Hi all. A flat week really and not much will change today. Flat for me too as I have been crook, hoping to be back on the Top Shelf next week, with no dust.
The US GDP figure is garnering some attention and being blamed for the shift in sentiment on the stock market and funds slowly move into safe havens as greenbacks weaken. Basically the stock market is tracking sideways unable to make higher highs all weak. VIX too is going nowhere and gold pulled back a little. One member of the Fed (Bullard) said overnight that rates would rise in the US sooner than thought, early 2015, however this contradicts Yellen’s last positions – so smoke and mirrors.
Safe havens (US bonds, Japanese bonds, Aussie and Kiwi bonds, gold etc) also received some flows due to perception that Iraq/Syria/ISIS will get worse before it gets better. Putin and Poroshenko are still battling over eastern Ukraine and despite Putin’s obvious credentials in a fight he is losing this one and will. The cash flow out of Russia is too damaging for him to maintain his unwarranted land grab.
Carney (despite criticism from some political muppets) is doing a great job of managing the UK economy, tonight’s GDP/current account should be telling on that matter. Last night the BOE showed the balanced approach he takes and did not upset the apple cart that could have been. The housing market needs to cool but not at the cost of killing the broader economic growth.
The Euro, is still a basket case, much like Japan. With stagnation and even disinflation in some areas at a time that other economic blocs are gaining strength and speed (think UK, US, China), they need to do something. It seems to me that Draghi is hoping that the global growth from others will help Drag-the euro-Hi-er… Rather than being proactive, yes the last cut wasn’t deep enough, he is kicking the can in vain hope to be rescued. Well, German CPI is out tonight and with an expectation of a mere 0.2% I do not see that powerhouse pulling them out of the mire. So, I am still bearish this economy and currency.
Not much else out there to chat about, and its Friday, so let’s move onto the technicals. In that, beware that we are at end of month and quarter and in some countries, the end of financial year. So there will be some volatility and “window dressing” to make their portfolios look good.
DATA HIGHLIGHTS TODAY – Japan CPI. German CPI. UK Current Account & GDP.
AUDUSD – Still hanging around like a bad smell. For it to push through and approach 95 cents it would need a boost from data. The RBA meet Tuesday but Stevens is not going to want a higher dollar so do not expect it from that angle. What is required is a wash out of the market, a push lower to 93 cents so it can gather momentum to tackle 94 area and stay above it. I wrote earlier in the year that the Aussie would head to 85 before becoming bullish and going to 98. We didn’t quite get to 85 but my call of 98 this year still stands, however, not this month, not this quarter.
EURUSD – This is a ring high formation and I do want to be short Euro’s. Not convinced that this is it yet though.
GBPUSD – Carney this week has done a Bernanke in saying opposing views in one week. We have a ring low, but again, I do not want to take this despite wanting to be long pounds. Momentum is too high to warrant a long trade from here. I suspect we may test this month’s high and may even better it, but it won’t hold for long, maybe until July 1st.
NZDUSD – Unlike the Moa, you just cannot kill the Kiwi. With the high interest rates it is a natural go to for carry trades and safe haven parking of funds. It is now a mere 60pips from the highs set in 2011.
USDCAD – Now is over extended and has divergence in momentum. Is on the 200% fib extension and also long term trend line from Sep 2012 lows.
USDJPY – Gained strength, partially from haven flows, partially because Abe’s “third arrow” disappointed the market. Realistically it is still inside range of 101.30 – 102.80. http://www.forbes.com/sites/stephenharner/2014/06/26/this-is-abes-third-arrow-growth-strategy/