Currency Positioning and Technical Outlook: Fade Breakouts ?
Guest post via Marc to Market.
The US Dollar Index reached its best level in more than six weeks on Friday. Yet it managed to only close a couple of ticks higher, as if warning short-term participants against ideas that a breakout is at hand. This also appears to be the message of the yen’s dramatic recovery from four-month lows.
Caught between what appears to be renewed deterioration of conditions in the euro area and US electoral and fiscal uncertainties, investors are paralyzed. Key events this week include policy meetings by the Japanese and Norwegian central banks, the new month PMI readings, and the US jobs and auto sales reports.
The economic data is unlikely to tell investors anything new. The euro zone economy is experiencing a shallow contraction for the second consecutive quarter. The UK data is likely to lend to our view that Q3 growth exaggerates the strength of the underlying economy. Meanwhile the US should continue to post modest net job creation. The Bloomberg consensus call for 125k rise in non-farm payrolls, which would be smack in the middle of the 3-month average (145k) and 6-month average (104k).
FX Positioning and Technical Outlook: What is Working
Guest post by Marc Chandler of Marc to Market.
Risk on as NFP beats “everything”
NFP figures shocking many investors. Beating consensus by miles, and above the highest “predictions”, the figures are making the markets go into risk on mode. Let’s see what people figure out after digging into the numbers…(birth/death etc)
We hope to see volume come back, as this number should get people out to trade the market again.
Meanwhile some soaring charts below, at least for now.
News That Matters
Ft.com
Authorities around the world have begun moving against anti-capitalist protesters, with police in the US and Switzerland clearing camps from their cities, reports the FT. In the UK, the City of London Corporation relaunched legal action against protesters camped outside St Paul’s Cathedral. http://ftalphaville.ft.com/thecut/2011/11/16/748721/authorities-move-against-occupy-protests-2/
Negotiators for Greek debt holders have offered to swap their bonds for new ones worth half their current face value, but only if the new bonds contain high interest rates and have extra incentives, including annual payments if Greece’s economy recovers. http://ftalphaville.ft.com/thecut/2011/11/16/748681/greek-debt-holders-in-bond-swap-offer/
(A familiar headline but…) George Osborne is to set out in mid-December detailed plans to shake up Britain’s banking sector, setting in train what is likely to be a detailed consultation with banks over the erection of a firewall between retail and investment operations. http://ftalphaville.ft.com/thecut/2011/11/16/748641/osborne-to-set-out-bank-reform-plans/
German frustration over Britain’s approach to the eurozone crisis erupted on Tuesday after a close ally of Angela Merkel accused the UK of selfishness just days before a meeting between the two countries’ leaders in Berlin, http://ftalphaville.ft.com/thecut/2011/11/16/748601/germany-attacks-uk-over-ftt/
Market shows first signs of moves as Weidman and Berlusconi dominate the News
Markets are still rather boring. Silvio news out that he does not have majority (but has a lot of Euros) and that some opposition leaders are asking for his resignation. We doubt he really cares about that. Weidman has also suddenly realized that money printing leads to hyperinflation. So, no real news as futures start moving for the first time today.
Don’t be surprised if we get increased margins on Italian Bonds….
Early Market Update
The SPX Trend Channel is still intact. Sentiment is clearly on the weak side, but the market is trading in a no volume regime so far. We believe the market has reached levels, where a correction is very probable. Let’s see where markets head later while we enjoy this World of Intervention, unless somebody pegs SPX at 1500?
and the PEGS;
USD/JPY at levels few have seen
If BOJ is taking early weekend we don’t know, but USD/JPY is hitting levels not seen in many decades. Expect Intervention time soon.
and the intraday sell off….
Risk Off as HFT Dominates Currency Trading
Markets trading in a risk off mood today. Volumes are light, but the moves are rather big. With volatility crushed over the last days, people will start feeling nervousness creeping up again. As usual, people have sold volatility in “panic”, and will be very surprised if we see SPX 100 handles lower. We believe yesterday was a nice last short covering panic.
Below some short term charts, and for those saying HFT don’t trade currencies, review the charts below…
SPX Trend Channel, market is losing steam.
Risk On as Shorts Puke
Quick Market Update. Market focus will be shifting, out of EFSF votes by Slovakia (who cares), to other subjects. With many “smart” people overly bearish, this market has more legs to the upside. With low volume HFT melt up trading taking place, shorts will cover in panic. We clearly see how all risk assets correlate and move in tandem. For a more detailed picture of charts, check UBS’s Technical Research posted yesterday. Buy the dip mentality is here for some longer.
Morning risk on charts below.
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