27 ledna 2010

Ken Veksler's Market Commentary

Good morning,

Risk, risk, risk!

I must admit I was kind of hoping that this year would get off to a slightly different start in that the equity markets would play less of a leading role in the FX markets and that there would (if not immediately then certainly sooner rather than later) a more than moderate decoupling of the risk trade from the major crosses with a return to fundamentals, then again I was also hoping to be owning a Porsche at some point this year, sadly however it looks like neither will be happening.

So let’s briefly revisit if we will the factors currently affecting risk;

• Bernanke reelection
• China tightening credit lines, CAR
• Obama’s new legislative changes
• North Korea fires on South Korean waters, South Korea fires back

And naturally as a result the equity markets are firmly under pressure and unless we see a legitimate move higher before (in my view before next Tuesday) the fear is for a far deeper correction than what we’ve seen thus far. But enough doom and gloom let’s look at what we had out overnight and what lies ahead for the day at hand.

Comments were the main catalyst overnight for the price action we saw, with the likes of Roubini stating that the Euro zone is far worse a shape than anyone readily acknowledges and points directly to Spain as the next ticking time bomb, EURUSD goes lower on this. The Euro groups Juncker stated his displeasure with the overvalued EUR and strongly undervalued USD and Yuan.
The Australian CPI data came in a little better than expected, the AUDUSD failed to impress with its subsequent move, however all local pundits are now calling an almost definite 4th rate rise from the RBA next Tuesday, AUD still goes lower.

Looking to the day today we have little on tap other than US new home sales and of course later tonight the FOMC decision. Now we all know quite well rates will stay on hold and I’m prepared to wager almost anything that the rhetoric also remains unchanged. Low rates for an extended period…. But nonetheless all eyes will be firmly set on Bernanke’s disposition and tone.

On the majors there is little to add today that I haven’t already written in the last few days…
At the time of print the EURUSD has broken below 1.4050 and taken out some weak stops, further progress lower is likely to be hampered by 1.4000 barrier protection, but I would expect that this level will likely break after the FOMC washout later tonight.

The USDCAD continues its grind higher and will make (a successful) attempt at talking at good offers around the 1.0680/90 level driving it into 1.0720 targets.
Cable is practically an enigma to me at the moment and I maintain my bearish stance but rather than get caught in the all the whippiness that it brings I remain strategically short in my GBPCHF looking to add more above 1.0720/30.

USDJPY broke below the 89.30 Fibo level overnight and now puts pressure on 88.80/90 where I would be considering initiating short term speculative longs targeting 90.70.

Best regards,

Ken Veksler.

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