30 listopadu 2009

30/11 Weekly comment

Prepared by Ken Veksler, Senior Trader, Saxo Bank

Last week came to an interesting end and this week promises to offer similar if not slightly more subdued price action. The excitement all stemmed from thin liquidity while the American’s were stuffing themselves full of turkey and Dubai was slowly sinking under the weight of the Palm’s development and mounting unserviceable debt. Neither event should come as a shock to anyone (definitely not the former), at least not to anyone that has a concept of global macroeconomic developments.

Most people should have at least been aware if not entirely wary of the fact that the cranes in Dubai have stood still and silent for almost 9 months now with life practically coming to a standstill in what was going to be the fastest developing economic zone/region of the world.

The lonely emirate was caught up in all the excitement of an overheating economy and decided that now was the time to capitalize and begin massive capital works projects including building the world’s biggest airport to service the hordes of people they were expecting to come through the nation in the coming years.

But as we all know things took a definitive nosedive and understandably this demand that they had counted on had waned significantly, so it should come as no surprise (although clearly on Thurs/Fri it did) that things we going to fall down sooner or later. Things were further complicated not only by thin liquidity and nervous markets not wanting to give away gains made over the last 9 months but also a religious holiday in the region that left no one minding the shop front and able to offer any comment on the issue. Understandably risk firmly fell off the menu and the greenback made a stellar recovery…..

We walk in this morning to the tune of overnight news from the UAE that they will not let the tiny sovereign nation fail and in fact have heard pledges from the UAE central bank regarding helping with liquidity and evaluating on an ad hoc basis the need to cover the odd monthly payment in order to help Dubai out. Shock me! And of course everything has come back in on the news meaning that the greenback is sold off once more (hello risk, my old friend), Dubai CDS have tightened by a factor of about 10% and the markets now look for the ominous month end fixing due later this afternoon.

The week ahead….

Well in a nut shell I expect more volatility, this time however it will focus on data/event risk rather than American’s on holiday or nations’ reneging on debt payments. Otherwise for the most part it should be business as usual, the S&P will slowly grind its way towards 1121, the EURUSD will move accordingly but will be rejected on first attempt at 1.5150/60 and the DXY will very likely look for the lows it found recently.

Data wise as noted above we’re going to be fairly busy this week and the highlights include;

Monday: CAD GDP
Euro Zone CPI

Tuesday: RBA Rate decision (market is 60% pricing in another 25bps)
US ISM Manufacturing

Thursday: ECB Rate decision
UK PMI
Euro zone GDP

Friday: US NFP
CAD Unemployment

So I hear you all ask, what’s my view on the majors? Well I’m glad you asked because here it is;

EURUSD: As noted above this thing is still a buy on dips but I warn of deeper corrections, happy to start averaging in longs from 1.4950 down to 1.4830, looking for 1.5164

GBPUSD: Still a sell on rallies and even these rallies are beginning to finally look tired. 1.6700/50 presents great selling and I look for a return to 1.6250.

USDJPY: Still looks ugly and anything into 87.00/50 is just begging to get hit. No matter the amount of verbal intervention the JPY government is still not prepared to do anything and while this is the case the cross is going looking for 85 and perhaps even lower.

AUDUSD: Strange to keep repeating myself but I sell the cross on rallies into the safety of the previously rejected zone around 0.9300/50 and recommend trading the range looking to pick it back up into 0.9000.

EURGBP: Despite what I wrote above and intuitively you would expect this cross higher, but I suggest keeping an eye on it this week as I think 0.9190/00 marks solid enough resistance to see this thing correct short term into 0.9050.

USDCAD: Looks healthy if you enjoy playing a range based on good macro rationale. 1.0700/50 is great selling territory as I noted late last week and traders should look for the bottom of the range 1.0450/80 to fix profits.

GBPCHF: I remain short half of original position and look to fade the move lower probably closing out the rest of the position gradually looking for 1.6420/50 as the average for profit taking.

AUDNZD: Those following my commentaries will be aware that I am now short this cross at an average of 1.2755 and look for the move below 1.2670 to confirm my suspicions.

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