Forex - Events in Korea & Speculation Over Portugal Pushes USD Higher
Notícias e acontecimentos:  It’s never a promising start to risk sentiment when the first news of the European day is artillery fire. North Korea’s official news agency declared that “the situation on the Korean Peninsula is inching closer to the brink of war due to the reckless plan of those trigger-happy elements to stage again war exercises targeted against the North." And if that’s wasn’t direct enough the North Korean agency further stated that the nation stood “ready to annihilate” South Korea’s stronghold. Asian regional indexes were marginally weaker with the Kospi leading the way down -1.34%. EU sovereign credit worries are primarily driving Forex rates right now and the EU news flow continues to be heavy. Rumors has it that a Financial Times Deutschland article is set to hit the presses reporting that European member states are pressuring Portugal into taking aid to stop contagion. The rumor is taking center stage and unnerved an already jittery market with the EUR paying the price. With the US off eating leftover turkey, liquidly conditions are poor - exacerbating the selloff (although conditions were already ripe for a EURUSD collapse). Yesterday, Bundesbank's Weber has tried to reassure the markets that if the €750 bn bailout fund was not enough then it could be increased (doubled actually). However, the market was well prepared for this type of mindless rhetoric with a series of research pieces quickly making the round refuting the actual size and the ability to realistically increase. An IMF economist is cited as stating that only €310 bn was actually available for use from the EU fund - short of the €375 bn potentially needed. Two core issues stand out in our mind - first is that should Portugal and Spain need bailouts (€35bn and €255bn respectively) then the current fund size is less than the ESA level (IMF contribution excluded) and the commitment of Germany to shoulder an ever increasing share of the bailout will increase. Eurogroup chairman Jean-Claude Juncker believes Germany is losing sight of the EU cause and it just seems that the European Stabilization Action (ESA) in its current form lacks the punching power to halt a full fledged crisis. Today the German government and the European Commission issued statements fervently denying that the EU executive body suggested increasing the size of the EFSF but we suspect they threw it out there to see if it got a positive response and then retracted the idea once it was rejected. In Australia, AUD was sold across the board as the RBA’s Stevens said that rates would hold for “some time” with the cash rate at “about the right level for now.” With markets leaning toward further hikes, this was a sudden jolt that perhaps rate expectations had been too optimistic. With many outstanding issues in EU and officials continuing to make a mess of the situation, the FX market should continue to focus on Portugal and looking to short EUR in the near term. EMU sovereign spreads remain at their recent highs with CDS prices right behind - illustrating that confidence is waning in the Euro. Today's calendar is fairly light with most of the US still in a tryptophan coma and we expect trading to come to halt in European afternoon. |
Pontos Chave de hoje (hora GMT): 00:00 EUR Portugal: Final vote in Parliament on 2011 austerity budget 09:00 EUR M3, % y/y (3mma) Oct 09:00 CHF Private sector loans, % y/y Oct 10:30 MXN KoF leading indicator Nov 15:00 Interest rate announcement, % 4.50 exp/prior |
O risco de hoje: GbpUsd The 3-week downtrend channel has managed to pinpoint almost perfectly the lows in GBPUSD’s descent this week, but this morning’s further collapse in sentiment has overshot even downtrend support (currently 1.5715), touching a low of 1.5686. The downside therefore looks ever more vulnerable in the near-term; next levels of note below us are 1.5705 (100-day moving average), 1.5650 (20 & 22 Oct high), 1.5600 (22 Sep low), 15505 (21 Sep low) and 1.5450 (15 Sep low). Crucial to the medium-to-long term outlook for GBPUSD will be the ability of the 200-day moving average to remain intact below us; that support is currently eyed at 1.5348. Players looking to sell-on-rallies are in abundance, so expect any rebounds to be brief and short lived –we doubt the pair will be able to regain the 1.5800 level, and believe 1.5840 (24 Nov high) is almost certain to cap us for the near term. On the off chance of a higher correction topside resistance is noted at 1.5955 (last seen on 23 Nov just before the big sell-off), then 1.5995 (upper edge of 3-week downtrend). UsdJpy A decent rally for USDJPY accompanied the Thanksgiving holiday, one which had the power to break above 83.80-5 (18 & 23 Nov highs), but for now the 84.00 (5 Oct high) range ceiling –although tested –remains intact. For the time being (while the range reigns supreme), the best strategy appears to be selling towards 84.00 and buying towards 82.80 –setting tight stops through these respective levels while trying to scalp 80 pips or so out of each oscillation. Should the bulls have sufficient gumption to break through 84.00, we’d also like to see an hourly close above the 100-day moving average (currently at 84.10) before we’d be lured into going long on the break. Targets on the topside will be in the region of 85.40 (24 Sep high), 85.90 (19 Aug, 30 Aug & 16-17 Sep highs), or even as far as 86.90 (2 Aug high). Should we collapse back into the range then naturally, a return to the 82.80 floor is on the cards; and a break-out from the range to the downside would open up a move to 81.65 (12 Nov low). UsdChf It was a choppy break-out above 1.0000 yesterday, but a break-out nonetheless. We therefore treat this as activation of the ascending triangle on the hourly chart, and have gone long with a stop around 0.9970, aiming for a target of 1.0150 (width of the triangle applied to the point of break-out). This target is an elegant one not only for the lack of resistance levels eyed between it and the break-out level, but also because it falls comfortably ahead of the next major resistance at 1.0185 (17 Sep high). Should the bears come back to their senses and manage to push the pair lower, key supports to be wary of will be Wednesday’s low 0.9899, 0.9830 (16 Nov low), 0.9725 (12 Nov low), 0.9670 (11 Nov low), and 0.9540 (first established on 18 Oct and re-tested on 5 Nov). Whilst we are willing to play this near-term short trade, over the medium term we still look for a return to the all-time low 0.9464 (seen on 14 Oct). |
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