Monday, December 7, 2009

USD rate outlook positive based on Fed, Jobs Numbers Dec. 7 (Bloomberg) -- The yen strengthened and the dollar rose to its highest level in a month against the euro as investors weighed whether the world economy is recovering fast enough to warrant higher central bank interest rates. U.S. stock index futures and commodities fell.

The yen advanced against all 16 most-traded currencies tracked by Bloomberg as of 8:14 a.m. in New York. The dollar gained versus 15. The MSCI Emerging Markets Index dropped the most in six days, losing as much as 0.8 percent. Dubai's equity index plunged 5.8 percent to a four-month low. The Dow Jones Stoxx 600 Index of European companies sank 0.6 percent. Futures on the Standard & Poor's 500 Index slipped 0.3 percent, while gold fell for a third day.

FX NOW! AUD/USD, AUD/NZD Flows - AUD support still minimal vs USD, but it climbs vs NZD

Monday, December 07, 2009 9:32:00 AM

* 07 Dec 09: 14:32(LDN) - FX NOW! AUD/USD, AUD/NZD Flows - AUD support still minimal vs USD, but it climbs vs NZD

USD is still firm, though off its highs and equities are creeping higher again, but not much higher. For AUD investors, there is little reason to get involved and they are not. Day traders are monitoring the action in AUD/USD to ensure the pre-US employment data intraday forces like equity price action and commodity movement is relevant. So far, AUD/USD is soft, but the big move appears to be over for now. While the market is contending with low volume decay in AUD/USD, AUD/NZD has been climbing and the odds are high that 1.2800+ is going to be seen regularly as the market sets up for the RBNZ announcement that hits the wires at 20:00 gmt on Wed. M.B.

* 07 Dec 09: 13:35(LDN) - FX NOW! USD/CAD, EUR/CAD Flows - Canadian Building Permits jump 18%, CAD fails to react

Canadian Building Permits for Oct surprised the market by jumping 18% m/m compared with the 3,2% m/m increase seen in Sep (revised from 1.6% m/m). The actual outcome was much stronger than 4Cast's estimate of up 0.8% m/m. The larger than anticipated number is being blamed on the hard to predict and volatile non-residential sector. Despite the surprising strength in the data, CAD's reaction has been muted as dealers and investors continue to deal with Friday's surprising strength in both Canadian and US employment results. M.B.

* 07 Dec 09: 13:05(LDN) - FX NOW! GBP/USD, EUR/GBP Flows - In thin trade, GBP drops vs USD and slips a little vs EUR

USD's advance is occasionally interrupted or exaggerated by the spotty order flow seen so far in the eurozone today. The point is that USD continues to work its way higher and GBP is one of the currencies that is most vulnerable to USD's advance. Clearing banks and the normal covey of large dealers are generally credited with the movement in the market, though the order flows are nothing to speak of in size terms. M.B.

* 07 Dec 09: 12:31(LDN) - FX NOW! EUR/USD, USD/JPY Flows - USD starts the N. American trading day/week with a bid bias

While the move is not really very impressive, it is apparent that those FX deals going through in the early hours of the N. American day/week are still biased toward buying USD. So far, while equity markets languish and commodities look vulnerable, the USD has been range bound since the eurozone open, after adding to gains during the latter half of the Asian trading day. Order flows are light, but they may be the only key to market direction while the market continues to look cynically at the "normal" USD to equity relationship that broke down, at least for the very short term, on Friday. M.B.

* 07 Dec 09: 11:54(LDN) - FX NOW! EUR/JPY, GBP/JPY Flows - JPY softened by "jawboning" but that only works for so long

While the FX markets are starting the week completely focused on USD, it is worth taking a look at key non-USD prices. In very limited turnover, JPY is ticking up vs USD and driving ahead of the rest of the market. Hear the "risk off" scenario seems to have some weight. Working in the background is the market's growing cynicism regarding the expected release of additional measures by the BoJ. Expanded QE at the BoJ seems to be scheduled and it seems to be largely the bank's reaction to pressure from the government to do something to give the economy a boost. So far the lack of news is tending to offset a tiny bit of the JPY decay that has come due to ongoing "jawboning" by Japanese government and BoJ officials. M.B.

* 07 Dec 09: 11:17(LDN) - FX NOW! USD Index, Gold Flows - USD's rally having usual impact on commodities, gold drops

The broad based USD is continuing to climb. Market breadth and depth are usually limited on Mondays and today is no exception, but that is not stopping the USD from advancing. While the "risk off" scenario that usually accompanies a rally in the USD has softened the equity markets, the impact it is having on gold is much less subtle. Starting with the USD rally in post employment trading, gold has tumbled and the intraday lows on Monday of USD1136 have not been seen since 20 November. In the light trading seen so far today, there is not much room for a turnaround in either the USD advance or the downside price adjustments in gold or commodities in general. M.B.

* 07 Dec 09: 10:45(LDN) - FX NOW! EUR/USD, S&P Futures Flows-USD unilateral rally challenges cross market relationship

USD's advance, following Friday's suprisingly strong employment numbers has sent USD up across the board. USD's advance has been noted not only vs other currencies, which is obvious, but its advance has been blamed for sending gold prices and other commodity prices lower. The dealer community, that has been very comfortable with the equity vs USD relationship, is no longer comfortable after Friday's apparent breakdown in the relationship. While the USD may still have some room to advance unilaterally, the odds are strong that old relationships and pressures will reassert themselves, but they will need to be adjusted for new levels on the USD. M.B.

* 07 Dec 09: 10:27(LDN) - FX NOW! GBP/USD, GBP/JPY Flows - GBP falling behind more than just USD

During mid-session in the eurozone, GBP has been offered. GBP has been under pressure, like the rest of the market vs USD, but it is also having trouble uncovering support vs most of the remainder of the FX market. There is little chance that scheduled events this week like the Chancellor's pre-budget report and the regular BoE monetary policy meeting will give GBP any support. Corporate flows related to the Cadbury story are still bubbling in the background, but lack real substance for now. While there are many days where GBP leads the market, this week may be one of those weeks where it leads the market to the downside. M.B.

* 07 Dec 09: 09:24(LDN) - FX NOW! USD/CAD, EUR/CAD Flows- CAD is not particularly weak, USD is stronger than the rest!

USD just keeps going. CAD is keeping pace with EUR, where prices on EUR/CAD seem to be range bound in the 1.5650 to 1.5750 range. But, CAD is unable to keep pace with the broad based mark up in USD. Last week's report of the jump in Canadian Nov employment by 79.1k more than offset Oct's decline of 43.2k, but more important, it highlighted the volatility of the employment data and underscored the reason the BoC does not focus on employment data in the same way the Fed does. Tue's BoC monetary policy meeting is due to end without telling the market anything new (Search BoC + M/T for a preview). According to 4Cast analysts, the bank is to reinforce their comments that official rates will be held at 0.25% into the end of Q2, 2010. Technically, USD/CAD resistance that is in line to be tested is up at 1.0697, while more refined technical levels on EUR/CAD include resistance at 1.5730, with support seen at 1.5572. M.B.

* 07 Dec 09: 09:25(SGA) - FX NOW! USD/JPY, EUR/JPY Flows - exporters not done yet

The USD may be bid everywhere else, but the exporters have not finished yet. That's going to keep USD/JPY sidelined and EUR/JPY under pressure and while we might get some more comment from MoF officials they are not going to intervene at current levels - although there is an argument that they should. PB

* 07 Dec 09: 09:17(LDN) - FX NOW! EUR/USD, USD/CHF Flows - 'General support' doesn't rule out downside spikes.

If the Asian sovereign was a buyer, then it was obviously only a 'taster' as the futures led selling of EUR/USD keeps the USD moving higher. Stops now triggered on USD/CHF on the break of 1.0220 has seen a quick 'squirt' to break 1.0240, and setting up a move next to the 1.0250, and then 1.0277 levels. On EUR/USD, we now look for the 1.4775 trendline area to provide general support, though this does not rule out a push to 1.47 first! C.F.

* 07 Dec 09: 08:54(LDN) - FX NOW! AUD/USD, EUR/AUD Flows - AUD buyers can patiently wait for end of USD feeding frenzy

USD's advance is not over yet. AUD, the darling of the FX market this year, has yet to uncover investors willing to stand in the way of the US employment fuelled USD advance. AUD is holding its own vs other currencies, but even there, while the USD is advancing, AUD buyers are sitting on the sidelines. The market is AUD heavy and with year-end approaching, there is likely to be a wave of AUD selling associated with booking profits and ensuring bonuses. To offset that potential sell-off, there is a good deal of cash in investor hands that will need to be put to work over year end, which means the decline in AUD has an element of offering a growing opportunity. For now the cash will sit on the sidelines and the advancing USD is dictating broad market price action without specific buyers or sellers being noted/credited with pushing prices around. AUD/USD support levels that could tempt include 0.9060 and then down at 0.8985. M.B.

* 07 Dec 09: 08:51(LDN) - FX NOW! EUR/USD, SPZ9 Flows - Now and in the future.

A good start to the week for model and futures names, who have made quite an aggressive push at downside stops on a number of the majors, as equity futures prices fell in tandem. Stops at 1.48 on EUR/USD didn't appear to have bothered the scorers much, but a quick glance at 1.4775 was enough to bring a buyer back into the marketplace. Not confirmed yet, but suspicions that an Asian sovereign name might be that buyer are widespread. C.F.

* 07 Dec 09: 08:47(SGA) - FX NOW! EUR/SEK, EUR/NOK Flows - SEK feels the heat as USD Index races higher

The better bid USD and with it the index are putting question marks again over the durability of a SEK recovery. Questions are again being asked of recently re-applied EUR/SEK shorts, and the stops will be building over 10.50. The NOK is not vulnerable to the index trades, but with near WTI toying with a break of $75 is not without its problems. PB

* 07 Dec 09: 08:30(LDN) - FX NOW! USD/CHF, EUR/CHF Flows - It's the dollar!

Swiss retail sales for October rose by 3.1%y/y versus the 2.1% fall of the previous month, but its unsurprisingly giving little support to the CHF, which is actually keeping a smile on the face of SNB members by losing ground versus the stronger USD this morning. Technical studies suggest that the next resistance levels on USD/CHF will be seen at 1.0200/05, followed by 1.00222. C.F.

* 07 Dec 09: 08:00(SGA) - FX NOW! EUR/GBP, GBP/USD Flows - GBP sellers again

GBP an early loser in Europe as models tip again to the Cable sell side, while GBP/JPY sellers have also been noted after a good weekend for them. We see GBP as fairly vulnerable into the pre-budget report and BoE meeting. PB

* 07 Dec 09: 07:11(SGA) - FX NOW! EUR/USD, GBP/USD Flows - Europe in no rush to press the accelerator

There is still little to get excited about as Europe carries on where Asia left off, that is by not doing very much. There's very little data to look forward to, and none of it will come close to rivalling Friday's payroll release. We do expect EUR/USD to head back over the figure, though note there has been no obvious sovereign interest on that side today so far. On Cable, while there has been some short covering among model traders we suspect there are enough potential pitfalls this week to keep appetites for GBP suppressed. PB

* 07 Dec 09: 06:48(SGA) - FX NOW! USD/JPY, EUR/JPY Flows - awaiting Europe; Fujii still wants a stronger USD

A very quiet Asian session awaits European input with FinMin Fujii hitting the wires by telling the World Bank president that he hopes the USD will become stronger, according to JiJi press. The post payroll bounce may have persuaded Fujii that verbal intervention is all that is needed, but we strongly suspect that USD/JPY is benefiting more from an accident of timing. PB

* 07 Dec 09: 03:49(SGA) - FX NOW! EUR/USD, GBP/USD Flows - both recovering, different speeds

Both EUR/USD and Cable are short of the modest session highs, certainly compared to where they were this time on Friday. We still consider that GBP has far more booby traps lined up for it this week than the EUR, and have a lot more confidence in a EUR recovery than seeing EUR/GBP trade again below .9000. PB

* 07 Dec 09: 03:37(SGA) - FX NOW! USD/JPY, EUR/JPY Flows - taking profits; Otsuka keeps the verbals up

USD/JPY and the crosses continue to drift lower after the exporters stepped in at the top and the lack of momentum is playing to late morning profit taking. Vice Financial Services Minister Otsuka is on the wires saying the government needs to address the matter of FX rates, but we suspect that we are some way clear of intervention levels. PB

* 07 Dec 09: 02:05(SGA) - FX NOW! AUD/USD, NZD/USD Flows - Massed ranks wait for next AUD bounce

Some encouraging data has helped underpin AUD/USD through it's latest test of support in the .9100/20 area and as everyone gets settled in for another run up to around .9300, though here again the main danger to another recovery is still that everyone appears to be the same way! NZD is keeping pace despite FinMin English again being reported warning that the way ahead will be bumpy and the recovery is still threatened, although some might suggest that 'gloomy' could be his middle name. PB

* 07 Dec 09: 01:50(SGA) - FX NOW! EUR/GBP, GBP/USD Flows - CEBR sees UK out of global top 10 by 2015

The UK's Independent newspaper highlights a report by the CEBR predicting that the UK economy will slide out of the global top ten by 2015and is already down to 7th from 4th since the turn of the century. It's not going to help sentiment towards GBP on the approach to the pre-budget report on Wednesday, that being quickly followed by the BoE MPC meeting and decision on Thursday, the central bankers not being the biggest fans of government policy just now. PB

* 07 Dec 09: 01:24(SGA) - FX NOW! EUR/USD, USD/JPY Flows - China still in no hurry to let the CNY appreciate

Having had visits from high powered delegations including US President Obama and a who's who of financial officials from the Eurozone in recent weeks, all hoping to get some progress towards a freeing up of the CNY, an essay in the International Business Daily from the research institute of the Chinese Ministry of Commerce doesn't hold out a lot of hope for an early move. "Forcing the CNY to appreciate would undoubtedly be unfavourable for the Chinese economy and likewise do no good for the sustained recovery of the world economy" just about sums it up! PBGMT

* 07 Dec 09: 01:08(SGA) - FX NOW! USD/JPY, EUR/JPY Flows - stimulus package due today; excitement confined

Japanese PM Hatayama says we can expect the decision on an extra stimulus today, probably helping nudge USD/JPY back over 90.00 but the pair look set to trade a relatively (especially given recent price action) range until we get any details. PB

* 07 Dec 09: 00:28(SGA) - FX NOW! EUR/USD, USD/CHF Flows - picking up the pieces again; SNB can relax (EUR/CHF)

Picking up the pieces from a late Friday EUR/USD sell off is far from a new task for traders in Asia on a Monday morning, though buyers are not making a great deal of headway despite the bounce in the N225 suggesting that risk appetite is very much switched to 'on'. The overall better bid USD scenario does have one benefit for the Swiss National Bank in that it has pushed EUR/CHF back over 1.5100, though the 1.5050/1.5150 trade still looks a standing order there. PB

* 06 Dec 09: 23:50(SYD) - FX NOW! USD/JPY, EUR/JPY Flows - Exporters not looking a gift horse in the mouth?

The fierce rally in USD/JPY in the aftermath of the US payrolls report seems bound to put some more daylight between the Nikkei and the 10,000 level at the reopen in 20 minutes. Whether this in turn suffices to insure fresh (risk appetite related) yen weakness remains to be seen. Price action ahead of the Nikkei re-open suggests otherwise (are we about to a see a pick up in foreign investor interest in Japanese equities?). We doubt though that exporters will/are being too shy in taking advantage of the present made to them by the US Bureau of Labour Statistics. News wise, the Nikkei reports that the government is to apply a three year moratorium on applying withholding tax on foreign investor holdings of Japanese corporate bonds. We don't have data to hand on foreign interest in corporate bonds to know how potentially significant this is, but strongly suspect the answer is 'not very'. RA

* 06 Dec 09: 22:35(SYD) - FX NOW! AUD/USD Flows - Rio sells JV stake to BP, did BP sell GBP/AUD?

Alongside news that BHP and RIO have finally signed an agreement related to its iron ore assets in the Pilbara region of WA (but which is going to be subject to some severe competition scrutiny, including from the EU) comes news that Rio has sold out its 50% stake in its Hydrogen Energy International JV to its partner, BP. The cash sum involved is undisclosed so we are not sure whether it is significant enough to make a dent in GBP/AUD though looking at the price chart one could be foreign for thinking that the answer might be 'yes'. RA

* 06 Dec 09: 21:58(SYD) - FX NOW! AUD/USD, EUR/AUD Flows - Softer start, but note LNG, Olivier job index news

While the Aussie was inevitably a victim of the rush back into dollars in the wake of Friday's US payrolls report, it closed in NY little changed against the euro on pre-NFP levels but has softened slightly thus far in APAC trade. Australia specific stories that should be capturing the imagination today includes confirmation of a A$90 deal between Japan and Chevron's Wheatstone LNG project in WA, with the AFR saying that long term export sales contracts for LNG signed so far this year now top A$500bn. Investment spending in the Wheatstone project alone is expected to be A$15bn (that's nearly 1.5% of current Australian GDP). We also had the Olivier job index out ahead of this morning's ANZ jobs ads and Thursday's November employment report and which jumped 5.88% (+7.84% over the past three months). RA

* 06 Dec 09: 21:08(SYD) - FX NOW! NZD, NZD/JPY Flows - Kiwi softens vs dollar as Fed exit in focus; but firms vs yen

Much stronger than expected US payrolls boosted equities but most gains were not sustained as markets worried about the impact on interest rates. This also saw the 'dollar smile' back in force, with the USD bid across the board as the Fed exit policies and the free money environment came into question, with NZD/USD dropping a full big figure to 0.7150 - though the largest damage was in the yen, which may become the favoured carry trade as the BoJ enters (quasi) QE even as expectations of Fed QEP begin to fade. This saw NZD/JPY rise while NZD/USD dropped, the former trading almost as high as 65.00 (now 64.55) after being capped under 64.00 throughout Friday's Asia session. The week ahead sees GDP indicators on Monday and Tuesday and Q3 Tot on Thursday, with the highlight the RBNZ on Thursday, seen maintaining its on hold rhetoric from October. MK

* 04 Dec 09: 21:47(NYC) - FX NOW! Percentage Change - Recap - (FLOWS, USD, AUD, CAD, CHF, EUR, GBP, JPY, NZD)

CAD's encouraging domestic employment report neutralised USD's strength following the much better than expected US employment report. The rest of the list wasn't as lucky as the mkt upped odds of Fed tightening, with JPY at the bottom of the pack after already being vulnerable all week as the gov't attempts to jawbone the JPY lower. SI

* 04 Dec 09: 21:23(NYC) - FX NOW! EUR/USD, USD/JPY Flows - Recap

* 04 Dec 09: 20:13(NYC) - FX NOW! USD/CAD, AUD/CAD Flows - CAD gives back gains vs USD

USD/CAD has taken back all of its losses folllowing its impressive domestic employment report, with today going without question to the USD where its employment report wow'ed a broader following. Weak equities and commodities, in reaction to the firmer USD, doesn't help CAD. Still, a look as AUD/CAD falling to settle near 0.9650 from 0.9750 shows that CAD is still underpinned by the favourable data on its crosses, although also giving back some there as well. SI