Currencies: AUD and NZD outperformed, while CHF and JPY lagged. AUD was buoyed by a mining tax deal reached in that country, and the subsequent rise in risk seeking caused the JPY weakness. CHF weakened after extreme EUR/CHF weakness prompted short-covering and speculation about SNB intervention.
EUR/USD. Down channel rejected
EUR/USD (1.2510) is down very slightly overnight, consolidating the huge gains yesterday. Some ascribe yesterday’s move to a huge short EUR / long gold position unwind, while others indicate that it derived from an increased focus on the downside risks for the US economy. Still others note that the Euro Zone dodged bullets this week with Spain issuing debt and the ECB’s 1yr loan facility expiring without incident.
Technicals:
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Trend: Daily higher; Weekly higher.
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Overbought/Oversold (stochastics): Daily overbought; Weekly oversold.
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Support / Resistance Levels: Support for EUR/USD lies at 1.2152 (Jun 29 low), 1.1877 (Jun7 low), 1.1827 (Mar’06 low), and 1.1640 (Nov’05 low). Resistance lies at 1.2540 (Jul1 high), 1.2672 (May 21 high), 1.3094 (May10 high), 1.3692 (Apr12 high), 1.3818 (Mar17 high), 1.4026 (Feb3 high), 1.4194 (Jan25 high), 1.4579 (Jan13 high) and 1.4626 (Nov low).
Positioning:
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The CFTC, EUR, non-commercial, net position (-64K) worsened moderately as the June rally in EUR/USD has stalled.
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The risk reversal (3m, 25delta) ticked higher on spot’s breach of 1.25.
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Implied Vol (3m) slipped overnight on the back of spot’s sharp rally.
Cross-asset valuation: The significant correlations that EUR/USD has during the past 60 days are the 5yr yield spread (positive), the 10yr yield spread (positive), the US10yr yield (positive) and the SPX (positive).
GBP/USD. STILL - Still trending higher
Cable (1.5205) is up overnight, building on its inexorable uptrend since May.
Technicals:
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Trend: Daily higher; Weekly higher.
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Overbought/Oversold (stochastics): Daily overbought; Weekly oversold.
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Support/Resistance Levels: Resistance lies at 1.5215 (Jul2 high), 1.5524 (Apr15 high), 1.5816 (Feb17 high), 1.6284 (Jan22 high), 1.6458 (Jan19 high), 1.6479 (61.8% retracement of Nov to Dec decline), 1.6722 (Dec 3 high), 1.6878 (Nov16 high) and 1.7043 (Aug high). Support lies at 1.4347 (Jun8 low), 1.4239 (May19 low) and 1.3503 (Jan’09 low).
Positioning:
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The CFTC, GBP, non-commercial, net-position moderated to -46K, continuing its moderation from a record low in May as spot rebounds.
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The risk reversal (3m, 25delta) is up overnight with the move higher in spot, but it remains skewed for GBP losses.
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Implied Vol (3mo) is down overnight, and it continues to sag around the new low since April it recently made.
Cross-asset valuation: The significant correlates over the past two months for GBP/USD have been the DXY (negative), EUR/USD (positive), S&P500 (positive) and crude oil (positive).
USD/CHF. Higher on concerns about SNB intervention
USD/CHF (1.0632) rose overnight on concerns that the SNB might reenter the market to thwart CHF strength versus the EUR. USD/CHF remains within a downtrend since late-May.
Technicals:
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Trend: daily lower; weekly lower.
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Overbought/Oversold (stochastics): Daily oversold; Weekly overbought.
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Support/Resistance levels: Resistance lies at 1.1731 (Jun1 high) and 1.1742 (Apr’09 high), while support lies at 1.0578 (Jul1 low) and 1.0435 (Apr1 low).
Positioning:
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The CFTC non-commercial net position moderated to -10K, but remains among the lowest readings since 2007 and suggestive of USD/CHF weakness.
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The risk reversal (3m, 25delta) fell overnight and remains near the lows since Oct’09. This market segment has largely abandoned its bullish USD/CHF call and has turned ever so slightly bearish.
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Implied Vol (3mo) is down overnight but looks to be beginning an uptrend from multi-year lows.
Cross-asset valuation: USD/CHF has correlated mostly strongly during the past 60 days with EUR/USD (negative), the USD index (positive) and the US 10yr yield (negative)
USD/CAD. Consolidating within gyrating rally
USD/CAD (1.0604) is up slightly overnight, after correcting lower yesterday from two days of steep rallying. The price action seems similar to the initial move up from the Jun low.
Technicals:
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Trend: Daily higher; weekly ;higher.
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Overbought/Oversold (stochastics): Daily neutral; weekly neutral.
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Support/Resistance Levels: Resistance lies at 1.0675 (Jul1 high), 1.0680 (Jun high), 1.0853 (May25 high) and 1.1725 (Jul’09 high). Support lies at 1.02 (psychological), 1.0139 (Jun21 low), 1.0110 (May13 low), 0.9931 (Apr21 low), 0.9825 (May’08 low), 0.9712 (Feb’08 low), 0.9058 (Nov’07 low).
Positioning:
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The CFTC, non-commercial, net position slipped to 27.6K, but it continues within the uptrending channel it has traced out in recent months.
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The risk reversal (3m, 25delta) rose overnight despite the softness in spot.
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Implied Vol (3m) is down slightly after a significant rise the past couple days. It lies just above the middle of it’s range so far in 2010.
Cross-asset valuation: In terms of other assets correlating with USD/CAD, watch the SPX (negative), DXY (positive), CRB (negative), crude oil (negative), and the 2yr spread (negative).
USD/JPY. Consolidating recent collapse
USD/JPY (87.62) is up slightly overnight, consolidating after trading to a low since December yesterday. Spot has now broken below uptrend support from late-2009. Spot has fallen to a level that it could begin to attract the attention of Japanese policymakers.
Technicals:
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Trend: Daily lower; Weekly lower.
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Overbought/Oversold (stochastics): Daily oversold; Weekly neutral.
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Support/Resistance Levels: Support lies at 86.97 (Jul1 low) and 84.83 (Nov27 low). Resistance lies at 92.89 (Jun4 high) and 94.99 (May4,5 high).
Positioning:
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The CFTC, non-commercial net position rose to +4.7K, within the 6-month mid-range and providing two-way risk for JPY.
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The risk reversal (3m, 25delta) fell overnight, consistent with the downtrend in spot. The skew lies in neutral territory: around the middle of its range the past six months.
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Implied vol (3m): slipped overnight and lies around the middle of it’s 6-month range.
Cross-asset valuation: The correlations of USD/JPY with the US 10yr yield (positive), the US-JP 10yr (positive) spread, the S&P500 (positive), CRB (positive) and crude oil (positive) are significant.
AUD/USD. Consolidating recent losses
AUD/USD (0.8445) is up slightly overnight, building on yesterday’s gains after AUD/USD tested a new low since early-Jun.
Technicals:
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Trend: Daily lower; Weekly lower.
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Overbought/Oversold (stochastics): Daily overbought; Weekly neutral.
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Support/Resistance: Technical support lies at 0.8316 (Jul1 low), 0.8067 (May25 low) and 0.7704 (Jul’09 low). Resistance for AUD/USD exists at 0.8859 (Jun21 high), 0.9389 (2010 high), 0.9406 (2009 high), and 0.9850 (2008 high).
Positioning:
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The CFTC, non-commercial net position slipped to 12.3K as spot topped last week.
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The risk reversal (3m, 25delta) is up overnight along with spot.
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Implied Vol (3m) is down overnight, above the middle of its range for 2010.
Cross-asset valuations: AUD/USD has correlated most strongly with equities (S&P500, positive), commodities (CRB, positive) and USD/JPY (positive.)
NZD/USD. Rebounding
NZD/USD (0.6939) is up overnight, rebounding from the low since early-Jun posted yesterday.
Technicals:
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Trend: Daily lower; Weekly higher.
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Overbought/Oversold (stochastics): Daily overbought; Weekly neutral.
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Support/Resistance: Resistance lies at 0.7160 (Jun23 high), 0.7326 (Apr30 high), 0.7442 (Jan14 high), 0.75247 (Nov high), and 0.7635 (Oct21 high). Support lies at 0.6795 (Jul1 low) and 0.6561 (May25 low).
Positioning:
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The CFTC non-commercial, net position rebounded to +0,8K, but remains near the lowest reading since Apr’09.
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The risk reversal (3m, 25delta) rose overnight, consistent with the rebound in spot.
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Implied Vol (3m) declined overnight back towards the middle of the 2010 range.
Cross-asset valuations: The strongest correlates for NZD/USD during the past two months have been AUD/USD (positive), stocks (S&P500, positive) and commodities (CRB index, positive).
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