Vantage FX | Big Week for markets – USDJPY a crowded trade | 3rd December 2012

December 3, 2012

Stocks were largely unchanged in the US on Friday night with fairly quiet ranges. The positivity that pervaded Asian trade after the announcement of  ¥1.2 Trillion stimulus package had most impact in Asian share markets and on Yen crosses but the bourses of Europe and the US were more subdued.

It is a huge week for data with the global PMI call already kicking off with Chinese data over the weekend but equally we are still faced with an enduring division over the fiscal cliff with Republican House leader John Boehner saying there is a stalemate but noting he doesnt want to go over the cliff but Republican Senator Lindsey Graham said on TV Sunday,

I think we’re going over the cliff. It’s pretty clear to me that they made a political calculation

What he is referring to is President Obama’s opening offer in the negotiations and Graham claimed that this offer put the US on the road to Greece. So there is plenty of opportunity for fiscal cliff negotiations to add volatility to the market this week and next.

Looking at the the European employment data released Friday night continued to paint a picture of a continent mired in a generational catastrophe. European leaders need to do all they can to settle this mess because unless or until unemployment which hit a new high of 11.7% Euro wide starts to come down Europe will remain in the mire.

Worth noting is that Moody’s cut the AAA rating of the EFSF and ESM highlighting the issues facing the rescuers rescuing those nations who need to be rescued – Europe is a mess yet Euro rallied again in November, go figure.

In the America’s Brazilian GDP was quite weak at 0.9% year on year while in Canada the rate of GDP growth was just 1% year on year. Looking at the Data in the US showed that personal income growth was flat in November with consumption growing only 0.1% in October.

Stocks

At the close the US market ended pretty quiet trade flat with the S&P 500 up 0.02% to 1416, the Dow up 0.03% but the NASDAQ was 0.06% lower. In Europe it was a slightly less positive day with the FTSE down 0.06%, the CAC fell0.33% and Madrid was 0.37% lower. The DAX bucked the trend however rising a tiny 0.06% but in the black nonetheless.

Asia had a good day Friday with even shanghai managing to reverse its run of negatives rising 0.84%. The Nikkei was 0.48% higher, Hang Seng rose 0.49% while the Straits Times in Singapore rose 0.79%. The Australian market was positive as well up 0.62% and futures are suggesting further rallies in trade when the market opens today.

FX Markets

The Yen was the big mover on Friday once the announcement of the stimulus package hit the screens traders sold Yen with gusto. Looking at USDJPY below it is clear that the announcement was unable to take out the recent high which to me reinforces this level as a tradeable high. Equally important is market positioning which according to the CFTC commitment of traders report released Friday for positions as at Tuesday last week is at a 5 year high – that is in the last 5 years Yen shorts have not been larger than they are now. The full report on the CFTC data is here and while positioning itself won”t cause a reversal it hints at a vulnerable market.

Elsewhere the Euro still can’t close above 1.30 and the AUD which has large positonns of its own has still not been able to break out of this resistance zone with any gusto. At one stage Friday the AUD looked terribly week but it rallied back off the old trendline which now acts as support.

The low Friday was in the 1.0405 zone we highlighted and technically the 4 hour charts seem to be focused back in that direction again today – it’s a huge week for the Aussie with the RBA widely expected to cut tomorrow and the release of a raft of economic data including Q3 GDP Wednesday and the latest employment data Thursday.

Commodities

Silver reversed sharply on Friday which reinforces the cautious tone we took on the break of that big trendline Thursday night preferring to see how the week closed to confirm the break. As you can see in my Vantage chart below it was a avery sharp pullback and Silver closed 3.33% lower at $33.41. Gold was lower by $16 or 0.94% to $1715 oz.

Crude was up 0.95% to $88.94 continuing its mild uptrend while the Ag’s were low with Wheat hit hardest down 2.82%. Corn fell 0.47% with Soybeans down 0.64%

Datawise It is such a huge week this week there are many event risks so we all need to know when and what data is being released.  On the day however we see the release of the AiG performance of manufacturing index, TD Inflation index, Job Ads, Company Profits and retail sales. In New Zealand we have the Terms of trade and PMI data out of China (things have been running positively lately). Tonight is huge with the release of PMI’s across Europe and the US

Thoughts, comments, queries together with frank and fearless feedback all welcome. I’m happy to answer questions or comments on the comment stream wherever I can

NB: Please note all references to rates above are approximate and should not be used for trade reference.

Catch me on Twitter @gregorymckenna or @FX_Global

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