FX ‘picking’, who is the one to watch?

For the past couple of months, volatility has declined in all asset classes and traders (and algos) have switched to a range trading attitude. If we have a quick overview of the market, we can see that the S&P500 is still fighting against the 2,100 level, the VIX is gradually approaching its crucial 12 level, core bond yields are trading a bit higher (Bund is up 10bps, trading at 16bps) and EURUSD is trading in the middle of its 1.05 – 1.10 range.

However, in a more detailed analysis, we heard some noise lately that trigger a bit of movements in the FX market.

1. SNB talks, first round…

The first one was the CHF move. A few days ago, I posted on my twitter account a chart (see tweet @LFXYvan on April 19) that I thought could be problematic for the Swiss economy (i.e. SNB). At that time, EURCHF was gradually approaching the 1.0250 level, down from 1.08 a couple of months ago (5% appreciation).

Then, a couple of days later, SNB comments sent he Swissy tumbling, with EURCHF and USDCHF up 150 and 200 pips respectively. In its comments, the SNB announced that it reduced the group of sight deposit account holders (bank account through which transfers in the form of cashless payments and cash deposits and withdrawals can be effected) that are exempt from negatives rates, therefore transferring the ‘negative carry’ to its clients and in hope that Sight Deposits are reduced.

Looking at the charts, it seems that it wasn’t enough to force investors to run away from the Swiss Franc and I think we are on the path to retest new lows on EURCHF and USDCHF. With Swissy becoming once again the safe-haven asset since the end of the floor in mid-January, SNB Jordan will have to do more to prevent the exchange rate from appreciating ‘too much’.

2. Cable: will the ‘hawkish’ minutes floor the currency losses ahead of the UK general election?

Yesterday’s BoE minutes trigger a bit of appetite for the pound and sent Cable to a 1-month high of 1.5070. As you can see it on the chart below, the currency is now flirting with its 50-day moving average, an important resistance that could halt the pair’s late bullish trend.

GBP

(source: FXCM)

To be honest, I didn’t understand the sort of positive GBP reaction based on the central bank’s report. If we look at the big lines, the Committee voted unanimously to keep the Official Bank Rate steady at 0.5% (as expected), and in the 23rd section, it says that policymakers were expecting the 12-month CPI rate to fall into the negative territory at ‘some point in the coming months’. It sounds more neutral (if not so, slightly dovish) than hawkish to me.

With the (uncertain) general election coming ahead, I’d rather keep a short position on Cable, especially at current levels. Conservatives should keep a tight stop at 1.5160 for a first target at 1.4750, however I would widen the room there and suggest a stop at 1.5250 (RR of 1.3).

3. Follow the CAD move

Another mover was the CAD, alongside rising prices for oil, which surged by 6 figures to hit a three-month low of 1.2090 on Friday before coming back to 1.22 (against the greenback). With the Western Canadian Select June futures trading at a 11.50 spread against the WTI and higher than expected inflation rate (1.2% YoY in March vs. 1% consensus), the probability of another 25bp cut from the BoC in order to counter a lower growth economic forecast was revised (lower) by the market. It could potentially cap USDCAD on the upside, first resistance is seen at 1.2280, then the second stands at 1.2400. I would be comfortable with a little short position on USDCAD, targeting 1.2180 at first (stop above 1.2360).

CAD

(Source: FXCM)

4. Trade the Yen from a ‘Technicals’ perspective

I will finish this article with the Yen and Japan latest news. We saw earlier this week that Japan Trade Balance saw a tiny JPY3.3bn surplus (vs 409bn deficit expected) after 48 months of trade deficits. Even though it should be considered as good news (for a country which is expected to see a current account deficit for the first time in 34 years), the reason of that tiny surplus was driven by a collapse in imports, that plunged by 14.5% YoY (the most since November 2009). The Good news for Abe (and Kuroda) is that the stock market closed above the 20,000 level this week for the first time in 15 years, making a least one of the arrows – monetary stimulus – work.
As the Yen still remains one of my favorite currencies to watch on a daily basis, I had a lot of conversations with some friends of mine, and we (almost) all agree each time that the BoJ will lose completely control of its currency in the medium/long term. If you look at Japan core figures (debt-to-GDP ratio of 240% according to the IMF, a declining population with more than 25% Japanese aged 65 or over – out of 127ml, massive stimulus as a share of the country’s GDP…), the problem is easily spotted and the biggest ‘opportunity’ will be in the currency market in the medium term.

However, I am more skeptical (i.e. less comfortable) with the short-term trading. Now that the currency has passed its safe-haven status to the Swissy (see tweet @LFXYvan on March 24), I am usually looking for some buy-on-dips opportunities. Being short USDJPY sometimes scares me in the way that I don’t understand how the market interpret good news or bad news in Japan (therefore I always keep a tight stop for short positions).

One thing I am still comfortable in saying that, in an intra-day basis, USDJPY and the equity market (SP500) are still ‘breathing’ together, therefore one of them will ‘carry’ the other.

The wide range on the pair would be 115.50 – 122, but based on today’s volatility I am looking at the 118.30 – 120.80 window. Any breakout of the window could lead to another ‘readjustment’; something I am going to watch closely. If the currency keeps approaching the high of the range, it could be worth going short at 120.60 with a stop above 121.00 and a target at 119.50.

JPY

(Source: FXCM)

Post FOMC Analysis, Dollar Flash Crashes…

This week has been full of macro events (four central banks meetings – BoJ, Norges Bank, SNB and the Fed), however all eyes were on the FOMC statement that came up yesterday. Dovish stance from Yellen in addition to 2015 forecasts revised on the downside created Dollar ‘Flash Crashes’, with the FX market completely out of control. The US Dollar index was trading around 100 yesterday morning, then went down from 99.50 to 98.00 after the FOMC, and eventually ‘flash-crashed’ after the US close. EURUSD (and Cable) soared by 400 pips (and 500 pips) to 1.1040 (and 1.5160 respectively), USDCHF down 4 figures as well down to 0.9620. The yen was less reactive (which clearly shows the declining Yen Pavlovian response the risk-off environment, USDJPY went down ‘only’ 200 pips to 119.30.

To review the FOMC statement briefly, the Committee revised down all 2015 forecasts since the previous Summary of Economic Projections (SEP) released on December 17 last year. The median dot plot for year end 2015 decreased from 1.125% to 0.625% (down by 50 pips). In addition, looking at the Fed’s dot plot for the year 2016 and 2017, we can see that the median dot for 2016 fell to 1.875% in March (vs. 2.5%) and decline to 3.125% from 3.625% for 2017.

FOMC DOT plot

 (Source: Fed’s website)

Furthermore, if we look at the table below which shows the advance release of the SEP, we can see that the central tendency for GDP this year was decreased to 2.3%-2.7% (from 2.3% – 2.7%), PCE inflation (the inflation measure watched by the Fed as the PCE index covers a wide range of household spending) went down to 0.6% – 0.8%, compared to 1.0% – 1.6% three months ago.

FED Forecasts

(Source: Federal Reserve’s website)

While the Dollar has been recovering all day (especially during Asia, USD index now trades back at 99.40, with EURUSD back down to 1.0660, USDCHF up to 0.9910, Cable down to 1.4740 and USDJPY at 120.80), the market is still a bit ‘stress’ with all core bond yields trading to lower levels (See appendix, Bund at 19bps, US 10Y at 1.95% or UK Gilt at 1.52%) and peripheral EZ bonds trading higher than yesterday’s levels.

As a result, the equity market (S&P500) is back on track after a quick 70-point bear consolidation as I was looking for (see tweet @LFXYvan on Feb 26). If we look at the chart below, we can see that the 100 SMA has acted as a sort of support where the market found some potential buyers-on-dips. Over the past few months, it looks like if the 100 SMA didn’t hold, the 200 SMA was doing the rest of the job (except in mid-October).

SP500

(Source: FXCM)

Even though the equity has lost a bit of ‘power’ since the Fed stepped out of the bond market at the end of October last year (the bear consolidation are becoming more and more recurrent), I still believe there is some potential room on the upside based on yesterday’s comments and readjustments.

I am curious to know how the US policymakers will play the rate hike within the next few months (will there be one in June?), as even if the job market has continued to show some strong figures with a NFP report at 295K in February and an unemployment rate at 5.5% (close to full employment according to economists), there has been a lots a disappointing macro figures. See list below with all the misses in just the past month…

Misses US

 (Source: ZeroHedge)

Earlier today, the SNB left its deposit rate negative at -0.75% and jawboned a bit about the recent CHF appreciation. EURCHF is trading at 1.0550, down 2.5 figures in the past month and potentially ‘hurting’ the Swiss economy (Swiss is also part of the ‘Currency War’ party). Norway unexpectedly left its interest rates unchanged and signalled in its report that another cut was planned to protect the Norwegian economy from the plunge in oil prices. The NOK rocketed against the greenback earlier today, down from 8.37 to 8.07 on this hawkish surprise. As a reminder, Oil (and gas) generate more than 20% of Norway’s output, and the country may be in difficulty if this low-oil-price era persists. Norway may have to ‘tap’ into their sovereign wealth funds – Government Pension Fund Global – (approx. $850bn) in order to support their annual budgets this year. However, the maximum that the government could spend from oil revenue is 4% of the fund (by law).

Otherwise, no surprise from Japan and the BoJ stood firm on Tuesday, leaving its monetary policy unchanged (80tr Yen of asset purchases annually, mostly JGBs), even though policymakers acknowledged that prices might start falling in the coming months. Consumer prices in Japan rose 2.4% YoY in January, the same as the previous two months and down from 3.7% in April last year.

 Appendix: Bonds yields…

BBG

 (Source: Bloomberg)

January 2015: A Rough Start

The past month has been quite eventful in the financial market and I am sure that some of the decisions (if not all) surprised many of us. After the SNB announce on January 15th, the ECB took over and unveiled a €60bn monthly QE (not open-ended) through September 2016; so 19 months at €60bn equals €1.14tr. The ECB, which has already been buying private assets such as covered bonds (a safe form of debt issued by banks) and ABS, will add an additional €50bn worth of public debt (bonds of national government and European institutions) to its current program starting in March this year. The purchases of these securities (in the secondary market) will be based on the Eurosystem NCB’s shares in the ECB’s capital.
In addition, President Draghi also added that the ECB will remove the 10bp spread on the TLTROs, and the interest rate applied will be equal to the rate on the Eurosystem’s MRO (5bp).

We saw on Friday that EZ preliminary inflation fell by 0.6% in January after a -0.2% print in December, the largest decline since July 2009 when prices also fell 0.6% following GFC.

The ECB decision(s) sent the Euro to newest lows last week, down to 1.1120 (11-year lows) against the greenback and below the 0.75 level (0.7440) against the pound. But more importantly, it sent a bigger amount of government debt in the negative territory (yields). According to JP Morgan, there is currently (approximately) €1.5tr of Euro area government bond with longer than 1-year maturity trading at negative yields over time, and a ‘mind-blowing’ €3.6tr of global government bond debt (nearly a fifth of the total) with negative yields as the chat below shows us. For instance, the entire 10-year Swiss curve is  now negative.

Global NIRP(Source: JPMorgan)

Another interesting topic is of course the 3 consecutive rate cuts (in 10 days) by the Danish Central Bank, that lowered it deposit rate to a record low of -0.5% to defend its peg and keep the Danish kroner (DKK) close to 7.46 per Euro (ERM II since 1999). EURDKK went down below 7.43; we will see this week how much policymakers spent in January in order to counter a DKK appreciation (some reports estimated that the central bank had to sell more than DKK 100bn). As a consequence (of the NIRP policy), a local bank – Nordea Kredit – is now offering a mortgage with a negative interest rate.
I believe the Danish krone is a currency to watch (in addition to the CHF) this month if the situation in Greece deteriorates.

A Weak Swiss Franc…
Since the SNB surprise, the Swiss has remained weak against the major currencies, with USDCHF up 7 figures  (trading currently at 0.93) and EURCHF up from parity to 1.0550. Analysts slashed their forecast for this year and are now predicting a recession (-0.5% according to the KOF Swiss Economic Institute). I like the chart below which shows the 12-month Probability of the top 10 countries to fall into recession in the coming months according to Bloomberg economist surveys.

Probarecession(Source: Bloomberg)

Japan and JPY still under threat over the long-run
In Japan, the 10-year JGB yield rose by 9bp in the last 10 days and is now trading at 29bps. USDJPY tumbled below 117 overnight on Grexit comments and Chinese manufacturing PMI contraction in January (49.8 vs. 50.2 expected), breaking its 117.25 support and extending its trading range to 116 – 118.75. ‘Buyers on dips’ reversed the trend and the pair is now trading at 117.60.
If we look at the long-run perspective in Japan, late macro indicators showed us that Abe’s government will have to do more. Real wages are still declining and fell the most in almost 5 years and the economy has now entered in a triple-dip recession (0.5% contraction QoQ in Q3). On the top of that, inflation has been weakening for the past 8 months as energy prices (mainly weak crude oil) weight on Japanese core inflation rate.
In addition, we saw that Japan plans a record budget deficit for next fiscal year (starting April 1st 2015) to support the economy. FinMin Taro Aso reported that government minister and the ruling coalition parties approved a 96.34tr Yen budget proposal for FY2015/2016. And I believe that we haven’t reached the peak yet, as Japan’s aging population (i.e. increasing social security spending) will ‘force’ the government to print larger and larger deficits. The IMF predicts that the country’s debt-to-GDP ratio will increase to 245% in 2015. It clearly shows that the USDJPY trend is not over yet, and there is further JPY weakness (and USD strength) to come.

On the other side of the Pacific Ocean, the US economy cooled in the fourth quarter. After the 5-percent Q3 print, GDP expanded at a 2.6% annual pace in the fourth quarter (first estimate). Net exports was the largest detractor from Q4 GDP (-1.02%) as imports grew faster than exports. King Dollar continues to benefit from the global weakness with the USD index trading slightly below 95. The equity market still handles the Fed’s withdrawal from the Bond Market with the S&P500 trading around 2,000 (looks like it is out of energy though), while US Treasury yields are compressing to new lows. The 10-year and the 30-year yields are trading at 1.67% and 2.25% respectively (which is quite concerning), and it seems the trend is not over yet. In regards to the inflation rate (that plummeted to 0.8% in December), the Fed delivered a hawkish statement last Wednesday (‘strong jobs gains’, ‘solid pace’ for economy), however dropping the entire ‘considerable time’ sentence and adding ‘inflation is anticipating to decline further in the near term’. The implied rate of the December 2015 Fed Funds futures contract is trading 30bps lower at 41 bps, while the December 2016 implied rate decreased by 60bps to 1.05bps in the past 6 weeks.

An important topic to follow this month will be developments in Greece which are moving very fast since the election on Sunday (January 25) and Syriza’s victory. ECB council Member Erkki Liikanen said over the week end that Greece needs to negotiate a deal before February 28th (when the Greek support program EFSF expires after the 2-month extension approved in December).

Japan and the Yen, where do we stand now?

On October 31st, Governor Kuroda announced that the BoJ will raise (by a 5-4 majority vote) its bond-buying program. We saw the reaction since then; USDJPY soared from 112+ then to 120 (with a high of 121.86 on December 7). Some analysts think that the move was/is exaggerated, but if you put the figures on table, it looks reasonable to me. By announcing that the Bank of Japan will buy between 8 and 12 trillion JPY of JGBs each month, it means that it will purchase the total 10tr Yen of new bonds issued by the Ministry of Finance; in other words, full monetization. As a reminder, the central bank is the largest single holder of JGBs (with 20%+ of the shares), and could end up owing half of the JP bond market within the next 3 to 4 years.

With the country now in a triple-dip recession (GDP contracted by 1.9% in the third quarter) and the inflation rate slowing down for the fourth consecutive month in November (core CPI, which excludes volatile fresh food but include oil products, rose 2.7% in November, down from 2.9% in September and 3% in October), I see just more ‘power’ coming from Japanese policymakers. Elected in December 2012 as Japan PM (the seventh one in the last decade), I am convinced that Abe (and Kuroda/Aso) cannot fail this time and will (and must) continue to go ‘all-in- on his plan. That will mean aggressive easing, therefore constant depreciation of the currency JPY in the MT/LT. Remember the graph I like to watch: Central Bank’s total assets as a percent of the country’s GDP (see article It is all about CBs).

In fact, as many analysts have stated, the hit from the sales tax increase back in April turned out to be bigger than expected. The second one, which was set for October 2015 and would have seen a 2-percent rise to 10 percent, has already been postponed for early 2017 according to Abe’s announcement last month. When will the country work on its budget balance? As a reminder, Japan has been showing a 8%+ budget deficit over the past six years, which rose the level of its debt to a ‘unsustainable’ 230% as a share of GDP.

Another major problem that the third-largest economy will have to deal with in the long term is its population. The chart below (Source: the Economist) shows the evolution of Japan’s population from 1950 to 2055 (forecast). It is aging, and that is terrible news for all the pension or mutual funds as many people from the Japanese workforce will switch from being net savers to net spenders.

20141213_gdc700(Source: the Economist)

With a population of 127 million in 2013, the number of people is expected to fall below 100 million by the middle of this century due to the low birth of rate (total fertility rate of 1.4 in 2013).

In my article last month on the Japanese Yen History, I added a quick ‘technical’ chart and stated that we may see some take profit a 120 and that the pair should stabilize at around that level based on the downtrend line. And each time I have some discussion about the Yen, I always say there are two ways to play it:
– either keep it short (against USD or GBP) for those who are looking for a medium or long term view;
– or buy the pair (USDJPY) on dips if you try to catch nice trends. Don’t try to short it, unless you are really confident and have been doing it for a while. All traders I know are looking for buying opportunities on the pair.

Speaking of that, it looks to me that the core portfolio I have been carrying over the past few months now – Short EUR (1/2) , JPY (1/2) vs. long USD (2/3) and GBP (1/3) – has been quite profitable, and I still believe there is more room. At least, it makes sense on the idea I had about ‘monetary policy divergence’, with the US and UK considering raising rates (no printing/QE) while EZ and Japan aggressively printing with NIRP/ZIRP monetary policies. I will try to write a piece shortly on the Euro while I am working on my 2015 outlook.

Japan, the Yen and the Aussie

Three days ago, we saw that Japanese GDP contraction in the second quarter was revised to an annualized 7.1% QoQ (vs. 6.8% previously), shrinking at its fastest pace in more than five years, due to a deeper decline in consumer spending and a bigger fall in capital expenditure (money used to purchase, upgrade, improve or extend the life of LT assets). In addition, the Ministry of Finance reported that the country showed market a current account surplus of 416.7bn Yen in July (slightly less that 444bn expected and 30% down compare to July last year) as the income from foreign investments (up 2.8% to 1.853tr Yen) outweighed the trade deficit (964bn deficit Yen in July, August one to be released on Sep 17th).

While the unemployment has fallen quite sharply since Abe’s election (4.5% in Dec 2012) to 3.8% in August, real wages have constantly been declining over the past few years (they fell by 3.8% YoY in May, the sharpest decline in years). One explanation of the fall in real wages we read lately (The Economist, Feeling the pinch) was that Japan’s labour market is divided between two sorts of employees, regular ones who are usually highly paid and protected [against being fired] and the non-regular [low-paid] ones. If you have a look at the figures, non-regular workers accounted for 36.8% of all jobs in June, a high number compare to historical standards and therefore confirming that most jobs created since Abe took office were non-regular workers.

This definitely explains weakening figures in household spending. We saw that July Household Spending fell 5.9% YoY, twice what economists expected, printing in the negative territory for the fourth time in a row. As a reminder, Japan is a consumer-driven economy (61% as a percentage of GDP in 2012 according to the World Bank); therefore the BoJ will watch closely those figures in order to avoid another dismal quarter.

However, according to the Bank of Japan Deputy Governor Kikuo Iwata, the economy is ‘gradually recovering’ and it is all about the sales tax increase effect. Moreover, with the BoJ now monetizing debt at negative rates (T-Bill 12/08/2014 has been trading in the negative territory for the past few days as you can see it in the chart below), Iwata added that he didn’t see ‘any difficulties in money market operations’.

sg2014091052862(1)

(Source: Bloomberg)

Quick review on USD/JPY

The recent surge in the stock market (Nikkei up 1,000 pts over the past month, closing at 15,788.78 earlier this morning) mainly coming from ‘more QE coming soon’ speculation combined with demand for international securities (Bonds, Stock) from Japanese funds have both played in favour of the depreciation of the Yen lately since it broke out of its 101 – 103 range on August 20. In addition, with US yields starting to ‘surge’ (10-year yield up 20bps over the past two weeks and now trading at 2.53%), USDJPY was sent up to 106.85 during today’s trading session, breaking its resistance of 105.44 (Jan 2nd high) and trading to levels seen back in September 2008. If the depreciation continues, the next MT target on the pair stands at 110.

Aussie updates…

AUDJPY (black bar) eased a bit from last week’s [16-month] high of 98.65, down more than a 100 pips (carry trade unwinds combined with AUD selling from corporate and macro names), taking the equity market (red line) with ‘him’ (S&P closed below the 2,000 level at 1,988).

AUDJPY-10-Sep(1)

(Source: Reuters)

The AU benchmark (S&P/ASX) index came back to a 3-1/2 week low after Westpac’s index of consumer sentiment reported a 4.6% decline in September, bringing the Aussie below the 0.9200 support against the greenback.

AUDUSD is also trading below its 200-day MA (0.9180) for the first time in five months. Market has turned bearish on the pair as the failure to hold the 0.9180 – 0.9200 support area has opened up further retracements levels: 0.9075 (61.8% Fibo retracement of 0.8658 – 0.9756), followed by 0.9030. Australia will report employment figures overnight (2.30 am), which traders expect to be disappointing, therefore sending the Aussie to lower levels.

AUD-10-Sep(1)

(Source: Reuters)

Japan Exports: Back Before Abe…

Last night, data continue to disappoint in Japan as we saw that the June exports drop 2.0% YoY, far below the 0.7% rise expected and down from +18.5% back in October last year. We picked the chart below from Zero Hedge, which shows the evolution of Japanese Exports (black line) since Abenomics (December 2012) against market’s expectations (orange line). As you can see it, we are back to levels we were before Abe took office in the last quarter of 2012, raising doubts about the Abe-Kuroda strategy. On the other hand, imports increased 8.4% from the same year earlier.

image001

(Source: Zero Hedge)

The Finance Ministry reported that the Trade Balance deficit widened to 822bn Yen in June (vs 643bn Yen expected) and reached the two-year mark last month as exports failed to keep pace with surging imports. In the first half of the year, Japan’s trade deficit soared to a record 7.6tr Yen and is expecting to remain in the red area for the long term, which is becoming a serious issue for Japan PM Abe.

The Yen remained steady against the greenback on the news and has been trading within a tight 30-pip range (101.30 – 101.60) for the past few days. We believe that USDJPY looks vulnerable to the downside, and the first strong support stands at 101.00 (there are buyers around 101.00/10 and some at 101.25). As we mentioned it previously, a quiet equity market in Japan (Nikkei is range trading between 15,000 and 15,500) in addition to low US yields (10-year is back below the 2.5% since last week and now trading at 2.48%) make it difficult for the Yen to depreciate against the US Dollar.

JPY-24

(Source: Reuters)

Important figures to watch tonight are Japan June inflation data. The recent spike we saw after the sales tax increase (from 5 to 8 percent on April 1st) eased market’s expectations of further easing in the coming months, therefore capping USDJPY on the topside. The May nationwide core CPI rose 3.4% in May from a year earlier, the fastest since 1982, and is expected to ease down to 3.3% in June.
Even if we feel that USDJPY will remain under pressure in the coming weeks, we would position ourself on EURJPY at the moment after the spike we saw on the Euro. Short a current levels (137.00) with a first medium term target at 134.50.

Quick market update…

Geopolitical tensions in Iraq, with militants taking control of a strategic Shi’ite town – Tal Afar – located in the North of the country, continue to drive US yields lower. The US-year yield is down 7bps from Friday’s high of 2.644%, pushing USDJPY below the 102.00 level. The next resistance on the pair stands at 101.70, followed by 101.55 (last week’s low). Last week, Bank of Japan decided to keep its monetary policy steady and seemed quite confident that the economy will meet its 2–percent inflation target without additional stimulus. Vols on USDJPY are now back to historical levels (for instance 1W ATM is trading at 5.47%), and the pair seems now stuck in the 100.75 – 103.00 range as we reported last time in our Update on Japan.
The Nikkei index dropped below the 15,000 (closing at 14,933) as geopolitical tensions kept investors on edge, a red session that continues now in Europe with the DAX down 1.6% since last week all-time-high of 10,033.74.

The British pound hit a high of 1.7010 against the greenback this morning before it started to be sold. A support zone is seen between 1.6900 and 1.6920 where we could potentially find new ‘buyers on dips’. In the UK, there are the Financial Policy Committee at the Bank of England and inflation figures tomorrow, BoE minutes on Wednesday and Retail sales on Thursday. On the US side, the Fed meets this week and there is little doubt on a update on its monetary policy; it will continue its Taper ‘auto-pilot’ strategy by cutting purchases by another $10bn bringing down the APP to $35bn.

The Euro remains week against the major crosses, trading below 138.00 against the Yen, at 1.2175 against the Swiss Franc and at 0.7980 against Sterling. We wouldn’t play the single currency for the moment especially after the sharp fluctuations we saw in the last couple of weeks; perhaps we will try to be long EURGBP (intraday position) based on a technical view (RSI is showing an oversold signal at 21) with a ST target at 0.7990.