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• ForexLive North American wrap: US consumer sentiment lowest in 13 months
• Yen shorts scaled back in weekly CFTC report
• Weekend wind down
• Six straight weeks of gains for US crude
• White House wants ‘clean debt limit increase’ without further delay
• The best trade this week: Long USD/CHF
• Norwegian wood invading Canadian cash
• House to vote next week on debt ceiling increase
• Some life in the yen crosses still
• EUR/GBP up around session high
• Italy has budget shortfall
• S&P 500 slides to the lows of the day
• European stocks mixed at the close
• If you’re going to kick the can, kick it hard
• Looks like some euro selling interest at the fix
• Soooooo, Bernanke was out to lunch in 2007
• IMF recommends zero interest loans to Greece due to new funding gap
• Cable rolls through 200-day moving average and 1.5900
• Cable extends slump
• U Mich Jan prelim consumer sentiment 71.3 vs 75.0 exp

ForexLive North American wrap: US consumer sentiment lowest in 13 months Posted: 18 Jan 2013 01:22 PM PST U Mich Jan prelim consumer sentiment 71.3 vs 75.0 exp GOP hopes to raise debt ceiling by three months in vote next week Canadian Nov manufacturing sales +1.7% vs +1.0% exp EU official: Next Greek aid sub-tranche approved in principle IMF recommends zero interest loans to Greece due to new funding gap Fed releases transcripts from 2007 meetings Dijsselbloem to be named Eurogroup leader Monday CFTC positioning S&P 500 up 0.3% to 1486 USD leads, GBP lags The euro plunged through the European lows at the start of US trading and down to 1.3297. It bounced to 1.3335 as former support became resistance. After the U Mich data EUR/USD started down again, eventually hitting 1.3280. The low of the day came at the London fix. As Europe wound down the single currency recovered to 1.3320. The yen provided plenty of drama this week but not on Friday. USD/JPY trading was tight between 89.80 and 90.10. A close above 90.00 is favorable for bulls. Cable was the dog all week and that extended to Friday as it broke below the 200-day moving average and 1.5900. Selling accelerated below the 200 dma at 1.5910 and didn’t stop until bids just ahead of 1.5850 were tested. Six days in a row of declines for cable. USD/CAD was bid rather strongly. The Chinese data wasn’t as strong as hoped overnight and multiple attempts to break lower have been kicked back. Last at 0.9921. Gold edged lower to $1685. The big line is still $1700 after a failed attempt near $1695 for the second straight day. The profit taking in EUR/CHF stalled and it ended flattish in US trading at 1.2443. It’s a long weekend in the US so trading will be slower than usual at the start of next week.

Yen shorts scaled back in weekly CFTC report Posted: 18 Jan 2013 12:32 PM PST From the weekly Commitments of Traders report (collected at Tuesday’s close): JPY net short 66K vs 74K prior EUR net long 7K vs net short 8K last week GBP net long 28K vs 26K prior AUD net long 89K vs 80K prior CHF net long 13K vs 10K prior CAD net long 69K vs 64K prior NZD net long 22K vs 19K prior Highest net long EUR since July 2011. Quite a surprise to see yen shorts pull back. I’m not generally the type to do technical analysis on a COT chart but it looks like a rebound to the breakout point, which could be followed by a decline to the 2007 lows — and that would mean deeper JPY losses.

Weekend wind down Posted: 18 Jan 2013 11:52 AM PST The CFTC numbers will be released at 3:30 pm ET but, otherwise, it’s time for some tunes.

Six straight weeks of gains for US crude Posted: 18 Jan 2013 11:40 AM PST Oil has closed the week up 2.1%. The move might be getting a bit long in the tooth but there is a chance to test $100 on the break of the recent downtrend.

White House wants ‘clean debt limit increase’ without further delay Posted: 18 Jan 2013 11:25 AM PST The White House has responded to the Republican offer to hike the debt ceiling for three months. The meaning of the statement is unclear because it doesn’t address Boehner’s demand for a budget before a long-term increase in the debt ceiling.

The best trade this week: Long USD/CHF Posted: 18 Jan 2013 11:02 AM PST The US dollar narrowly edged out the euro and kiwi dollar as the top performer this week while the pound and Swiss franc lagged badly. On the week, USD/CHF gained 2.2%.

Norwegian wood invading Canadian cash Posted: 18 Jan 2013 10:10 AM PST Canadian are up in arms because the new $20 banknote features a Norway maple, rather than the traditional Canadian maple leaf. Adding insult to injury, the Canadian dollar has declined for six straight months against the Norwegian krone. I’m sensing a viking conspiracy to takeover Canada, they’ve tried it before.

House to vote next week on debt ceiling increase Posted: 18 Jan 2013 09:45 AM PST The extension will be for three months. Three months of relative US political peace is like an epoch. It might even give the economy some time to get up on its feet.

Some life in the yen crosses still Posted: 18 Jan 2013 09:41 AM PST Trade had quieted down but it has come back to life with some buying of USD/JPY and the crosses. Headlines are crossing about the Republicans authorizing a three month temporary debt limit increase in order to give the Senate and House time to pass a budget. I expect flows rather than those headlines are the driver.

EUR/GBP up around session high Posted: 18 Jan 2013 09:30 AM PST Forgot to mention earlier was hearing talk of barrier option interest lined up at .8400 in the cross, sell orders just ahead of said interest. We’re presently up at .8385. Personally I wouldn’t expect the barrier option interest to survive too long, but then that’s just me. Interesting week for sterling next week, plenty of event risk. Tuesday sees public sector net borrowing;  Wednesday jobs report and latest Bank of England minutes; and then the possible coup de grace on Friday with provisional Q4 GDP (expected to show a contraction of some -0.1/-0.2% quarter on quarter)

Italy has budget shortfall Posted: 18 Jan 2013 09:27 AM PST Italian finance undersecretary Polillo tells Bloomberg the country must make 9 billion euros in additional cuts to meet its deficit goal. No reaction from the euro, which might be balance from a comment from the ECB’s Coeure saying lower exchange rates are not the panacea industrial companies hope for.

S&P 500 slides to the lows of the day Posted: 18 Jan 2013 08:50 AM PST Technically, a close above the September high of 1474.50 is important for stocks. Expect FX risk trades to move alongside stocks if that level breaks. Currently down 5 points to 1476.

European stocks mixed at the close Posted: 18 Jan 2013 08:40 AM PST UK FTSE +0.5% German DAX -0.3% French CAC -0.1% Spain IBEX -0.5% Italy MIB -0.2% On days like this I picture Gerry looking across the English Channel with a smug sense of superiority. On the week, most continental exchanges were slightly lower while the UK FTSE closed at a 4.5 year high.

If you’re going to kick the can, kick it hard Posted: 18 Jan 2013 08:18 AM PST Republicans are considering extending debt limit to April 15. I expect Obama and Democrats would want a longer extension than that (or — heaven forbid — a deal).

Looks like some euro selling interest at the fix Posted: 18 Jan 2013 08:03 AM PST EUR/USD down through 1.3300 to the lows of the day. Cable is testing bids at 1.5850 but there are reports that the move lower has come on low liquidity, which is a worrying sign for bears.

Soooooo, Bernanke was out to lunch in 2007 Posted: 18 Jan 2013 07:36 AM PST Bloomberg is running some headlines from the transcripts from the Oct. 2007 FOMC minutes. Here are some of the gems. There are no evident spillovers from housing ‘Inflation is a concern’ Mentioned a ‘general freeze-up’ in markets in Aug 2007 meeting I don’t think I need to recap what happened in the following months. People in the bond market knew something very bad was happening beginning in August or earlier. Also, there is an interesting comment on the WSJ’s Greg Ip, who was the Jon Hilsenrath of the time. Bernanke said: “the way Greg Ip works is that he goes around and talks to each person and gets a little of the story and then builds it” People thought then (and now) that the Fed was leaking signals to the WSJ but then (and now) it’s just conjecture.

IMF recommends zero interest loans to Greece due to new funding gap Posted: 18 Jan 2013 07:34 AM PST Recommends rates ‘close to zero’ on bilateral loans Debt relief and aid ‘crucial’ Lower rates on EFSF loans to Greece also possible Expects more measures to cut debt by 2020, 2022 Sees Greece needing extra funding of 5.5-9.5 billion in 2015-16 Greek program fully financed well into 2014 Funded into 2014 is pretty good compared to the usual 6-month cycle of unexpected shortfalls. Of course, Greece always ends up needing far more cash than the IMF anticipates.

Cable rolls through 200-day moving average and 1.5900 Posted: 18 Jan 2013 07:12 AM PST Cable was like a safe harbour this week with the volatility in the yen crosses. The downtrend has been solid and relatively smooth. I have been talking about cable shorts all year but after 6 consecutive days of declines, it’s probably time to take some money off the table. The daily chart looks like it wants to go down and test the 200-day moving average at 1.5909 or the November low of 1.5825. I don’t know what it is about cable but it always seems to go my way (can’t say the same about the kiwi dollar).

Cable extends slump Posted: 18 Jan 2013 07:01 AM PST Talk of light stops through 1.5900 apparently.  Some buy orders noted down around 1.5880.  Those must be Silverwings Presently at 1.5905.

U Mich Jan prelim consumer sentiment 71.3 vs 75.0 exp Posted: 18 Jan 2013 06:55 AM PST The final December reading was 72.9 Current conditions 84.8 vs 88.0 exp Expectations 62.7 vs 65.2 exp Overall sentiment at 13-month low and current conditions at the lowest since July.

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