29 ledna 2010

Ken Veksler's Market Commentary

Good morning,

Bernanke reconfirmed for a second term!
Hoorah! Scratch that off the long list of likely events hitting risk aversion.

Outside of this overnight as we have seen all week were more comments out of Davos hitting the wires from the World Economic Forum. Utter nonsense that serve no purpose other than to swing the market back and forth violently. All of a sudden every country under the sun is paying lip service to new proposals and variations on the theme of Obama’s plan to overhaul banking regulation. And yes we’ve all heard it many times before predominantly in the months following the collapse of Lehman’s and even later when all government’s were scurrying to cover their behinds from the systemic risk inherent in a globalised system. But folks what of it? We’re now the better part of 2 years on from the focal point of this crisis and little if anything has fundamentally changed in the regulatory framework, so what makes anyone think that its all of a sudden going to start happening now.

Personally I think it’s all smoke and mirrors but what it does in fact do is serve to highlight the nervous nature of a massively overbought market. Bulls remain in control but only sort of right now and that control is slipping more and more with each passing day. The big question for everyone now is will they after all this manage to wrangle back full control or are we set for the bears to have their time to shine in the medium term… Time will tell.

Elsewhere a macro think tank reported overnight that there should be no rate hike in Australia next week which also didn’t help an ailing domestic cross in the face of commodity and China uncertainty coupled with a strengthening USD. We were able to take out the 0.8930 support and trade as low as 0.8885 with a small bounce back this morning but only as far as the previous breakout level. The USDCAD suffered a similar fate in the face of slipping gold and oil prices printing a high of 1.0700 where it ran into small offers but only as far as 1.0620 where it still looks bid.

The EURUSD on the back of all of the above has seen fresh multi month lows printed overnight trading as low as 1.3911, bouncing from there but overall still looking heavy in the near term. Bounces higher into 1.4030 to 1.4100 provide good chances to get short for a deeper move into 1.3850.

The Cable still looks heavy and as you might have guessed I am still a greenback bull for now. Rallies in the Cable need to be sold and anything you see into 1.6250 is definitely the place to be getting short. I remain strategically short the GBPCHF from a new average of 1.7070 and look for moves back into 1.6750 and lower.

USDJPY?!?!?!? Well toss a coin right now. I do think in the longer term we have more upside into 95 but for now on all of this risk aversion I think we’ll be seeing 88.50 printing sooner rather than later.

Next on my radar in the coming week or so is the NZDJPY and/or AUDNZD for new strategic positions. I’ll keep you posted.

Data wise today important release include US GDP, Euro zone CPI and CAD GDP. Briefly commenting on the US figure, it’s worth noting that all tier 1 banks have been calling a vast improvement in this number and as always I remain the contrarian and think that consensus of 4.5% should probably be the best number we see printed, if not even a little lower. Bare in mid Goldman Sachs has been calling 5.3/5%!!!!!

As always on a Friday I say don’t ruin your weekend with a cheap punt.

Best regards,

Ken Veksler.

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