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Data/Event Risks

  • USD: Fiscal cliff discussions recommence this week – progress (or lack of) will be a key determinant of dollar direction. Tomorrow is hectic for data releases, including durable goods orders,   Case-Shiller house prices and consumer confidence.
  • GBP: Not much out today but tomorrow we see if Q3’s 1% GDP increase will be revised. BoE still adopting a wait-and-see on policy.
  • EUR: Minor economic news, including Spanish and Irish house prices. Progress in Greek debt discussions will be critical.

Idea of the Day

Traders have been covering euro shorts over the last couple of weeks, for two main reasons. Firstly, they were simply not making any money out of these positions. Secondly, short yen was becoming more profitable. As such, the euro has looked bid in part because shorts have switched to the yen. This process is probably not yet complete.

Latest FX News

  • EUR: Friday witnessed more short-covering, but also some new longs being established. Indeed, euro has been steadily moving higher over the past two weeks, despite Greek debt hiccup and French downgrade. Shorts have been complacent.
  • JPY: It is as though traders have decided that the yen is a better short, and as such have closed out euro short positions where they were not getting anywhere. Judging from the price action, it appears that there is still plenty of interest in selling the Japanese currency. As such, no need to fight the tape.
  • AUD: Enjoyed some short-covering over the second half of last week, as dollar longs took profit. Still trapped in a very tight range. Has cleared 1.0450, which is encouraging for the bulls.
  • GBP: FX flows for now are mostly in the other majors, so sterling is just bobbing around without any real independent direction. Traders are not playing, preferring other trades such as yen and the euro.