US Open – 15.05.14

Good day,

Here is a brief for the US Open:

EURUSD has broken through the key level of 1.37 and out of the range it was trading in. It seems that it worked for ECB to talk the euro down. Here are the comments:

–    ECB’S CONSTANCIO – WE ARE DETERMINED TO ACT SWIFTLY IF REQUIRED

–    ECB’S CONSTANCIO – DO NOT RULE OUT FURTHER MONETARY POLICY EASING

Later on, an article in a Spanish newspaper, alleged recirculated by a prominent macro economist in the morning, was attributed to the dramatic move in EURUSD. The Spanish  newspaper La Vanguardia reports that the ECB will lower its refi rate to 0.15 or 0.10% and impose a negative rate of 0.25% for bank deposits. “The goal: to circulate money and reach SMEs.” 

   Soft country-level GDPs added to the EUR’s woe:

–    France GDP at 0.0% QoQ in Q1 surprised to the downside (0.1% expected) and the Q4 figure was revised down from 0.3% to 0.2%.

–    German GDP at 0.8% QoQ beats the consensus forecast of 0.7%

–    Netherland GDP at -1.4% QoQ majorly undershoot the 0.0% expectation

–    Italian GDP at -0.1% QoQ also disappointed the market forecast of 0.2%

–    The April Eurozone CPI remains at 0.7% in the final reading, inline with the flash reading and the consensus forecast.

–    Eurozone GDP, however, printed 0.2% QoQ (0.9% YoY) in Q1, versus 0.4% (1.1%) expected and 0.2% (0.5%) in Q4.

It is looking heavy here and we are looking for a further move down. I believe there could be another 300 points or so to be had here. You stop loss would depend on your risk management as it has gone through a few levels in May now.

GBPUSD remains heavy following the disappointing data and QIR yesterday. Cable failed to break the 55d MA at 1.6720 this morning and has bounced back above the 1.6750 support level. There needs to be a clear sign of reversal for me to be comfortable to go long. Being patient is the key here and I would be comfortable selling it if its breaks the 1.67200 support level.

USDJPY could not seem to sustain momentum above 102 and has fallen back to the 101.90 level. While the pick-up in activity can be attributed to front-loaded domestic demand before the consumption tax hike, it may be enough to throw cold water on easing expectations by the BoJ any time soon. There isn’t much to say here. It is pretty much range trading. Key short term levels are 101.400 on the downside followed by 101.200 and 101 on the downside and 102 followed by 102.400 and 103 towards the top.

AUDUSD is trading between 0.93 and 0.94 since almost the begining of May with 0.92 and 0.94500 the wider range. We have been long here since break of 0.93 on May the 6th and are still holding the position. It is choppy and up and down but we expect it to break through the 0.94 handle and then take another 40 points above that with our overall target being 140 points. It is trading at 0.93650 now.

 CHF led the under performance against the green-back this morning as the possibility of an increase of the EURCHF floor emerged. EURCHF is now trading near the day’s high of 1.2230.

–    Bloomberg reports on a note from Nouriel Roubini to clients. “Our recent discussions with a senior official from the Swiss National Bank (SNB) indicate that the SNB may consider increasing the EURCHF floor from 1.20 to 1.25 or even 1.30 in response to the expected rollout of further unconventional easing by the ECB in June,” it says.

–    Bloomberg adds the SNB has declined to comment. EURCHF is now 1.22250.

USDCAD keeps trading under the 1.09 handle but can’t seem to break the 1.0850 on the downside. We picked it up on the lows of 1.08 and are still staying long with our stop loss at our point of entry which also comes in with the 200EMA on the daily. It is looking heavy now but we are sticking to our strategy and risk management and staying in this trade without risking any banked money.

Key news for today are the core CPI and the Unemployment Claims for US at 13:30 BST along with the CAD Manufacturing Sales at the same time. At 15:00 we are waiting for the Philly Fed Manufacturing Index.

That is that for today. Good luck trading.

-Denis Taranov / denis.taranov@savitrading.com