40, looking for a move back above 103.00 over the coming days.
Spot reference: USDJPY - 102.28 View from: Frank Cahill

GBP
Price action remains heavy as positioning continues to unwind in the Pound into QIR/Jobs data tomorrow. GBP makes new lows on the month this morning at 1.6757 at the USD is better bid and BRC sales fall – food sales fell by most in 5 ½ years. Assumption now being that the heavy discounting unlikely to put much upward pressure on inflation in the near term. Flows to start the week relatively light but evident further reduction into the main events, any remaining GBP demand seems to be exclusively against the EUR. We remain tactically long into tomorrow’s events with the bar seemingly lower on both a positioning and expectations basis for the QIR. Levels: below 1.6750 next support with a gap below that to 1.6680 (38.2% of Years highs to lows) followed by 200dma 1.6652, resistance at 1.6820. EURGBP 55dma above continues to hold at 0.7988 with 0.7920 below first support.
Spot reference:GBPUSD – 1.6775; EURGBP – 0.7968 View from: Ben Stone

AUD
NAB Business Survey comes in stronger than expected (11 vs. 8 last) insulating AUDUSD from the US$ advances seen across the rest of the G10 space. An autopsy of the figure suggests strong underlying components too with all measures registering rises vs. the previous month – business confidence, business conditions, trading conditions, profitability, employment, forward orders. Whilst AUDUSD stalls ahead of the 0.9239 lows seen last Thursday/Friday, we remain flat cash with 0.9210 still the key level that needs to break below. On the session we will look to sell a rally towards 0.9300 in order to play the 0.9250/0.9300 range – a short term stop through 0.9330/35 now preferred. AUDNZD looks an attractive long around current levels and we will look to average in down towards 1.0980 with a 1.0910 stop.
Spot reference:AUDUSD – 0.9255 View from: Kristian Brauten-Smith

NZD
REINZ house price index falls 0.7% MoM with the YoY figure registering +5.9% vs. the cycle peak at 9.9%. These latest figures certainly take the pressure off the RBNZ to hike over the September/October meets and NZDUSD looks to test the key 0.8393/0.8400 February highs/June lows. On the topside, stops can be rolled down through 0.8500 should 0.8540 feel too far away and we have lightened our position once again with the idea of either selling a break of 0.8390/0.8400 below, or offering out back towards 0.8450/60 in an attempt to improve our average. It feels as though Kiwi still has further to fall, but given the lacklustre price action in US FI, we await a catalyst on the US side of the equation. The cross looks interesting at current levels and we will look to buy a dip back towards 1.0980 with a 1.0910 stop – series of highs in April, lows in August.
Spot reference:NZDUSD – 0.8420 View from: Kristian Brauten-Smith

NOK/SEK
Norwegian inflation data yesterday surprised meaningfully to the upside taking EURNOK through 8.3000 support. Into the data there was around 20bps of cuts priced into the curve for next year which has now moved down to 12bps but participation in the currency remained relatively muted. In fact corporate supply of NOK was the underlying theme as the broader market remains unwilling to engage in NOK until we see some consistency form the Norge – our strategy currently also to stay away. Next up today Sweden with the bar ever so slightly higher given the surprise yesterday, but the reaction function a little more straight forward given how direct the Riksbank reaction function has with respect to the inflation data. An upside surprise (anything positive!) brings the long SEK trade back to life and would likely see EURSEK back through pre Riksbank support of 9.1400 with 9.2500 the resistance point above.
Spot reference:

GBP tracking interest rates perfectly... market clearly seeing this as dovish, I'm less sure...

Citi saying strong support at 1.67, but heavy stops below if triggered = 1.6640

Wages shocking... BoE f'cast to 1.25% from 2.5%... so who thinks we'll see a rate hike in 2014 after that?

JPY – very quiet overnight, USD/JPY was a 11pips range between 102.45/56 thanks to Obon holiday in Japan. BoJ officials said to consider cutting the growth forecast for 2014. Interestingly we have seen mainly sellers of USD/JPY this week but USD/JPY has rallied for 5 consecutive days, it was not a big move but very steady. Cross/JPY continued to extend gains, too. AUD/JPY is now approaching a daily cloud top, a break there will add more bullish bias to the cross I feel. I still keep long USD/JPY, top side levels has been gradually broken and now the next level to watch are 102.80 and 103.15 on the topside. Supports are 102.12( base) and 102.22( conversion).



EUR - Short EUR/USD position has been squeezed again despite the weak European GDP yesterday, market started to reduce long $ exposure it looked and EUR/USD was involved, too. However, the pair was pushed back below 1.34 quickly and is opening at 1.3365 again which is 4days in a row. A reduction of long $ position may continue a bit more but data suggests a slowdown of European economy and I still like to sell EUR/USD on rallies. 2daily highs ( 1.3408/16)will provide a level to enter short as an intraday and then at 1.3435/45 as good resistances.


GBP – Further sterling weakness continued yesterday but the 200 day held the base well ( 1.6667 ) in cable as eurgbp took out the stops through 0.8030 .
Today we have UK GDP with the market not expecting any surprises from the data , so I think we will continue to trade within yesterday’s ranges ,
0.7980/0.8030 and 1.6665/1.6720 should cover things until the U.S data later on .
For the dollar in general look to fade any moves to the DXY support at 81.40 as it is really dominating the euro at the moment .

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



The ADXY posted a new yearly high overnight , the aud$ has benefited most in the commonwealth space and is now testing short term resistance at 0.9335 , support for the pair today should come in at 0.9300 , with the way Asians are trading you have to remain a buyer on dips today until they turn , also the announcement from BHP that it was considering selling off 12 bil of assets will keep the aussie on the front foot.
Same really with the kiwi , resistance at 0.8510 ( fibbo) held the topside yesterday , but there will be buyers on any dip to 200 day which comes in at
0.8464 .
The loonie will be dominated by the revised employment data that the stats trainee got wrong last week , ahead of that 1.0880/30 .

This thread has gone quiet ...........