Today is Sun, June 25, 2017 7:28:31 GMT
RSS Follow Us Follow us on Twitter Friend us on Facebook
Currencies AUD Compass Directions Morning Report Friday, 25 November 2011

The end may be near for the European experiment as the headlines become more sensationalist and investors begin to act in a self-fulfilling manner to unravel to the Euro. A Bloomberg headline read “Germany Buys Itself First Class Ticket on Titanic” in a story about the failure of Germany to attract bids for all of its bonds in its latest auction. As long as Germany continues to oppose the idea of com-mon Euro-bonds, the chances of the Eurozone remaining intact will fall. Germany will take a hit to its AAA rating is it decides to ulti-mately share the debt burden with the rest of Europe. Otherwise, Germany is indeed captaining a sinking ship. The EUR opens the Asian session at 1.3340.

The bad news surrounding debt in Europe, the US and China over the last few day now spreads to Japan as S&P indicated that it was preparing to downgrade the nation’s sovereign debt rating. S&P cited the lack of progress by the Noda government in addressing public debt. S&P’s director of sovereign ratings was very succinct when he said “Japan’s finances are getting worse…every second.” Japanese debt levels will breach 1 quadrillion yen ($13 trillion) next year as the nation pays for reconstruction efforts after this year’s devastating natural disasters. USDJPY is trading above 77.00 while the Australian failed to hold onto gains above 0.9750 as it struggles amid the global turmoil.

Equities were subdued over night as the US was closed for the Thanksgiving holiday. General lack of investor interest and fatigue over debt woes across the globe saw low liquidity dominate markets. European stocks fell after Chancellor Merkel again ruled out the idea of a Euro-bond and discounted calls for greater powers for the ECB to fight the debt crisis. In Europe, the DAX closed 0.54% lower to 5,428 while the FTSE lost 0.24% at 5,127. Asian markets will most likely be quiet ahead of the weekend.

Major commodity exchanges were closed for the US Thanksgiving holiday. WTI crude oil rose 0.89% to $97.03 as tensions in the Middle East and the Iranian situation held up prices. Precious metals treaded water largely unchanged with Gold at $1,698 and silver $31.92. Soft commodity markets were shut while copper was also flat for the day.

EUR/USD rallied during the European morning as the DAX bounced and the Bond markets weren’t getting the moves seen during the previous days. More talk of ECB buying Bonds with pockets that wont empty supported the pair into the US morning. Position squaring from the bears also had an effect as taking profits is much easier than cutting losses. Talk of option expiries in NY at 1.3400 kept the price bid during the US morning but once the market thinned out the price moved quickly lower as Germany’s Merkel again confirmed her parties view on no Euro Bonds! In the end the pair fell to make another new low at 1.3315 and as we close the day the price has seen a little bottom picking with the price returning to 1.3346 to close the day. I really wan to stay with the short bias in the shorter term but the smarter play would be to square up as liquidity will be thin and past US session holidays have lead to large bounces in the Euro. Square up and take the rest of the week off sitting on nice profits!

GBP/USD was trapped in a choppy range during the London session as the market was effected by the mixed data with Business Investment dropping sharply. Adding to the weaker tone was the BoE Broadbent who said this was the most serious time in the last 100 years for the British economy and he sees a recession in the near future. The Cable broke below 1.5500 during the US session as earlier attempts found solid option related buying but in the end we see the price closing below 1.5500 at 1.5493. As for the next couple of sessions with the US Thanks Giving holiday more than likely going to have a late effect on liquidity with the flow already being reduced likely movements are going to be over extended and when the US had Veterans Day back on the 11th the Euro and Sterling staged large bounces, so we are changing our short term bias to neutral as taking a new position around here is to high risk for us. We will be looking for bounces to possibly enter a new intraday short if 1.5620ish is seen.

USD/JPY continues to trade within the new range as the markets reaction to the Thanks Giving holiday was to leave the USDJPY alone and no real attempts to take it either below the 77.00 support of the 77.20 offers. And with this in mind today will most likely be contained as well unless the Tokyo CPI and National CPI numbers are away from the markets forecast targets – 0.3% and 0.1%. BoJ Gov. Shirakawa is speaking after the data releases and of interest will be his view on the European crisis and the effects it is likely to have on the Japanese economy and the likely direction the BoJ will take as the USDJPY continues to fall and looks more than likely to head back towards 75.50. We saw the major banks with RBC London calling the USDJPY to below 70.00 during the beginning of 2012. This is nothing we have not been reporting now for the last 3 or 4 months but I have to say its nice for the big banks to jump on the bandwagon as they are the ones with the prop desks that drive the positions.

AUD/USD followed the rally of the Euro during the European morning as the better risk sentiment or more likely lack of new sellers as the market squares ahead of the US Thanks Giving holiday long weekend. Talk that option expiries at 0.9750 and 0.9800 contained the pair until the rolled off at the NY option cut off also did the rounds and this looks more than correct as selling after that and the London 4pm fix has taken the pair back down to close at 0.9727 which is just above the London opening level. The Australian Reserve Govenor Stevens spoke last night and his view is the European crisis has a long way to go with the effects being seen across the globe but with minimal effect on the Australian Economy.  Could this be because the AUD would tumble as China slows down and this could possibly boost commodity exports or just the profit of what is sold. Anyway, it looks more than likely the AUD is headed lower over the next couple of months as even the leaders are talking lower but remember
when they start talking about it in th taxi its time to turn long!

 

DISCLOSURE AND DISCLAIMER
Compass Global Markets Pty Ltd (“Compass Global Markets”) ACN 144 657 885, Authorised Representative No. 377377, is a Corporate Authorised Representative of Calibre Investments Pty Ltd (Australian Financial Services License No. 337927). Please refer to the Financial Services Guide which is available through our website www.compassmarkets.com for more information regarding the financial services that we offer.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
This report is provided for Australian residents only and is not intended for use by residents of any other country.
GENERAL ADVICE WARNING: The advice provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should, before acting on the advice, consider the appropriateness of the advice having regard to these matters and, if appropriate, seek independent financial, legal and taxation advice before making any financial investment decision.
This report has been prepared for the general use of Compass Global Markets clients and must not be copied, either in whole or in part, or distributed to any other person. This report and its contents are not intended to be construed as a solicitation to buy or sell any security, product or asset, or to engage in or refrain from en-gaging in any transaction.
Compass Global Markets does not guarantee the performance of any investment discussed or recommended in this report. This report and the information used within may include estimates and projections which constitute a forward looking statement that express an expectation or belief as to future events, results or returns. No guarantee of future events, results or returns is given or implied by Compass Global Markets. Such statements are made in good faith and based on reasonable assumptions at the time of publication. However, such statements are also subject to risks, uncertainties and other factors which could cause actual results to differ substantially from the estimates and projections contained in this report or otherwise provided by Compass Global Markets.
Any information referencing past performance is not indicative of future performance. All information in this report has been obtained from sources believed to be accu-rate. Compass Global Markets does not give any representation or warranty as to reliability, accuracy or completeness of information contained in this report and therefore all responsibility is expressly disclaimed, whether due to negligence or otherwise. The information presented and opinions expressed in this report are given as of the date hereof and are subject to change without notice. We hereby disclaim any obligation to inform you of any changes after the date hereof in any matter set forth in this report.
Global Compass Markets, its affiliate and their employees may hold positions in the financial products, or securities or derivatives of, in the companies referred to in this report from time to time.
Analyst Certification: The views or opinions expressed in this report accurately reflect the personal views of the analyst(s) and no part of the remuneration of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this report. Any views or opinions expressed are the author’s own and may not reflect the views or opinions of Compass Global Markets unless specified otherwise.

Recent posts by forexnews