Mid-day update is attached. Until BTP yields stabilize (6.2% for 10s now despite ECB being in, and next auction isn’t until November 14!) the bears have the upper hand. I still think there’s more joy to be had in being bearish of HUF and the rest of Eastern Europe, than selling the euro, but only because the euro short-covering rallies are so brutal. EUR/USD 1.3650 is the big Fibo level everyone is angst-ridden about. It’s too close, and the Greek crisis will drag too long. It’s gonna break.
My thought at the end of last week that credit and equity investors were bound to fear being left out if they didn’t join in the big risk rally is blown right out of the water. Even though the core drivers are intact. US data are OK (though we’ll have to wait and see how ISM/jobs play out) – within the context of 2% growth being OK that is – and even if the Chinese PMI was soft, Asia is slowing and not collapsing, while a softer policy outlook is good. All of this will matter again one day, but not on a day when we are all in utter despair at the way Europe’s political leaders dream up new ways to disappoint us.
So trades: Long USD/HUF. Time to cut EUR/GBP shorts. We think this is stuck in a range, we still have strangles, and we would rather re-sell at 0.88, again. You could even argue GBP/USD is a better short here, than EUR/USD. And I want to find a place to buy AUD/JPY. Far, far, far too dangerous to do today but the same thing as saying 1) I think we’ll see the Japanese intervene again and 2) I think SPX is a buy somewhere as this European drama drags it down.
Click here to read the full report:
http://www.easyforexnews.net/wp-content/uploads/2011/11/fxnoon.pdf
Societe Generale
Research & Analytics