BarCap-Global Instruments Technicals & Oil Supply Issues – 28th Oct13

Here a nice traditional price technical round up by the tech team at BarCap.

Barcap-wklyglobaltech-28-10-13

To counter the above tech bearish view on WTI, post the likely near term bounce, here a Barcap, more bullish, fundamental perspective re the troubles in supply from Libya and Iraq, released yesterday.

barcap-oil-fundamentals-28-10-13

Last week, sector wise the European oil sector broke out convincingly of her 3 year wedge pattern. This week the move has gathered considerable momentum. Breakouts from these sorts of patterns are usually meaningful and is usually driven by insider or smart capital that has an inside track on what is coming. I would there fore watch the underlying WTI and Brent contracts closely here. The sector was cheap vs its peers but its now seeing both yield compression as well as improved earnings. I’ve been over weight the sector for the last few years. The breakout dictates a hold to test if an decent deviation or overvaluation can be seen.

Rich

JPM-Wkly FX Technicals 28th Oct13 – “GBP on the Brink”

Its amazing how quickly the vultures circle. The GBP is back on the menu vs the USD and EUR here.

Participants need a target and a trend to ride. With so many loosening UK announcements from the BOE as well its government in recent weeks and with its money supply expanding quickly its clear the UK is in focus as a potential major currency trading target, short! The problem here for the GBP is that its monetary expansion is a unilateral expansion and this makes it an easy target for value debasement.

Price technically speaking, the attack is gathering weight. A double top areas to have been established vs the US$ and the Euro has distributed at a high price level within its cyclical bear trend vs the gbp. A breakout of this bear trend is within line of sight for the euro.

JP picking up the issue in this week’s report.

JP-WklyFXtech-28-10-13

 

 

 

BarCap-FX Quantitative Weekly Report – 28th Oct13

Below an outstanding Barcap report in which they run through the output from the latest data of their proprietary “quantitative analysis” expert system model.

Much of these models were originally developed the Lehmans Brothers teams in the US which Barcap have continued.

Their model highlights the under valuation of the EUR vs the GBP. Putting together with the more classical price technical work we saw from the Nomura and CS teams we see some clear threats to the gbp cyclical bull.

Fundamentally we know the issues all too well surrounding the GBP.

Importantly also note the over valuation of the euro vs Nok on their model. Over bought by 1.4 std. 2.4 std on market sentiment and 1.7 std over fair value. But if the euro is over valued vs the Nok and the euro is under valued vs the GBP. Then the std for the gbp vs the nok is therefore immense and my instinct tells me this is the illiquid alpha fx trade!

Here the superb report:

BARCAP-Wkly-FX-SuperTech-28-10-13

Rich

 

BARCAP-Wkly Macro & Commodities Price Tech 25th Oct13

BarCap here basically going all in on all asset classes to the end of 2013.

A super bullish call this.

No matter fixed income, Piigs fixed income, oil, equities, junk, bullion.

In summary, put on the blind fold or hand the dart to the chimp, and go all in.

BARCAP-WKLYMACROTECH-25-10-13

With Yellen at the FED and Carney at the BOE, they could be right.

Here the commodities weekly

BARCAP-Commoditieswkly-25-10-13

Rich

 

NomuraB – EURGBP EURUSD Technical Price Charts 28th Oct13

Just a quick update eurgbp. I have to, unfortunately, agree with them that the euro is likely making a move toward the channel resistance at circa 0.87 vs the gbp.

The battle for the technical continuation of the cyclical bear vs the gbp has been running for what seems like the last 6 months. Checking the chart it has indeed been 6 months!

Fundamentally speaking, the UK is do all it can on all policy fronts to create money supply and inflation. It is in Vanguard of states ie the UK and Japan in attempting the inflationary route from its debt woes.

Its the test case. Historically the stress point for states that attempt these methods is a debasement in their currency. Given this historical background it should not come as a surprise to participants when the euro secular bull reasserts itself vs the GBP. This has a very highly likely hood of occurring from a fundamental perspective  unless the ECB monetizes in a similar way to the BOE and the ECB the secular euro bull will return. I envisage borrowing all GBP fx to fund gbp longs at some point in 2014. Borrowing gbps at 1% per annum via your IB account is a very good business so, no problem.

For Euro bears recall Japan. Deflationary, deleveraging policies in an export lead economy. These policies can lead to a huge appreciation in the local currency even as the economy contracts year on year.

Europe is increasingly looking like Japan with perpetually high savings, debt deleveraging and ever harsher capital ratios for its financial institutions.  This is euro appreciation strategy fundamentally speaking so long as Europe is stable. Like Japan during the 90s, it doesn’t need to grow!

Here Nomura

Nomura-gbp-28-10-13

Here a reminder of my longer term price chart i’ve been running for a while which ties in to their trend resistance price of 0.87.


Apologies for the old chart from mid Aug. Im time constrained here. But the point is price has barely moved. The euro is distributing around this key area. The UK announces more fiscal and monetary stimulus every weak it seems at present and the economy is clearly in a domestic boom relative to the rest of the world. Its a pond debasement strat which will eventually threaten this key trend line. Medium term long term wise we need to watch this key trend line as it will directly feed into large allocation shifts in fx terms.

(It will also play in to the bullion, as another currency. Longer term bullion listed in gbps may be a better trading vehicle than US$ listed bullion).

As traders and investors alike, get direction and FX funding currency correct and you enter the super profit in-zone.

Here Nomura on the EURUSD. A critical area as well. Eur longs have been accumulated, at least for a short term push to 1.40 area. In theory the euro is in breakout of its cyclical bear vs the US$ but the breakout is early days and needs to be tested before allocators can really embrace the euro currency. Concerns fundamentally on an ECB weakening move though the recent “chat” from Draghi on higher capital reserves for the euro banks indicates he is content to see the euro higher. (UK moving in the other direction and weakening capital standards).

Here Nomura on the eurusd pair.A key pair for global commodity allocations due to the inverse correlation.

Nomura FX – EURUSD – 28-10-13

All the best

Rich

P.s. CS also here on a daily report also picking up the long eur vs gbp on the near term, for now.

cs-fx-daily-28-10-13

 

 

 

 

DeutscheB Commitment of Traders, Major Instruments – 28th Oct13

A nice report here which adds another arrow to the technical view on the markets.

I like the level of the shorts on WTI, as one example playing into the weak seasonals for the instrument.

Purely from a trading perspective if they can be ‘turned over’ these are the sorts of games that traders like to play, making participants reverse allocations.

There is a lot to comment on and digest here. The long gbp for asset managers reflects some discussion on the forum for a while ie the long GBP equities fully funded with GBP cash is a trade that has been in motion for a while now and shows no signs of abating quite yet though we maintain an eye on the cyclical bear Euro chart vs the GBP as she is in distribution and close to threatening some key trend levels.

Here the report. A useful report.

Deutsche-CMT-28-10-13

Rich

SC – FX Wkly Technical Analysis “EURUSD Possible Extension to 1.418” 28th Oct13

Here below the latest major pairs review from SC.

They remain bullish euro short term up to a possible 1.418 level. But they also remain US$ bulls on the more medium term horizon.

They are neutral GBPUSD and bearish USDJPY given the crowded net long position near term.

Without delay here the report:

SC-FXWklytech-28-10-13

All the best

Rich