Here the latest GS price technical chart report across the major asset markets.
Note their highest conviction current trade sets up are the audusd for aud weakness and the next highest conviction is the usdjpy for more jpy weakness down to the 99 level and this goes down to the 94 level hence the call that the pair could be setting up for a big JPY strengthening move.
They are even weight eurusd and lack conviction on the pair. Top down until the ECB produce some policy action the bias is to a strengthening move though equity weakness should see some usd flows so an even weight looks correct to me on the near term.
And here the latest Fitzpatrick report from CitiB.
Now its worth noting here that both Fitzpatrick and the guys at UBS are both now bullish the Nikkie225 and the USD vs JPY. Both have been wrong the last few weeks however with the bounce in the Nikkie being shallower than the UBS team had hoped for and the sell off a little stronger than they had thought probable. Fitzpatrick put 40% of his fund on the trade allocation long the usd vs the jpy. Both are badly under water and both very close now to his stops. Lets see. It would be an expensive loss for him but as the stop at 99 and change, around GS’s target for their trade the battle lines on the pair are clearly drawn for us. Participants would take the Nikkei breakdown below 13900 or so and 99.5 or so USDJPY as a very bearish indicator for wider risk assets.
Both instruments are also exposures for my own book. I was short the usdjpy from 104 and short the Nikkie from 15000. The entries were good but i usually like to take the trend forming trades. Ideally Id like these to run so the 99.5 sort of level is important for me also to watch here. It is possible i water down the trades to bank some of the profit. Ill be driven by US indexes in the main due to the high degree of correlation.
Fitzpatrick remains ultra bullish soft commodities.
Which brings us to the latest JP FX weekly report here on the major pairs.
They are targeting 106 usdjpy in the medium term but for the immediate 100. These are the levels across the major speculators at present. Eurusd they have increased their eurusd targets to 1.36 which is lagging the euros move. The inaction by the ecb and nothing on the horizon to suggest a move in spite of the latest 0.5% inflation reading is making the euro the Neo-Deutschmark mark, for now. A higher eurusd is likely to be used as a pressure lever by fx speculators to help produce action from the Ecb. I wouldn’t bet too hard against that move as generally its better to bet with the market on issues like that one. Its in everyone’s interest to see a strong euro at present, apart from Europe. But Europe is toothless to fight the appreciation for now. As soon as this correction subsides the euro should see more buyers, policy aside, but we could see some dollar flight in the near term due to equity weakness especially as the usd index is at her price support as this tech report from jp states. If the support goes, it will be golden, of course.
Will this week provide a reversal in equity markets as supports come into line of sight. Lets see. UBS have the 1800 mark as a worse case so expect an intraday move to 1785 in that case to catch the stops.
Nasdaq looks more meaningful with a surge in volatility and nq option volumes. Anyway much more to come.
The problem I’m finding with spending the warmer months in Ibiza is that there are a considerable number of beautiful distractions here. There is a large well heeled expat community that are very active and enjoy life very much. Although i’m not complaining, its lead to a few time pressures today so my larger update has been delayed until tomorrow. Apologies but the wait will be worth it i hope.
All the best for now.
Rich
