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Saturday, June 1, 2013

Your forexlive.com ENewsletter

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If you’d like to start your weekend off with a bit of worry

Posted: 31 May 2013 06:00 PM PDT

The latest from Ambrose Evans-Pritchard is that the falls in emerging market currencies and bonds point to big pains ahead in global markets.

Stephen Jen from SLJ Macro Partners said South Africa is the "canary in the coal mine", the first to break after a global resource boom and an emerging market investment bubble.

If AEP didn’t say everything pointed to big pains ahead in global markets, he might have a point.

ForexLive Americas wrap: Late fireworks

Posted: 31 May 2013 01:35 PM PDT

Forex trading headlines for May 31, 2013:

Markets were in a slumber after Europe closed its doors but that changed in the final hour of US trading as stocks led a sharp flight to safety. There was lots of chatter about the Hindenburg Omen which may have fueled the move but month-end could have been a factor.

USD/JPY took a run at 100.00 in early US trading but stalled at 100.22 and from there it was straight higher to 101.17 but the rally fell short of the Asian high of 101.28. All was quiet as the pair consolidated around 100.90 and then stocks cracked and USD/JPY fell to 100.38.

What looked like a nice rebound day for the US dollar was mostly washed away. EUR/USD finishes then day near 1.3000 but it was as low as 1.2944 near the European close. Cable rebounded to 1.5200 from 1.5141.

The US dollar made its best gains against the commodity currencies. AUD/USD finished a dreadful month with a nearly 1% loss and all commodity FX finished near the worst levels of the day.

It was interesting to see gold continue falling late in the day, even as the US dollar declined. They have tended to move in opposite directions lately. That could be a sign of month-end moves or growing risk aversion.

Have a great weekend.

CFTC: Swiss franc shorts starting to pile on

Posted: 31 May 2013 12:47 PM PDT

Futures market speculative positioning data from the CFTC as of the close on Tuesday, May 28:

  • EUR net short 85K vs short 81K prior
  • JPY net short 100Kvs short 95K prior
  • GBP net short 75K vs short 77K prior
  • AUD net short 42K vs short 32K prior
  • CAD net short 33K vs short 34K prior
  • NZD net long 14K vs long 18K prior
  • CHF net short 29K vs short 20K prior
  • Dollar Index net long 46K vs 46K prior

Two things I want to highlight:

  1. Australian dollar shorts continue to balloon, which is incredible because 6 weeks ago the market was heavily long
  2. The net CHF short is at an 11-month high. The market has quickly been beginning to bet aggressively against the Swiss franc. This points to USD/CHF gains and possibly EUR/CHF gains.
CFTC swiss franc net positioning May 31, 2013

CHF net positioning

Yen makes a late run

Posted: 31 May 2013 12:30 PM PDT

Some late selling in USD/JPY is breaking up a quiet afternoon.

The pair has quickly fallen to 100.40 from 100.70 and spilled the US dollar across the board. I don’t see any headlines behind the moves.

The Hindenburg Omen strikes, stocks fall

Posted: 31 May 2013 12:06 PM PDT

Whoever came up with the Hindenburg omen should get a prize for marketing. It pops up every year or so, punters talk about it at cocktail parties and it’s promptly forgotten.

It’s a stock market technical indicator when on the same day:

  1. The 10-week moving average is rising
  2. New Highs are greater than 2.2% of total issues traded
  3. New Lows are greater than 2.2% of total issues traded
  4. The McClellan Oscillator is  negative

The omen is said to be confirmed if it occurs twice in a a 30 day span and points to a serious drop in stocks. It occurred April 14 and today; which is more than 30 days apart but I guess that’s close enough to cause some fright at today’s close.

 

Ex-Goldman Sachs trader sentenced to two weeks vacation for fishy Treasury trades

Posted: 31 May 2013 11:44 AM PDT

This is grand.

The CME Group has fined Glenn Hadden $80,000 and given a 10-day suspension from trading on the CME after a Treasury futures trade that ‘violated rules’ in 2008.

Glenn Hadden

Hadden

The details of what went wrong are murky but it took place Friday Dec 19, 2008 when Hadden was a star trader at Goldman Sachs. It was a wild month in markets and futures expiration day.

The New York Times previously reported officials were:

investigating whether Mr. Hadden's purchases or sales of Treasury futures late in the trading day manipulated closing prices in the market and, in turn, made other of his trades more profitable, according to people briefed on the matter who were not authorized to speak publicly.

Today’s decision says:

Hadden was trying to cover some market risk associated with a position he had just before the close on the day the trading in question happened. He had difficulty with the trade because the market was quite illiquid, and was found to have not unwound the position in an orderly manner.

At Goldman (perhaps later) he was head of government bond trading and he’s currently the head of global interest rates products at Morgan Stanley.

There appears to be another incident that took place later but the timeline is muddled, according to the press in Canada, where Hadden is from.

In an unusual move, Mr. Hadden was placed on paid leave for roughly a year before his departure from Goldman [in 2011].  The firm took the step after regulators at the Federal Reserve Bank of New York complained about Goldman’s trading involving government bonds, according to a person familiar with the matter.

At this point it’s unclear exactly what he did and who profited and it may never be revealed. Whatever it was, it certainly hasn’t hurt his career.

In the final tally, he got a full year of paid leave from Goldman, a promotion to one of the top positions at Morgan Stanley, an $80K fine and two weeks of vacation (which will conveniently begin July 15).

S&P 500 nears the low of the day

Posted: 31 May 2013 11:19 AM PDT

The S&P 500 is down 5 points to 1649 as trading winds down for the week.

The low shortly after the open was 1647. So far FX hasn’t taken notice.

The best forex trade for May was short AUD/USD, why it will continue lower

Posted: 31 May 2013 10:57 AM PDT

The US dollar was the best performer in May but it will be remembered as the month the Australian dollar bull market finally broke.

FX performance in May

The AUD/USD monthly chart shows a large plunge; but it has plunged before and rebounded.

AUDUSD monthly chart May 31, 2013

What’s different this time?

Other Australian dollar declines coincided with episodes of risk aversion. In the three previous 6% monthly declines in AUD/USD, the average decline in the S&P 500 was 5.4%.This month the S&P 500 gained 1.4%.

Australian dollar versus the SP 500 index

The Australian dollar declines this time are a falloff in domestic investment, a slowdown in China and low RBA rates. AUD can bounce from here but the fundamentals have changed and the trend will be lower.

S&P lowers RBS outlook to negative from stable, sees risk for UK banking

Posted: 31 May 2013 10:35 AM PDT

S&P cut its outlook on the Royal Bank of Scotland, Virgin Money and Yorkshire Building Supply citing “industry risks for UK banks.”

No reaction from GBP.

Now here is a guy who knows what’s up

Posted: 31 May 2013 10:00 AM PDT

Jeff won last month’s non-farm payrolls t-shirt contest and he made this great video with him sporting it in Orlando.

Thanks Jeff!

Watch the 20-dma in USD/JPY – Nomura

Posted: 31 May 2013 09:36 AM PDT

Analysts at Nomura are performing a bit of technical analysis and say USD/JPY can rally to 102.50 if the pair closes above the 20-day moving average.

The mark is at 101.45 today.

USDJPY daily chart

After having the grandeur of my proud country dismissed, I’m off

Posted: 31 May 2013 09:25 AM PDT

“to a perpetually rainy island in the Atlantic ocean, or something like that.“

Cheeky sod.

I’m sure the Great British public and press will welcome our new saviour, Lord Carney from the colony, with open arms….for about 2 months, and if after that the streets aren’t paved with gold he’ll be packed off on the first boat home.

I’m sure there will be some who will be sad to see him go.

Thank you all for your comments and input this week. I hope you all have a very good weekend.

 

Spanish fin min says yen devaulation risk hasn’t materialized

Posted: 31 May 2013 09:09 AM PDT

de Guindos says there is no currency war and the yen devaluation risk hasn’t materialized.

I guess a six-month 21% fall in the yen doesn’t qualify as devaluation.

de Guindos also said Spain needs to improve the treatment of savings, which is so vague it’s ominous.

BOJ caves in to market demands

Posted: 31 May 2013 08:53 AM PDT

On Wednesday we reported that the market had warned the BOJ about buying JGB’s on auction days and that some participants wanted  the BOJ to increase market operations beyond 1 year.

Well the BOJ have taken note and will now look at offering 2 year ops.

Taming market volatility and putting downward pressure on yields are the BOJ’s priorities

Said a source.

Full details from Reuters here.

Mark Carney benefited more from Canada than Canada benefited from him – a scathing farewell

Posted: 31 May 2013 08:52 AM PDT

Mark Carney is being lauded as ‘The Wayne Gretzky of central banking’ today, on his last day as Bank of Canada Governor.

His contributions have been grossly exaggerated.

Carney banknote

Carney is seen as a savant but his predecessor at the BOC had already begun a rate cutting cycle before Carney’s first day. In a shrewd move, Carney himself cut rates by 100 bps early in 2008 but he was blind to the buildup in risks over the summer of 2008 as he held rates at three consecutive meetings.

It’s tough to read the BOC statement from early September 2008 and give Carney any sort of credit as a great central banker. Dislocations in credit markets were overwhelming at the time.

“The course of the U.S. economy and the ongoing turbulence in global financial markets – have evolved broadly in line with the Bank’s expectations,” the BOC wrote days before Lehman’s collapse.

At the end of that month, he was equally oblivious, hailing the coming storm as a ‘cathartic’ event, giving it an almost positive spin.

In conclusion, Governor Carney cautioned that while international events will have an important influence on our economy, “they must be considered in tandem with domestic factors, including the strength of domestic demand, the evolution of potential growth and the health of our financial system.”

Carney inexplicably saw Canada — a country bound to the whims of the global economy perhaps more than any other — as a sheltered haven of economic strength.

Carney hit the panic button like every other central banker after Lehman collapsed. Even then, he didn’t hit it hard enough until December when the global economy was on its knees.

Rates didn’t bottom until late April 2009 — more than a month after Bernanke proclaimed ‘green shoots’ in the US economy.

BOC interest rate chart under Mark Carney

Although he was behind the curve in the crisis, Carney has brilliantly manipulated a reputation for central banking heroics. In truth, he benefited more from Canada — a country that coasted through the crisis because of a commodity boom and fortuitous government banking policy — than Canada benefited from him.

In my mind, Mark Carney is clearing out his desk today as Canada banishes him to a perpetually rainy island in the Atlantic ocean, or something like that.

Carney will be an improvement over the hapless Mervyn King but he won’t work miracles.

European stock market close 31 May: High EU unemployment takes the shine off

Posted: 31 May 2013 08:35 AM PDT

  • FTSE -0.9%
  • Dax -0.5%
  • Cac -0.9%
  • Ibex -1.5%
  • FTSE MIB -0.8%

Around the bonds (10′s)

  • Italy 4.16% -4 bp
  • Spain 4.44% -7 bp
  • Germany 1.51% Flat

Euro and Pound on the ropes

Posted: 31 May 2013 08:12 AM PDT

King dollar is on the mend and sterling and the euro are suffering.

GBP/USD has broken below 1.5150 after a modest fight slipping to 1.5142 and yesterdays low at 1.5111.

Bids are layered down at 1.5140, 1.5120 and 1.5100

EUR/USD is already into yesterdays lows at 1.2840 hitting a low of 1.2944.

Buy orders are placed at 1.2930, 1.2910 & 1.2900

 

March Canadian budget balance -6.51bn vs 1.60bn prior

Posted: 31 May 2013 08:00 AM PDT

  • Prior revised to -8.96bn
  • Year to date -18.32 vs -11.80bn. Revised to -21.59bn

USD/CAD technical analysis 31 May

Posted: 31 May 2013 07:59 AM PDT

I’ve been away from this pair for a while despite posting the corp stuff.

I, and a few others on here missed the gravy train from down near parity and a lovely train it was. I hope others managed to get on board.

1.0400 was a fairly big level for the pair and it broke under some fairly good strength. It looked too strong for me so I let it go.

There may yet be another attempt as we are still driving around the area.

There’s a nice confluence coming together of the June 2012 high and the 55 mma at 1.0445.

usdcadmonthly 31 05 2013

 

My love of such big long term tech levels means this temptation is too big to resist.

I’m going to look to go short at 1.0400 and add to it just ahead of that confluence level at 1.0445 and more at 1.0520. I’ll also be watching the strength of any moves up there to see if I either stop myself out or add more ahead of the Oct 2011 high at 1.0655. If I do my stop will go in on a break of 1.0700.

It’s along way to go and will be a long term trade but as usual I will be paying attention to how the market feels when and if it happens.

In the here and now;

Resistance is seen at 1.0398 then 1.0417 and the high at 1.0419.

Below, support is at 1.0300 and then corporate bids at 1.0270.

Loonie time

Posted: 31 May 2013 07:22 AM PDT

Adam stole my favourite post of the day yesterday and a right mess he made of it too.

So I’m reneging on my promise to not post up a picture of him enjoying a night out with one of his home town ladies.

Corporate buyers have moved back to 1.0270 with smaller bids down to 1.0225 and 1.0215. The decent stuff isn’t until 1.0185 and lower.

Sellers are in scant supply until 1.0420 & 1.0440


at 5:02 PM

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