12 ledna 2010

Ken Veksler's Market Commentary

Good morning,

Interesting price action overnight on the back of what was predominantly a night led by comments and disclosures rather than any substantive flow action. Leading the verbal charge was a representative of the CIC (the Chinese Investment Corporation¬), essentially the Chinese sovereign investment fund who not so subtly indicated that the recent weakness encountered by the USD was all but over and that the only way from here was up for the greenback, this was coupled with remarks regarding the further purchase of gold and the unlikely chances of this happening at current “overpriced” levels. Clearly this gave the big dollar a boost and we saw the majors retrace yesterday’s gains on the back of it. Interestingly although not surprisingly no more than 40 minutes later there was another official statement from the CIC saying that the previous comments were of a personal nature and did not represent the official lien in the sand…. However, damage done and besides a slap on the wrist for the original comments the market interpreted this correctly as far as I’m concerned.

Further afield we had the BOC rep. Flaherty commenting that the recent strength in the CAD has done enough of its accord to ensure that the BOC doesn’t increase their rates at the next meeting held on the 19th (next week). He further implied that any more strength to the domestic currency will hamper the revival of an economy affected by the global crisis. I concur, but strangely almost every tier1 bank out there is instead calling the USDCAD lower and chooses to express this through the CAD crosses, preferring EURCAD and AUDCAD shorts. I just don’t see it myself and still buy the USDCAD on dips and consolidation towards 1.0250.

Data out of Australia pointed to a massive 5% decrease in new home loan numbers and while a lot of this can be explained away this is still a pretty ordinary result and if anything cements my current bearish view of the AUDUSD. Conversely the NZD showed good resolve on the back of strong capacity utilization data and this lends further support to my overall argument for a lower AUDNZD cross. Returning to the AUD briefly I just want to note the sensitivity of the currency at current levels to any piece of negative data, no matter how convincing, what does this mean? Fade the rally and look for significant retracements of recent strength. 0.9330/50 is the first zone in which to start initiating fresh shorts and this could extend to the recent highs of 0.9380. If concerned about the Chinese resource bubble and its impact on the commodity crosses, look to buy 1mth out to 3mth AUD downside in the form of low delta puts with strikes below 0.9000.

On the EURUSD, well basically it’s range bound with 1.4570 proving to be magnetic on the topside for the time being. I remain bearish but do concede that we’re likely to test higher before we do anything substantial on the downside. On the day I am a seller into 1.4530 and look to take these back around 1.4430/50.

The Cable is not in a dissimilar boat and while range bound and somewhat bid at the moment I am a firm seller into 1.6130/50 on a squeeze ahead of today’s trade balance data, looking for 1.6050/30 for limit orders. More Cadbury’s M&A chatter doing the rounds adding to the overall hype, but as Flavor Flave once so eloquently put it “Don’t believe the hype!”.

Best regards,

Ken Veksler.

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