Friday, April 1, 2011

April Fools Day London Hours - April 1, 2011

London Hours

  • Seems End of Asia trading will end up positive for equities; the only downers seem to be Japan and India
  • Crude fell from its yesterday highs through Asian trading
  • Overall Dollar largely unchanged over night with slight weakness over Asian Trading (overall strength from previous session)
  • European Equity futures point to lower open
  • Rumors on cheap Japan having cheap banking loans to the system
  • More US Fed speakers talking with Hawkish tone
  • Softer China PMI

Bloomberg comes up with more stupid headlines "Australia Boom Pays Men Without Degree More Than Bernanke" , the guy is a semi-public servant what do you expect? Its amazing how compelling this growth story has been. I was really correct on my NZD view on my targets however I didn't expect it to move with the speed that it did so I completely missed out on the action. Also, the effect of the RBA rate decision again had very limited effects over maybe two weeks. Asia fundamental growth is there, or this is all speculation at this point. While OECD growth has been largely inflated the past few years (QE one through infinity, pomo, stimulus, austerity sentiment blah blah blah blah).

Going into NFP within 6 hours I get the feeling these levels have been to hesitant. Expectations of anything less than 125,000 to 145,000 is bad while the bar is set even higher currently. I dunno the effect of missed expectations on this, but I'm leaning towards a dollar correction that will weigh in on crude initially. This will likely carry into early next weak before continuing a dollar weakness trend.

Going forward I'm looking at:

  • EUR/USD needs break about 1.425 then 1.428
  • Markets looking for rate hikes next week for the EUR/USD to support yields
  • GBP/USD continues its weakness within the majors breaks below 1.593 will see accelerated lower prices
  • In general large divergences of fundamentals and sentiment (AUD, EUR, USD)
  • ISM later today along with EUR employment data and PMI releases

Don't think the Eurozone can handle a rate hike for whatever reason. Fundamentally the region is too weak - essentially what we are seeing is the "buy the rumor sell the fact."

UK econ data is still very fuzzy with mixed reports which has definitely been weighing in on the pair. However, a bullish selling point is that 1.60 still remains a good support.

Again with Australia, it is either a true growth story or spectulation. I think this big move up to 1.03 the latter part of the highs have been speculation. Prices will give back some pips into next week. Overall though, greater than parity has been a good call. Just a matter of time before NZD follows.

To much risk to take leveraged positions today. Trade small today. Today and into next week I expect a reversal in the trends we saw all this week (Equities up, Crude up, Dollar down).

Alexander Lê
Managing Partner
Analyze Capital LLC

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