02 března 2010

Ken Veksler's Market Commentary

Good morning,

The RBA has gotten off the fence and moved 25bps higher taking the OCR to 4%. The accompanying statement was, just like the decision, “finely balanced” offering the market little more to go on than the fact that they are prepared and are on the road to normalizing and approaching the average rate target. To give an indication the average rate over the course of the last 20 or so years was roughly around 6.25% which gives you an indication of how much room is left. At this stage it’s likely that they don’t move at the April meeting and now sit waiting for the May decision. The AUDUSD was little moved on the news having been better bid after retails sales data released before the decision. On the announcement the AUD traded higher up to 0.9030 with only really a 40 pip move and was quickly sold down to overnight lows of around the 0.8960 mark. Building approvals data came in worse than expected and kept the AUDUSD capped for any further upside.

We come in this morning to see the AUDUSD better bid and having another run at the 0.9030 overnight high. I think the upside is limited for the time being and if 0.9030 were to break then 0.9080 should definitely cap any further upside. My AUDNZD has been higher this morning as a result and I’ve used this opportunity to sell more improving my current average to 1.2903. I remain resolute on this trade and would urge you to think about the fact that the previous (10yrs ago) all time high was 1.3015 so from that take what you will….

Elsewhere the Greek drama’s continue unabated and the EURUSD suffers as a result. Little to add on this front other than 1.3620/30 is a definite sell on the intraday moves higher and some weak stops sit below decent bids at 1.3500. 1.3450 now marks a critical level for this cross and if attacked one more time could see some pain unravel. On the day look for that level to hold though or at least until Merkel gives in and says that she will indeed help her Greek friends.

The other main story of the last 2 days is clearly the Cable and the woes aren’t likely to end anytime soon really. Punished is an understatement and taking the Prudential/AIG deal out of the equation there is still more pain on this thing to be worn for those long of it. On the day and for the week going forward I look for dirty bounces into 1.5050/5100 to be sold and target the next real level of any substance as 1.4740, although that really is a stretch at present.

Otherwise on the day we have the BOC announcement on rates and while they are expected to stay shtum on the move the commentary is likely to be more on the hawkish side of dovish and lend more support to the CAD. I look for 1.0380 to be broken on the day but ultimately 1.0330 to hold. I look to buy the cross on dips into the 1.0280/0330 area for a mean reversion return to 1.0550/0630.

The only other piece of data of note today is the Euro Zone flash CPI estimate which if anything should prove heavy for the cross.

Best regards,

Ken Veksler.

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