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Viewing entries tagged with 'EUR'
AUD vulnerable?
All
Last week, when detailing my NZDAUD thoughts, I suggested that the AUD was vulnerable due to the market being ‘long’. I posited that the AUD had long been a beneficiary of incoming flows due to its AAA rating, relatively high interest rates and proximity to one of the few engines of global growth being China (read resources boom).
Thus this morning I was pleased to see that the official IMM positioning data confirmed my thoughts as per below
G.
BUZZ-IMM spec AUD longs 4th highest on record
Aug 26 8:20am
- IMM spec data helps explain EUR/AUD squeeze as AUD longs rose further
- AUD longs up 20,203 to 86,992, takes them to 4th highest ever in Aug 21 week
- Suggests there may be more room for squeeze, though trend may be tiring
- EUR shorts trimmed slightly to 123,932, GBP flips long for 1st time in 3 mths
- Net USD long vs G10 halved to USD 3.24 bln from 7.69 bln
- IMM spec data in charts: http://r.reuters.com/taf29s
NZD/EUR & AUD/EUR - The Draghi Put
All
The NZD and AUD have been displaying ‘topping’ signals against the EUR as suggested in my piece of Wed 25th (NZD and AUD – Now the weakest?). Whilst I got the direction of the NZD/USD and AUD/USD spectacularly wrong, the NZD/EUR and AUD/EUR are still displaying all the hallmarks of being exhausted on their upside moves that have occurred over the last 2 ½ months.
With Mario Draghi’s stunning “ECB will do whatever it takes to preserve the euro”, adding, “believe me, it will be enough” comments I’d suggest that the drive to diversify into NZD and AUD will not be there in the near term. Further the EUR currency, given its bleak outlook and low interest rates had been used heavily as a funding currency for the ‘carry trade’. Now surely with these comments this flow will be reversed. In other words we now have the ‘Draghi Put’ where you can buy EUR knowing that the ECB ‘has your back’!!!!
Now the USD pairs have been very difficult of late, think risk on/risk off every other day, so these look like a lovely place to be in right now.
AUD/EUR – Made a ‘reversal’ day Monday after significant uptrend. Should be able to see 0.8300 even if this period only turns out to be a consolidation of the recent up move.
AUDEUR – click here to view chart
NZD/EUR displays very similar traits.
Regards Graham
Charts of interest - EUR Complex
All
A very interesting development in the EUR currency complex overnight. Despite the obvious turmoil in Europe and the Moody’s ‘outlook negative’ ratings change for Germany the EUR has hung very tough. Could Putin’s reaffirmation of the Eurozone as an investment destination have been a catalyst (surely not enough on its own?) or has the EUR bashing simply reached a zenith for now?
Whatever the reasons the chart displays are warning of a change.
Exhibit 1 – The EUR/USD. Despite extreme bear news the EUR/USD is displaying caution in the down move.
EURUSD – click here to view chart
Exhibit 2 – The EUR/AUD. The pair has been trending lower for 1300 points in almost a straight line. However, in potential confirmation of the EUR/USD chart above, the EUR has traced out a key day reversal against the AUD. The two chart developments together strengthen the idea that EUR selling may be exhausted.
EURAUD – click here to view chart
I’ll be buying a dip in the EUR/AUD with a stop loss against the low and watching the next 24 hours for confirmation of the EUR/USD doji.
Regards G.
Bullish failure?
All
Last week I reluctantly suggested that equity markets and ‘risk’ could turn north in response to the Eurozone developments of the previous week. Those thoughts were made on balancing weak data against the possibility of central bank responses which I thought would bolster sentiment.
However, after a week where we saw China surprise and cut interest rates, the UK expand their quantitative easing program and the ECB cut interest rates, global equity markets have failed to take solace from the central bank moves and ended last week lower than they started. The very weak global manufacturing PMI’s and the tepid U.S jobs report certainly overshadowed the stimulus moves. That, I’d imagine, is not a good sign.
In the wake of last week a number of ‘risk on’ instruments are displaying potential ‘topping’ signals.
NZD/USD – Dennis Gartman often likes to return to a trade in the 50%-61.8% box of the previous move. The NZD/USD in this instance traced out a ‘shooting star’ reversal week right from the 61.8% bounce of the last fall. No joy from central bank actions + sharply falling commodities (our dairy prices fell nearly 6% last week) suggest downside is again back in vogue. The AUD/USD is almost identical.
NZDUSD – Click here to view chart
S&P500 – The daily chart of the ‘big board’ in the U.S. paints a similar picture. Whilst the index stays under Thursday’s high the technicals look bearish.
S&P500 – Click here to view chart
There are two obvious game changers lurking in the background. Any certainty that the FED will come riding over the hill with QE3 will change the dynamic as will a wide ranging agreement from European policy makers. Until then it appears that the doom scenario may again hold sway.
G.
Bullish Failure?
All
Last week I reluctantly suggested that equity markets and ‘risk’ could turn north in response to the Eurozone developments of the previous week. Those thoughts were made on balancing weak data against the possibility of central bank responses which I thought would bolster sentiment.
However, after a week where we saw China surprise and cut interest rates, the UK expand their quantitative easing program and the ECB cut interest rates, global equity markets have failed to take solace from the central bank moves and ended last week lower than they started. The very weak global manufacturing PMI’s and the tepid U.S jobs report certainly overshadowed the stimulus moves. That, I’d imagine, is not a good sign.
In the wake of last week a number of ‘risk on’ instruments are displaying potential ‘topping’ signals.
NZD/USD – Dennis Gartman often likes to return to a trade in the 50%-61.8% box of the previous move. The NZD/USD in this instance traced out a ‘shooting star’ reversal week right from the 61.8% bounce of the last fall. No joy from central bank actions + sharply falling commodities (our dairy prices fell nearly 6% last week) suggest downside is again back in vogue. The AUD/USD is almost identical.
NZDUSD – Click here to view chart
S&P500 – The daily chart of the ‘big board’ in the U.S. paints a similar picture. Whilst the index stays under Thursday’s high the technicals look bearish.
S&P500 – Click here to view chart
There are two obvious game changers lurking in the background. Any certainty that the FED will come riding over the hill with QE3 will change the dynamic as will a wide ranging agreement from European policy makers. Until then it appears that the doom scenario may again hold sway.
G.
Break the bank! Could the EUR/CHF peg break?
All
Recall George Soros and how he ‘broke the Bank of England’ with his US$10 billion bet that they couldn’t hold GBP at US$2.00 ? If you don’t then I can tell you, he made his fortune, see here…..
http://en.wikipedia.org/wiki/George_Soros
Well the Swiss National Bank made a similar undertaking to that of the BoE last year effectively ‘pegging’ the CHF to a level of 1 EUR = 1.2 CHF
Here’s a chart. As you can see the market has slumped to the defence level of 1.2000 for the last couple of months (finger in the dyke stuff???).
EURCHF Daily Candlestick – click here to view chart
Ok, so as one of my well-travelled and experienced clients wrote to me this week:
Graham
Desperate is the word. The ULTIMATE safe haven is the Swissy and gold, not the USD.
Especially when there is now a strong likelihood of civil unrest in Greece, and probably France a little later down the track.
Anarchy puts a new slant on the value and accessibility of cash.
We have never since George Soros nearly rolled the BOE 30 years ago seen a government beat the market.
My money is still on the Swissy being overpowered with buyers.
So it was with considerable interest that I noted this piece from my subscription to Thomson IFR Markets today…..
BUZZ-Talk of large EUR/CHF sales overnight
May 23 8:29pm
- Trader chatter of 8 yards of EUR/CHF sold overnight @ 1.2010
- Likely that the flow contributed to 1.2620 in EUR/USD breaking
- SNB working overtime these days
So that chatter is that some fund or funds sold 8 billion EUR and bought CHF. The Swiss National Bank (SNB) do not want the CHF stronger as it hurts their exports (just like NZ). The question is why are these funds doing this if they think the SNB can defend the line?
My understanding over the years is that the market is ALWAYS bigger.
Regards G.
USD Pairs - an intriguing week
All
I used the term ‘intriguing’ in my headline but I could just as easily substituted ‘nasty’. My sell recommendation in the AUD/USD was in the money by 100 points the very next day but two days later the AUD/USD was 220 points higher. Only the nimble made money.
Overnight the world seemed to go mad on embracing ‘risk’ but the world economies that I read about look decidedly troubled. Personally I am a bear on global growth which is suggestive of equities going lower and presumably ‘risk’ being shunned. However the charts as I interpret them do not support my view for the moment. That leaves me side-lined.
A few charts of interest that I am watching.
Dow Jones Index – I interpret this chart as the beginnings of a new bear market. The 7 month up-trend has been broken and the rally of the last two days I believe is just a re-test of the break down. Also bear markets are noted for their volatility and where you can see the grinding nature of the last few months up, the latest moves have been very ‘noisy’ (big down, big up).
Dow Jones – click here to view chart
NZD/USD – The kiwi is historically VERY highly correlated to the performance of U.S. shares. And yet this chart absolutely contradicts my equity market view right now. Right now, if the kiwi closes the week above 0.8261 then a ‘bullish engulfing week’ would be suggestive of higher ahead.
NZDUSD – click here to view chart
Not only is the kiwi showing ‘bull’ signals but EUR, AUD, GBP, Gold and Silver are all displaying positive signs on my short term models. Usually I’d just follow them but for some reason I can’t shake the ugly feel I get from reading about the prevailing fundamentals.
Personally I’ll be sitting the week out and looking for more clues come Monday.
Regards G.
USD Pairs - an intriguing week (part 2)
All
Friday’s price action is highly suggestive that my preferred ‘negative equities –slowing global growth’ theme (see below previously) is the prevailing wind. I’m suggesting selling EUR/USD here and now with sell signals in NZD,AUD, Gold and Silver very close at hand.
Technically if you look at the ‘risk’ complex they are all very ‘trend ready’……………..that is they have been confined to very narrow ranges (and thus very narrow Bollinger Bands) for a month or so and that is typically where the best moves spring from.
NZD/USD
NZDUSD – Click here to view chart
EUR/USD
EURUSD – Click here to view chart
Gold and Silver look on the edge of the precipice too with a move through last week’s lows likely to be a precursor to substantial falls.
Regards G.
Update - EUR/AUD - Another look
The option strategies profiled on 9 February (below) have performed excellently. Indeed, I had a number of clients try to express this view in ‘spot’ only to get knocked out with small profits in amongst the early two way chop before the cross took off. Guys with 3 month option strategies are up about 150% on investment at the moment.
Sent: Thursday, 9 February 2012, 12:58pm
Subject: EUR/AUD – another look (buy call option)
Hi again
I have just been exploring other ways to capture this trade as I am very upbeat that Greece will come up with the goods in the next few days. Greece has come this far that it is unlikely to cock things up now especially now that the country is governed by non-politician in Lucas Papademos, a Greek economist who was previously Governor of the Bank of Greece from 1994 – 2002.
His appointment has largely taken the political ‘conflict of interest’ (not having to be re-elected) out of the way. Indeed all the charts, be it EUR/JPY, EUR/USD or EURAUD all scream that the smart guys understand the likely outcome of the PSI negotiations.
A 1 month EUR/AUD ‘at the money’ call option is ridiculously cheap in my opinion at 0.0175 points. The cross went up that far on Tuesday alone, let alone having the opportunity for gains over 1 month.
Look at the long term chart of the levels needed to profit (I’ll expand it on the 2nd chart).
EURAUD Chart – click here to view
A closer look shows that the average move per month over the last 3 months has been about 600 points (premium in this case 175 points) and we know the EUR market is terribly short.
EURAUD Chart Expanded – click here to view
If Greece defaults you have no further risk that your premium paid, no slippage, no surprises.
Regards G.
