FX Focus : The Polar Vortex To The Rescue
After the FOMC, the BoJ and ECB, there is little more to look forward to as the stimulus and taper take effect simultaneously.
Europe + Japan vs US has meant sell EUR and sell JPY and buy USD.
Waiting from one FOMC to the next to ratify those positions.
Thus, the Polar vortex is Good.
“Forecasters say the polar vortex will engulf much of Canada and the continental United States in the days ahead, bring the first true chill of winter with it.
Weather experts say Typhoon Nuri is the main culprit behind the upcoming chill, as the tropical storm’s presence over Alaska is forcing a cyclone of cold Arctic air to shift south in a “polar vortex” effect. ” http://www.ctvnews.ca/canada/polar-vortex-returns-with-arctic-blast-for-parts-of-canada-1.2094210#ixzz3IeWvILNO
Any large scale weather disruptions are Good.
Because it takes away the trouble of worrying about the next unemployment or non farm payroll number – Blame it on the Vortex !
Valuations need not change and the big picture can remain rosy because any aberrations in retail sales, employment, jobless claims, manufacturing and such can all be blamed on the weather, Bless those souls with no homes and heating.
This is a good week for come backs and we are seeing strong starts in EM currencies led by the Korean won, Norwegian krone and NZ dollar as the APEC meeting in China kicks off which gives rise to natural optimism in the markets.
Thus I believe the DXY index will not go anywhere this week after breaking a 4 year high last week.
This means the EUR and the JPY will see some respite as we have all the little central banks coming up this week.
12 Nov Sri Lanka
12 Nov Ghana
13 Nov South Korea
13 Nov Indonesia
13 Nov Serbia
14 Nov Peru
Janet Yellen will talk on 14 Nov (145 am SG time) at the Fed/ECB event but she has already hinted last week when she said to do whatever it takes. http://www.bloomberg.com/news/2014-11-07/yellen-message-to-europeans-divided-on-qe-do-whatever-it-takes.html
Given that the BoJ and ECB will be starting on their large scale asset purchases in the near term, this week should be the best time to load up on the USD on pullbacks which I am expecting on just lack of new developments.
I expect the USDJPY lower to 112 and the EUR back to 1.26, the EURJPY down to 141.
Because if it gets colder during the week, we are sure to see those analysts revising their Fed hike calls to a later date which supports the DXY weakness. That would be the opportune time to buy, at 85-86 level.
And yes, on Gold and Silver.
Gold saw a rebound last week even as long positions contracted the most in 2 years and ETFs saw outflows. http://www.bloomberg.com/news/2014-11-09/gold-bulls-accelerate-retreat-to-this-year-s-fastest-pace.html
It has struck me as strange because the last time we had QE, Gold rallied on inflation expectations.
Thus it means that the market is already expecting that the ECB and BOJ WILL FAIL.
We still have the Swiss referendum coming up this month end which could be the make or break for gold. https://tradehaven.net/market/fx/swiss-referendum-the-meaning-of-or-the-lost-cause-of-gold/
I am staying away from Gold because of UBS. The biggest private bank in the world admits to rigging gold prices and customers do not get a refund ?
Nov. 9 (Bloomberg) — Settlement to occur alongside planned agreement between U.K. and U.S. authorities and seven banks over accusations of foreign exchange market rigging, FT reports, citing two people close to situation.
• UBS previously disclosed internal probe of precious metals business in addition to forex investigation
• FT says UBS declined to comment on story
Link to story: http://on.ft.com/1uObAjg
Otherwise, I will just be busy prepping for a mad Christmas bake off and chide myself for taking those fruitcake orders in bulk.
Leaving you with the data schedule for those sleepless nights.