Thursday update… Equities rally ahead of Jackson Hole meeting

Equity markets have continued to nudge up ahead of the Jackson Hole meeting in the US. Its difficult to gauge what expectations are from the markets about any special announcements from Fed Chairman Bernanke but on balance its seem a QE3 announcement would possibly be a surprise at this stage. The Euro has been the main beneficiary nudging up against the dollar to EUR/USD 1.4470 while elsewhere a slightly stronger dollar has seen the Euro up against the Yen, EUR/JPY 111.50, Swiss franc EUR/SFR 1.1470 and Sterling even more at EUR/GBP 88.30.
Nothing really major in forex markets as risk taking continues to be subdued. EU tensions remain below the surface and while a better tone from stocks has helped the Yen and Swiss franc weaken a shade we all know that this could about turn any time.
Gold sold off to 1745 are we seeing some topping price action?

Thursday Update.. Bank Of Japan hits markets with heavy intervention

It seems like the Japanese Finance Ministry finally decided the time was right to halt the Yens rise and instructed the Bank of Japan(BOJ) to sell Yen aggressively.
USD/JPY is back to 80 from 77.10 and this has helped the US dollar strengthen elsewhere ( EUR/USD back to 1.4250 from 1.4350.
Yesterday saw a shake out in the Swiss franc which showed up more on EUR/SFR where I suspect most positions were, having the affect of lifting EUR/USD.
However the BOJ selling of Yen against the US dollar has as I said lifted the US currency, although EUR/JPY is higher nearing 114.
Tensions in the Euro block bond markets remains high with both Italian and Spanish politicians trying to dispel fears.As things stand though it will be some months before the EFSF can buy their bonds in secondary markets meaning that the cavalry in that shape are some way away.
Equities are off the lows but by no means is the economic gloom cloud lifting at the present time.
With longs of the Swiss franc and Yen taking a bit of a squeeze its been left to Gold ( new high of US$ 1672) to continue to hold the safe haven mantle.
Fundamentals ,technicals and whatever remain very difficult to read for short or long term trends in forex markets and as such I have no inspiration to call anything at the moment.
European rate decisions today , with any ECB hike well off the agenda now. Markets will continue to watch economic data and also up and coming Spanish and Italian bond auctions.Spanish PM Zapatero has cancelled his summer vacation but at least has the prospect of lots of free time after the November election.
Stay small if you must have a punt is my advice

Friday Update…Survey says TGIF

Yes thank God it is Friday in a week that has been dominated by the continuing uncertainty in the US. Failure to get a vote on Republican proposals last night was just another nail in this weeks coffin of indecision. Finally it has rattled equity markets as stocks around the world limp from one poor session to another. No real panic (yet) but just too much uncertainty to support markets.In forex land EUR/USD at 1.4275 has not gone not very far although EUR/SFR at 1.1450 and EUR/JPY 110.70 tells the story. Swiss and Japanese authorities are struggling to halt their currencies from strengthening at the moment. The Swiss National Bank posting a loss of 10 Billion Swiss Francs on currency losses tells its own story of unsuccessful intervention.
On the Euro negative side Moody’s has indicated a possible downgrade to Spain’s AA2 while on the positive side Germanys retail sales surged to a 50 month high , up 6.2% on the month. Now that would be great if the rest of the EU could join in or Germany started sucking in imports. Every German I see here in Spain drives a Mercedes ,BMW or Audi so not much joy there.
All in all lets just put this week to bed with a C for effort and D- for progress. Thank goodness Moody’s don’t rate me right now
Have a great weekend

Weekly review….. Euro takes a triple whammy or was it 4

Even for seasoned traders last weeks events were pretty hairy. Who would have believed in a matter of days many commodity prices could collapse ,Trichet shows his soft side and US Employment data (although somewhat conflicting) was stronger. The final nail in the Euro on Friday was a report in German Magazine Der Spiegel that discussions were to take place regarding Greece leaving the Euro block.
The Upshot has seen the Euro fall across the board.Down to nearly EUR/USD 1.43 and below 116.00 EUR/JPY
We have bought EUR/USD on the way down which is uncomfortable .I do not see an end to US dollar weakness but undoubtedly there will be a focus back on peripheral EU problems.Taking the above factors one at a time.

Firstly commodities which have enjoyed such a good run show just how speculative some positions are . Prompted by huge falls in Silver which was triggered by increases in margin requirements the sell off continued Friday. Oil falling under US$100 to $97 was another big mover.It shows that authorities will have to get some hold on these markets if they are to prevent speculators causing real damage to peoples lives and economies by forcing up prices. However, tlast weeks move does nothing to interfere with the longer term uptrend.
Trichet chose not to issue hawkish comments. The dilemma for the ECB is that Germany for sure does need higher rates peripheral countries do not.If Germany prints higher inflation levels the pressure will increase on the ECB.
US jobs data was positive with more jobs added however the headline Unemployment rate went up to 9%. The Fed will never tighten while unemployment remains so elevated. What remains in the balance is will there be more QE.
Finally the Spiegel article in what is a publication. normally well worth following in English online. Briefly it hinted at a special meeting in Luxembourg because one option for the Greeks was withdrawal from the Euro.
This has been denied by all member states although discussions on the Greek problem will be ongoing. Once again all parties have excluded the possibility of restructuring. The truth is that the possibility of Greece not restructuring at some time is absurd. They will but when the time is right and in a manor to prevent too much turmoil in the banking sector.
So where can forex markets go from here.Quite possibly a relief rally for the Euro on Monday but Fridays events have rattled the markets. For longer term players there should still be opportunities to buy EUR/USD cheaper although 1.50 plus EUR/USD may well have been postponed for some time.Indeed we may see levels nearer 1.40 before any significant rally begins
Amongst all the fun equities recovered and stability there could well determine general risk appetite.

Wednesday Update… Euro storms back leaving bears crushed again

There must be a few uncomfortable commentators this morning as the Euro sell off not only stopped but has made a significant reversal. Back over EUR/USD 1.44 and EUR/JPY 119.
Of course we still have the major hurdles up front above 1.45 but the Euros resilience has been there for all to see.We do have a Spanish Bond Auction today of 10 and 13 years and that will not make good reading for the Spanish authorities. However, barring a disaster it should have limited effect on the currency. Equity markets have helped the cause with a good performance overnight. It seems investors are believing that Corporations are in good health even if Governments are not.Gold through the US$1500 level tells its own story and continued commodity strength will weigh on the US Dollar.
Elsewhere UK Bank of England minutes are expected to confirm the same split of views. Only a change in that will affect Sterling. That said one suspects there are more US Dollar longs in Cable (GBP/USD) than maybe elsewhere so there could be a squeeze there.
Of course there will be more to come on the Euro debt problems but by now the only people who refuse to acknowledge the need for Greek debt restructure are politicians and central bankers, and that in public. An announcement if it happens will be a relief probably to the markets ,certainly not a surprise.

Weekly Review.. Why ei in Finland is no for the Euro

The feature of last week was consolidation of the US Dollar and Euro which remained in a tight range EUR/USD 1.4365 to 1.4520. Technically a stall was needed with the Euro overbought against the dollar and even more so against the Japanese Yen. The usual culprits of events came into play. Plenty of rhetoric about Euro interest rates going higher and on the other side the debate on peripheral debt restructure which seems to be acting out like some soap opera.Of course we all no why the politicians and central bankers are adamant that the PIG countries will not restructure. The banks who own so much debt and who will require a few more years to be in a position to handle the inevitable.
This push and pull on the Euro left the Swiss Franc to take up the mantle against the US Dollar. Commodities and particularly Gold show no signs yet that the US currency bear run is ending. Notwithstanding some Euro area shock we should see the EUR/USD push on next week. However ,even if it does not ,any lower levels should prove good buying opportunities.
The one proviso is a shock which just could be brewing in Finland. The only country where parliament approval for bailouts is required goes to the polls this weekend.Anti Euro parties have seen popularity rise dramatically and were the swing to go just 2 or 3 % more than suggested we might be in for some real fun and games with the Fins refusing to sanction the Portuguese bail-out.
It probably won´t happen but all around Europe ( Not least the National Front in France) voters are becoming disillusioned. In the strong counties. Voters are fed up with paying for others and in the peripherals’ austerity is becoming harder to tolerate.
I stick with my long EUR/USD view I just wish it felt 100% comfortable

Thursday Update.. And here we are again

A bit of a Yen and Euro Correction overnight saw the EUR/JPY down to 120.20 and EUR/USD to 1.4410 but proved to be very short lived. Already we have been back over EUR/JPY 121.00 and EUR/USD 1.4500 and have settled a smidge lower. All in all it still looks like consolidation which could still carry on a while. Too early to rule out any deeper correction but overall for the Euro the bullish scenario still holds. Thus far levels above 1.45 have met with some selling and resistance lies between 1.4520/50.

As I said at the weekend we may have to wait awhile longer for levels above 1.4600
Some comments out from the German IFO Economic Institute would seem to poor more water on the politicians and central bank view that Euro land is ok now. They talk of Portugal’s debt being a bottomless pit and raise concerns still about Spanish Banks. None of which seems to bother the Euro a jot at the moment.
US Budget wrangling continues with probably more potential to be Dollar negative than positive.

Wednesday Update ..Yen and US Dollar rebounds turn out to be Dead Cat

Tuesdays reversal in the Japanese Yen and to some degree the US Dollar turned out to be the proverbial dead cat bounce. The Nuclear Crisis seemed to have sparked a panic in risk but today it seems more like business as usual. the JPY/USD is back over 84.00 EUR/JPY over 122.00 and EUR/USD 1.4500.
The Euro continues to find support from Sovereigns diversifying reserves and turns a blind eye to anything adverse on the peripheral country news. In the hear and now I still think mid 1.45s EUR/USD could prove a bit a a barrier but in reality I am just hoping for another correction to stock up.EUR/USD 1.50 still looks likely in the coming weeks together with EUR/JPY 130.
In the long run of course a stronger Euro will just add to the woes of PIG but for now markets seem to be happy to ignore what might happen some time in the future. The Politicians rule out restructuring as they did with bailouts while most knowledgeable commentators think the opposite.My own view is that in the end it will be the public in Portugal and Greece who will decide enough is enough. Certainly the appetite for austerity in Portugal just does not seem to be there. When months turn into years then patience will snap.
Elsewhere Sterling continues to look vulnerable following disastrous retail sales figures. A move over 90 against the Euro might be a bearish sign for a test of all time highs…….that should send the Irish shoppers back over the border in droves and prove a killer for the Irish economy.

Weekly Review..Euro Strength and Dollar Weakness set to continue but..

With the ECB raising rates as expected and the US still unlikely to raise their rates any time soon it was up and away for EUR/USD lat week.Technically the picture points to a test of EUR/USD 1.50 but in the immediate future there seems good resistance between 1.4500 to 1.4575. This means that trimming long positions may offer better levels to reestablish. Of course we may just consolidate rather than retrace but whatever I feel we will not see 1.46 at least until later , if at all next week. With Gold, Oil and other commodities adding to the US Currencies woes though it does just look like it will be a pause for breath.If there is some kind of surprise around to damage the US dollar negative view then I for one cant see it at the moment.
The Japanese Yen continued its declines as well and likewise after some consolidation should continue. This may well show up more in EUR/JPY rather than USD/JPY .
Equities lost a bit of their luster on Friday but would need more of a sell-off to influence forex markets.

Thursday Update…. Portugal seeks bailout, they need a miracle

Finally Portugal has done what the markets have been telling it. With 10 year bond yields at nearly 9% the inevitable bailout request has been made. Of course markets unlike governments are not stupid and this has been long discounted.
Yesterday saw more Euro strength across the board above EUR/USD 1.4300 and EUR/JPY 122.00.There has been some pullback this morning below those levels but with the ECB expected to do what is expected the bias is still to the upside.The Yen has staged a modest comeback generally from its very oversold levels and another shake out is still possible.
Elsewhere AUS$ hits record high and CAN$ 3 year highs against the US Dollar as risk appetite improves. In the UK the Bank of England can only surprise markets with a hike. Only one of nearly 70 Economists surveyed expects that, maybe he just ticked the wrong box.
So all eyes and ears on the ECB. 25 basis points the overwhelming expectation but comments from Trichet may give more market reaction.
French February Trade figures just announced. Deficit of Euros &.6.55 billion vs. 5.7 expected, more signs of convergence …me thinks not.