13 ledna 2010

Ken Veksler's Market Commentary

Good morning,

Looks like the Chinese have done it again! Having raised reserve/liquidity requirements for their domestic lending institutions overnight they have also managed to wipe a significant chunk of risk appetite off the table taking with it the recent JPY weakness we have encountered. So what does that mean? Well in short it means that Japanese Minister Kan is not to be paid any attention to as the domestic currency gathers strength for starters. What it also means though is that the market in my view is becoming increasingly edgy about which way to be placing their bets and the fact that we are indeed in my mind headed towards a correction in many markets. Clearly this goes hand in hand with what I perceive as a stronger USD in the new year, but as always the timing is key…

Other overnight developments (not unlike the night before) came from various sound bites and speech excerpts delivered by Fed and BOE officials. On the Fed side we had everyone that’s not Ben Bernanke essentially telling the world that they’re looking at exit strategies already and not necessarily waiting for the unemployment rate to improve before doing so… More credence to the USD story in the new year (am I talking my own book here?), but with this I suggest caution because after nearly 2 ½ years as head of the Fed the market still isn’t entirely sure how to interpret what he has to say let alone reading too much into what his underlings mutter about. On the BoE side we had Sentance (and yes that is his name) telling us that the BoE is nearing a point at which it will have to stop bond purchases and reflect on how the stimulus is flowing into the economy. In short that signals (according to him) that even if the MPC decided not to increase the asset purchase program, it doesn’t necessarily mean that they would withdraw it entirely. Take from that what you will but in short it has given the Cable a temporary bid tone as the EURGBP gets sold off on perpetual rumors of LHS fixes and M&A flows through the market.

And finally for those of you that have read the latest Reuters headlines, the EC has made further mention that things could be even worse in Greece as (surprise surprise) their books don’t seem to be as transparent or clean as one might have hoped for. Goodbye Greece and thanks for all the Souvlaki!

On the majors today in light of a fairly data free day today,

The EURSD continues to find good support around the 1.4450 area and for those looking for spec trades on the day buying into that level could prove a decent day trade but stops need to be tight and join the multitude no doubt already sitting below 1.4440/35, the upside for the time being is capped at 1.4530.

The Cable is currently the thorn in my side and as mentioned above seems to be fairly decently bid with a floor under it sitting at around the 1.6150 area. This thing is determined to have a look above 1.6235 on the day and from there I would suggest fading the rally. Those getting involved here need to keep a watchful eye on what the EURGBP does, as my gut tells me we go lower before we run into good bids around the 0.8800 area.

USDJPY remains a sell on rallies and is the trade I’m probably most happiest with at the moment, having touched 90.70/80 support overnight anything running into 92.00 should be sold on the day.
USDCAD also looks well bid at the moment but will have some serious trouble overcoming the 1.0420/30 resistance currently sitting in front of it, so a buy on dips is suggested but the upside is going to be limited so be mindful of your risk/reward when entering the position.

Best regards,

Ken Veksler.

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