economics monitor - january 21

FX Beat

Inside View

Pa ge 2 Market Recap, T reasuries,

Briefs, Institutional Posi tions

Pa ge 3 Economic Data Preview,

Key events, Top News

Pa ge 4 Fundamental Analysis

Pa ge 5 Economy Watch, T rade

Views

Pa ge 6 Indiv idual Forecasts

Pa ge 7 Hedging Perspectives

Pa ge 8 Trade Posi tions

Pa ge 9 Technical Analys is

Pa ge 10 Trade Idea

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● USD: The dollar index was down about 0.1 percent at 99.025. The greenback shed

about 0.1 percent to 116.75 yen after falling to 115.97 on Wednesday, undermined

by U.S. data.

● EUR/USD: Ahead of the ECB meeting, the euro was up 0.1 percent at $1.0905 in

early European trade, down from an overnight high of $1.0976 and virtually un-

changed from levels seen immediately after the ECB's last meeting in December. The

ECB is expected to keep the policy measures unchanged at the first meeting of

2016. Interest rates are expected to be at 0.05%, the deposit rate facility at -0.30%

and marginal lending rate at 0.30%. Technically the pair is facing strong resistance

around 1.1000 and break above will take it to next level 1.1060/1.1100 level. On the

downside support is around 1.0800 and break below targets 1.0710/1.06700 level.

● USD/JPY: The yen has recovered till 117.47 after making a low of 116 and was

trading around 116.88. Short term trend is still weak as long as resistance 117.50

holds. The major support is around 115.50 (Dec 2014 low) and break below targets

114.80/114. On the higher side minor resistance is around 117 and break above will

take the pair till 117.50/118.

● GBP/USD: Sterling slid back towards a 7-year low against the dollar on Thursday, as

investors found few reasons to buy the currency due to a slew of potential risks to

the UK economy and with no interest rate rise in sight. It was once again on the

back foot on Thursday, down 0.1 percent at $1.4185. The intraday trend is still weak

as long as resistance 1.4200 holds. Any break above 1.4200 will take the pair to next

level 1.4235/1.4250. On the downside support is around 1.4120 and break below

targets 1.4000/1.4365. Overall bearish invalidation is only above 1.4360. The ster-

ling was 0.2 percent down against the euro at 76.835 pence, close to 1-year low of

77.56 pence.

● USD/CHF: The pair has once again recovered after making a low of 0.9990 and was

trading around 1.00575. The major resistance is around 1.0880 and any break above

will take the pair to next level around 1.0125/1.018/1.0250.The minor resistance is

around 1.0060. On the lower side major support is around 0.9980 and break below

will drag the pair till 0.9950/0.9920. Overall bullish invalidation is only below 0.9920.

● AUD/USD: The Australian dollar was down 0.2 percent at $0.6894 in the Asian

session having traded almost flat following the mild rebound in crude oil prices. It

was trading around 03909 at the time of writing. On the higher side major resistance

is around 0.6960 and break above targets 0.7000/0.7025. The major support is

around 0.6820 and break below will drag the pair till 0.6760/0.6590. Overall trend is

still bearish as long as resistance 0.7025. Against the safe-heaven yen, the Aussie

rallied 1-1/2-yen to 81.52, pulling back from 3-1/2-year lows touched in the last

session.

● NZD/USD: The New Zealand dollar rose 0.5 percent to $0.6460, after Wall Street

pared losses toward the end of the U.S. session. Support was found around 64 cents,

the 76.4 percent retracement of the Sept-Oct move. Resistance was seen at this

week's peak of $0.6514. The kiwi touched a 4-month low of $0.6348 on Wednesday.

1

January 21st, 2016


2 www. econotimes. com

Market Recap

● Europea n sha res were stea dy on T hursday after

globa l ma rkets wiped off tri ll i ons of dol l ars in the

l ast two days . London's FT SE rose 0.2-0.4 percent

in early trades gains , Germa ny's DAX rose 0.2 per-

cent, Fra nce's CAC 40 increa sed 0.1 pct, while the

FT SEurofirst 300 gained 0.4 pct.

● Ja pa n's Nikkei ended down 2.4pct, adding to i ts

3.7pct drop in the previous sess ion. China stocks

ended down 3 pct after a volati le sess ion. MSCI's

broa dest index of Asia -Pa cific sha res outs ide Ja -

pa n hi t a new 4-year low. HongK ong's Ha ng Seng

Index closed down 1.8 pct at 18, 542.15 points.

● Oil dropped back towards 12-year lows on persis-

tent concerns about a supply overhang and the de-

ma nd outlook . T he interna tional benchma rk Brent

was down 43 cents at $27.45 per barre l by 0913

GMT . Brent has lost 26pct so far in January, on

track for i ts biggest monthly fall s ince 2008. Front-

month W est T exa s Intermedia te crude futures

traded at $28.09 per barre l , down 26 cents from

thei r previous close.

● Gold cl imbed to a near 1-1/2-week high, wi th i ts

safe-haven appeal intact as equities and oi l gave up

early gains . Spot gold was up 0.3pct at $1, 103.80

an ounce by 0709 GMT .

Treasuries

● U. S. 30-yea r T rea sury bond rose nearly 2 points in

pri ce , 30-year yield l ast stood at 2.715 pct.

● Germa n bund futures opened 25 t i cks lower at

160.88, Portuguese 10-yea r y ields rose 6 bas is

points to 3 percent, pul ling the gap wi th German

equiva lents to i ts widest since October 2014. Ita l -

ia n equiva lent yields were up 3 bps at 1.69 percent,

the gap was the widest since August l ast year.

● Austral ia n government bond futures ea sed, wi th

the 3-yea r bond contra ct off 2 ti cks at 98.110. T he

10-yea r contra ct al so fel l 2 to 97.3250, but the 20-

yea r contra ct a dded half a t i ck to 96.8400. New

Zeala nd government bonds ea sed s li ghtly, pushing

y ields up 1.5 bas is points across the curve.

Market Briefs

● USD/JPY back above 117 after sl iding to 115.97

Wed. Plays 116.47/117.48.

● Rebound i n crude oil and equities help dol la r re-

cover .

● EUR/USD up i nit i all y to 1.0921 but ea ses to

1.0885 in Europe .

● GBP/USD consolidates above Wed's 1.4125 7 year

low. Plays 1.4152/1.4202.

● Russia n ruble plummets to new lows as pressure

bui lds .

● USD/RUB comes close to new record high 86 be-

fore retreating .

● UK Dec RICS housing survey +50 vs prev ious 49.

50 expected.

● Greece accepts IMF pa rticipa tion i n ba i lout pla n -

Dijsselbloem .

● K remlin says ruble is vola ti le, but "not col la psing ".

● Da vos- IMF La ga rde : China 's structura l reform are

"ma ssive underta king ".

● Da vos- China to honor i ts commitment on reforms

re l ated to SDR entry.

● Da vos- IMF La ga rde: China should communicate

better with f ina ncial ma rkets.

● China 's Dec commercia l ba nks' net forex sales at

$89.4 bln.

● Ca pital outflows f rom China ea sed i n Q4-FX regu-

l ator.

● Unnamed JP Abe aide : JPY has to stop ris ing, BoJ

should a ct next week – WSJ

● Abe a ide Shibaya ma: BoJ ease not on the cards.

Institutional Positions

● J.P. Morgan: Stay short EUR/SEK but with an intervention

floor, short EUR/CHF and short EUR/CZK.

● Societe Generale: Short EUR/PLN, entry 4.2380, target

4.0700, stop 4.3200 P/L -1.93%.

● Societe Generale: Long USD/TRY, entry 2.9600, target

3.1500, stop 2.8800, P/L -0.78%.

● Societe Generale: Short TRY/MXN, entry 5.8000, target

5.43, stop 5.94, P/L -2.41%.

● J.P. Morgan: Stay long USD/SGD from 1.3721 July 24,

marked at +5.11%.

● J.P. Morgan: Buy 3m AUD/USD ATM vs sell USD/CAD

3m 25d, 1.5 x 1 AUD vega, P/L -3.3 vol.

● Societe Generale: We are still be a long term CAD bulls vs

AUD and NZD.

● BoFA Merrill Lynch: We are medium-term bearish EUR,

but see short-term risks.

● Barclays: Keep long USD/BRL, targeting 4.24.

Economic Data Preview

● (0745 ET /1245 GMT ) T he Europea n Central Ba nk

i s l ikely to sta nd pa t when i ts poli cymakers meet

on T hursday, even as a ma rket cra sh, tumbl ing

ba nk stocks and ebbing infla tion set the stage for

action l ater in the year.

● (0800 ET /1300 GMT ) Bra zil payrol l da ta i s ex-

pected to show about 1.5 mil lion Brazi li ans lost

thei r jobs in 2015, in a year when the economy

contra cted at i ts steepest pa ce i n 25 years. T he

economy shed a net 655, 000 pa yrol l jobs i n De-

cember .

● (0830 ET /1330 GMT ) T he number of America ns

f i l ing for jobless benefits l ikely sl ipped to 278, 000

from 284, 000 the prior week , showing li ttle s igns

of a pick-up i n la yoffs despite a recent sha rp s low-

down i n economic growth and f ina ncia l ma rkets

turmoi l . T he continuing cla ims proba bly dropped to

2.248M from 2.263M.

● (0830 ET /1330 GMT ) T he Federal Reserve Ba nk of

Phi la delphia releases its ma nufa cturing survey for

January , which l ike ly dropped to 5 after fal ling to

5.9 in December.

● (1000 ET /1500 GMT ) T he Europea n Commission's

Consumer Confidence Index for January i s l ikely to

show a drop to 5, the index fel l to 5.7 in December.

● (1030 ET /1530 GMT ) EIA 's Na tura l Ga s Stora ge

change for the week ending Jan 15 i s expected to

be at -180B.

● (1100 ET /1600 GMT ) EIA 's Crude Oi l Stocks

change for the week ending Jan 15 i s l ikely to re-

main at 3.000M.

Key Events

● (0830 ET /1330 GMT ) T he ECB releases its mone-

ta ry pol icy sta tement and the president spea ks at

press conference.

● (1045 ET /1545 GMT ) FedT ra de Operation 15-yea r

Fa nnie Ma e / Freddie Ma c (max $525 mn).

Top News

● T he Europea n Central Ba nk i s l ikely to keep inter-

est ra tes on hold when i ts pol icyma kers meet on

T hursday, even as a ma rket cra sh, tumbl ing ba nk

stocks and ebbing infla tion set the stage for action

l ater in the year.

● Investors are try ing to beat a tax increa se on buy-

to-let properties in Brita in, helping to push up

house prices l ast month, according to a survey.

● At f i rst gl ance there i s something odd about Ita ly 's

economic da ta . For months the country ’s consumer

and business sentiment has been stronger than

almost other countries in the euro zone , yet eco-

nomic a ctiv i ty sti ll la gs i ts peers.

● Blood-letting in g lobal ma rkets i s domina ting cor-

ridor talk as business lea ders and pol icyma kers

meet in Davos, al though so far the v iew i s that it

doesn't signal a f ina ncial crisis.

● T he Interna tional Moneta ry Fund said on Wednes-

day i t ended an exemption to i ts lending rules that

had al lowed i t to make major loans to Greece, Ire-

la nd and Portugal i n 2010 and 2011 to f ight a

growing euro-a rea sovereign debt cris is .

● Ba nk of Ja pa n Governor Ha ruhiko K uroda said he

i s not thinking of a dopting a nega tive interest ra te

pol icy now , hinting that any further moneta ry ea s-

ing wi ll likely take form of an expa nsion of i ts cur-

rent ma ssive asset-buying progra mme.

● South Africa 's credit ra ting would be downgra ded

i f further policy mista kes are made and if growth

continues to disa ppoint , the regional hea d of Sta n-

da rd & Poor's said on T hursday.

● Moves by China 's centra l ba nk to inject over 600

bi l l ion yua n ($91.19 bi ll ion) in l iquidity ahead of

the Lunar New Year hol idays could substi tute for a

cut i n the a mount of ca sh that ba nks must hold as

reserves, the chief economist a t the People's Ba nk

of China (PROC) was quoted a paper as say ing on

T hursday.

● Foreign direct investment i nto Indonesia rose al -

most 20pct in terms of rupia h i n 2015 from a year

ago as investment i n the f inal quarter jumped after

a series of government stimulus measures.



Fundamental Analysis

Sovereign downgrades likely to accelerate in 2016, suggests

S&P's report

Standard & Poor's global sovereign ratings outlook published

in Jan showed that the number of investment grade sovereign

ratings ('BBB- or above) amongst the 131 sovereigns rated by

S&P globally, is just over 53%, the lowest level ever. Similarly,

the number of 'AAA' rated sovereigns has now declined to 13,

from 19 in December 2010, however the 'AAA' share in the

total rated sovereigns is off its all-time low of 9% recorded in

mid-2015.

Since mid-2008 sovereign downgrades have generally out-

numbered upgrades. The eroding credit quality of rated sov-

ereigns goes some way to explain the mild decline seen in the

unweighted average sovereign rating. Over the past five

years, S&P has lowered two sovereign ratings per month on

average, but raised only one. This pattern was continued in

2015, despite a mild uptick in upgrades.

The trend is also expected to continue into 2016, with more

downgrades likely for the year. Negative outlooks have out-

numbered positive outlooks since early 2008. The second

half of 2015 has seen a reversal of the gradually improving

trend in the outlook balance that had begun in 2013. On Dec.

31, 2015, the 25 negative outlooks outnumbered eight posi-

tive outlooks by a ratio of 3 to 1.

Over the past year, the outlook balance has deteriorated in all

global regions except Asia-Pacific. The deterioration was

most pronounced in the Middle East, Commonwealth of In-

dependent States (CIS) and Africa, while Europe has seen the

strongest improvement among all regions in its outlook bal-

ance since 2011. At year-end 2015, there were three positive

outlooks in the Eurozone (Cyprus, Malta, Slovenia) and two

negative ones (France and Finland).

For 2016, China appears to top the list of economic concerns.

For Sovereigns and businesses that borrow internationally,

Fed hike has seen financing costs increase through 2015. That

said global oil prices appear likely to remain low in 2016,

which will provide support for economic activity and trade

accounts for the many oil importers in the region.


Economy Watch

● Barclays: We reduce our forecast for Q4 2015 US real GDP growth to 0.5%.

● BOC expects non-commodity exports to lead the recovery, growing nearly 21% from 2q15 levels by the end of 2017.

● Reuters Survey: 51 pct of Japan firms call for BOJ fresh stimulus this year, 49 pct see no need.

● Reuters Survey: 48 pct of Japan firms see no escape from deflation this year.

● U.S. economy on track to grow 0.7 pct in fourth quarter, up from +0.6 pct estimate Jan 15-Atlanta Fed's GDPnow Model.

● Barclays economists raise U.S. Q4 GDP view to 0.4 pct from 0.3 pct after U.S. Dec CPI data.

● Yaresko says expects Ukraine economy to grow in 2016; global slowdown may force review of original 2 pct growth f ’cast.

● European Commission February growth forecasts for EU, euro zone to be largely unchanged –Moscovici.

● Italy Economy Minister Padoan says ECB bank oversight chief said on Wednesday there will be no intervention in Italian

banks.

● Hungary Econ minister believes good chance to receive an investment rating upgrade this year, before summer is an option.

● Kenya's central bank governor says sees current account deficit of below 8.5 pct in 2015 from 10.4 pct in 2014, to narrow

further in 2016.

Policy Watch

● Nordea Markets: US Fed is still believed to continue hiking, although the renewed slump in oil prices might delay the next

hike until mid-2016.

● Westpac: RBA to remain on hold for some time, but the RBNZ to ease again later this year after evidence of persistently low

inflation emerges.

● RBNZ to stand pat, with the first of two 25bps rate cuts this year to come in March- RBC Capital Markets.

● Bank of Canada will be on hold through the remainder of this year, but the risks of a cut in the near-term are still apprecia-

ble- RBC ca pital markets.

● Morgan Stanley: Lower inflation expectations could bring further RBNZ rate cuts back on the table too.

● Morgan Stanley: RMB real rates should come down as China ’s authorities try to control the pace of de-leveraging.

● Reuters Survey- Hungary's benchmark rate seen flat through 2016, rising to 1.83 pct by end-2017.

● Reuters Survey- All 21 analysts say Hungarian central bank will keep main rate on hold at Jan 26 meeting.

Trade Views

● China central bank: Total social financing outstanding at end-2015 138.14 trln yuan.

● Westpac: Expected RBA vs RBNZ direction, plus strong M&A flow into the AUD, favors AUD/NZD upside over the next

few months to beyond 1.10.

● Westpac: Multi-month, we expect to see NZD/USD lower towards 0.62 as the divergent monetary policies of the fed and

RBNZ play out.

● Morgan Stanley: We expect a range-bound EUR over coming weeks as downward pressure from negative rates.

● Morgan Stanley: With the EU bringing more milk supply to market and a slowing Chinese economy, NZD looks vulnerable.

● Morgan Stanley: The outlook for AUD continues to deteriorate, with Australian terms of tra de, capital expenditures and

housing all pointing downward.

● Survey- China yuan short positions fall slightly on PBOC stabilization efforts.

● Survey- India rupee bearish bets highest since august 2013 on equity outflows.

● Survey- S.Korea won short positions largest since late august on stock outflows.

● Survey-Taiwan dollar short positions near 5-month peak on elections, weak economy.

● Survey- Indonesia rupiah sentiment least pessimistic among Asia FX on bond inflows.

Forecasts


EUR/USD

CONTRIBUTORS 1 MTH 3 MTHS 6 MTHS 12 MTHS

4CAST 1.0640 1.0400 1.0100 1.0000

AIB 1.0800 1.0700 1.0600 1.0500

ANZ BANK 1.0700 1.0500 1.0200 1.1000

ALPHA BANK 1.0640 1.0500 1.0200 1.0400

AUREL 1.0500 1.0300 1.0500 1.0200

BBVA 1.0600 1.0500 1.0800 1.1200

BHF BANK 1.1200 1.1200 1.1200 1.1200

BMO 1.0800 1.0750 1.0600 1.0300

BNP PARIBAS 1.0700 1.0400 1.0200 1.0200

BANCO BPI 1.0700 1.0500 1.0700 1.1000

BANCO SANTANDER 1.0900 1.1200 1.1300 1.1800

BANK OF AMERICA 1.0300 1.0000 1.0000 0.9500

BANK OF TM U 1.0700 1.0600 1.0300 1.0600

CA CIB -- 1.0400 1.0300 1.0300

CIBC 1.0800 1.0700 1.1000 1.1300

CREDIT SUISSE 1.0700 1.0400 1.0300 1.0000

DNB 1.0700 1.0500 1.0300 1.0000

DZ BANK 1.0700 1.0400 1.0400 1.0400

DANSKE BANK 1.0600 1.0600 1.1000 1.1600

DESJARDINS 1.0600 1.0500 1.0300 1.0200

EUROBANK ERGA 1.0800 1.1000 1.1200 1.1700

GOLDMAN SACHS 1.0900 1.0700 1.0500 1.0000

HSBC 1.1100 1.1500 1.1600 1.2000

IHS GLOBAL 1.0800 1.0600 1.0500 1.1000

ING FIN MARKETS 1.0500 1.0200 0.9800 1.1000

INFORMA GLOBAL 1.0900 1.0800 1.0500 1.0300

INVESTEC 1.0700 1.0600 1.0800 1.1500

JULIUS BAER 1.0700 1.0600 1.0700 1.1500

LBBW -- 1.0500 1.0500 1.0800

LBK HESSEN 1.0800 1.0500 1.1000 1.0500

MIZUHO SECURITIES 1.0600 1.0500 1.0300 1.0300

MORGAN STANLEY 1.0700 1.0140 1.0300 1.0000

NAB -- 1.0500 1.0500 1.0700

NOMURA 1.0700 1.0500 1.0000 1.0000

NORDEA BANK 1.0844 1.0809 1.0440 1.0052

OCBC 1.1000 1.1170 1.0913 1.0400

POHJOLA BANK 1.0800 1.0800 1.0600 1.0500

RBC 1.0700 1.0300 1.0000 1.0200

RABOBANK 1.0800 1.0600 1.0500 1.0400

RBS 1.0600 1.0200 1.0000 0.9600

SEB 1.0700 1.0300 1.0000 1.0300

SAXO BANK 1.0500 1.0100 0.9700 0.9500

SCOTIABANK 1.0700 1.0500 1.0000 0.9500

ST GEORGE BANK 1.0600 1.0500 1.0600 1.0700

SWEDBANK 1.0800 1.0400 1.0300 1.0900

TD SECURITIES -- 1.0300 1.0600 1.1200

UNICREDIT 1.0500 1.0500 1.0700 1.1200

WELLS FARGO 1.1000 1.1000 1.0700 1.0200

WESTPAC -- 1.0500 1.0200 1.0300

ZUERCHER KAN 1.0900 1.0500 1.0400 1.0300

USD/CAD

CONTRIBUTORS 1 MTH 3 MTHS 6 MTHS 12 MTHS

4CAST 1.4000 1.4200 1.4500 1.4400

BARCLAYS -- 1.3600 1.3700 1.4000

BAYERNLB -- 1.3600 1.3200 1.2900

BBVA 1.3900 1.3800 1.3200 1.2100

BMO 1.3850 1.4050 1.4200 1.3750

BNP PARIBAS 1.3800 1.3800 1.3900 1.3800

BOFAML 1.3800 1.4500 1.4400 1.4000

BTMU 1.4100 1.4200 1.4000 1.3300

CA-CIB -- 1.3700 1.3800 1.3600

CIBC 1.4000 1.4200 1.3700 1.3200

CITIGROUP -- 1.4200 -- 1.3800

COMMERZBANK -- 1.3500 1.3600 1.3000

CREDIT SUISSE 1.3800 1.3600 1.3700 1.4000

DANSKE BANK 1.3500 1.3600 1.3300 1.3000

DEKABANK -- 1.3100 1.3300 1.2900

DESJARDINS 1.4000 1.3900 1.3500 1.3300

DEUTSCHE BANK -- 1.3900 1.4000 1.4300

DZ BANK 1.4000 1.3200 1.3000 1.2800

GOLDMAN SACHS 1.3900 1.3200 1.3500 1.4000

HELABA 1.3600 1.3300 1.3200 1.3000

HSBC 1.3900 1.4000 1.3500 1.2500

IFR MARKETS 1.4050 1.4250 1.4550 1.3550

IHS GLOBAL 1.3882 1.3820 1.3619 1.3188

INFORMA GLOBAL 1.4000 1.4000 1.4400 1.4500

ING FINANCIAL 1.3700 1.4200 1.3800 1.3500

INVESTEC 1.3700 1.3500 1.3300 1.2900

JULIUS BAER 1.3900 1.3700 1.3600 1.3200

LBBW -- 1.3600 1.3300 1.3000

MORGAN STANLEY 1.3900 1.3800 1.4100 1.4500

NAB -- 1.4700 1.4700 1.4600

NATIXIS -- 1.4400 1.4200 1.3700

NB FINANCIAL -- 1.4000 1.3700 1.3100

NOMURA 1.3800 1.3500 1.3600 1.3700

NORDEA BANK 1.3636 1.3124 1.2712 1.2352

OCBC 1.4130 1.4250 1.4350 1.4550

RABOBANK 1.3900 1.3900 1.4000 1.3700

RBC 1.4100 1.4500 1.4000 1.3300

RBS 1.3800 1.3200 1.3300 1.3000

SANTANDER 1.3500 1.2800 1.2400 1.1800

SAXO BANK 1.4100 1.4200 1.4500 1.4800

SCOTIABANK 1.3700 1.3700 1.3800 1.3900

SEB 1.3600 1.3700 1.3300 1.2600

SOCIETE GENERALE -- 1.3400 1.3500 1.3100

ST GEORGE BANK 1.3200 1.3000 1.2900 1.2800

STANDARD CHART -- 1.4100 1.3800 1.4000

SWEDBANK 1.3900 1.4000 1.4000 1.3500

TD SECURITIES -- 1.4000 1.3700 1.3300

UNICREDIT 1.2700 1.2700 1.2600 1.2300

WELLS FARGO 1.3700 1.3700 1.3800 1.4000

ZKB 1.3900 1.3600 1.3500 1.3400


Hedging Perspectives

EUR/CAD seems to be edgy, deploy option strips for hedging and speculating

This Thursday ECB President Draghi faces a tough task curbing the appeal of the single currency. The euro jump in recent

trend is major due to the massive price drops in crude prices to $28 way below the ECB projections for 2016 ($52.2) and the

causing drop in inflation prospects present a stern encounter to the divided governing council opinions.

On the flip side, 25 bps cut is not completely factored in from CAD side, With an approximate 60% probability to this effect,

swings in Canada/US rate differentials could be key to USD/CAD testing 1.50 or retracing below 1.40 and EUR/CAD to

1.5425 levels.

Technically, we foresee more downside potential in EURCAD as bearish signals from leading oscillators (RSI & Slow Stoch

pops up overbought pressures) and "bearish gartley" formed on weekly charts, so the bulls seem to be exhausted at 1.5959

levels and claiming price dips from last two days, more slumps further are on cards. Hence, the next immediate targets south-

wards seen at 1.5425 levels.

Hold 2W At-The-Money 0.51 delta call and simultaneously hold 2 lots of 1M At-The-Money -0.48 delta put options. Huge

profits achievable with the strip strategy when EUR/CAD exchange rate makes a strong move either upwards or downwards

at expiration, with greater gains to be made with a downward move. The profitability can be maximized for every shift to-

wards downside and this is not the same on upside.

What makes ATM instrument more productive in our strategy: the delta of this instrument is here at its fastest rate and gets

faster as your position come closer to the expiration date. As a result, time decay may have a relevant impact on ATM options .

Please be informed that the trader can still make money even if his anticipation goes wrong - but the underlying pair has to

move in the opposite direction really fast. The 1 call bought has to beat the cost of buying all the options and still bring in

some profits.

Trade Positions


EUR/USD USD/JPY GBP/USD USD/CHF AUD/USD EUR/GBP

RESIST3 1.1000 117.61 1.4235 1.0106 0.7003 0.7799

RESIST2 1.0994 117.48 1.4232 1.0092 0.6957 0.7781

RESIST1 1.0985 117.16 1.4197 1.0082 0.6942 0.7756

SUPPT1 1.0860 116.47 1.4125 0.9991 0.6827 0.7655

SUPPT2 1.0855 115.97 1.4000 0.9984 0.6790 0.7600

SUPPT3 1.0824 115.85 1.3655 0.9969 0.6765 0.7597

Strategy SHORT SHORT SELL BUY SHORT LONG

Price 1.0900 117.20 1.4235 0.9958 0.6900 0.7610

Target 1.0715 116.10 - - 0.6530 0.8060

Stop 1.1005 117.50 - - 0.7050 0.7580

EUR/JPY EUR/CHF USD/CAD GBP/JPY EUR/NOK EUR/SEK

RESIST3 128.34 1.1000 1.4709 184.65 9.7725 9.4360

RESIST2 128.00 1.0985 1.4700 183.95 9.7475 9.4090

RESIST1 127.69 1.0980 1.4700 183.37 9.6460 9.3980

SUPPT1 127.14 1.0910 1.4500 182.19 9.5315 9.3150

SUPPT2 126.64 1.0871 1.4400 181.04 9.5125 9.2925

SUPPT3 126.28 1.0860 1.4400 180.00 9.4815 9.2810

Strategy SELL SHORT BUY SHORT SELL SELL

Price 128.10 1.0940 1.4410 182.62 9.7400 9.3425

Target - 1.0871 - 180.10 - -

Stop - 1.0990 - 184.30 - -

NZD/USD AUD/NZD AUD/JPY USD/SEK USD/NOK USD/ZAR

RESIST3 0.6516 1.0809 101.24 - - 16.9970

RESIST2 0.6496 1.0791 99.91 - - 16.9710

RESIST1 0.6417 1.0788 99.01 - - 16.9600

SUPPT1 0.6348 1.0679 95.17 - - 16.6080

SUPPT2 0.6340 1.0660 94.78 - - 16.5750

SUPPT3 0.6289 1.0609 94.00 - - 16.3825

Strategy SHORT LONG - SELL - SHORT

Price 0.6510 1.0735 - - - 16.7200

Target 0.6200 1.1260 - - - 16.3850

Stop- 0.6515 1.0490 - - - 16.9800

Source: Aggregate trading positions of traders reported on Thomson Reuters FX matching platform


Technical Analysis

EUR/USD trades in narrow range, markets await ECB meeting for further direction

● EUR/USD is trading in a very narrow range between 1.0800-1.1000 for the past 10 trading session. Markets await ECB

first policy meeting of this year 2016 for further direction.

● The ECB is expected to keep the policy measures unchanged at this meeting. The market expects ECB to maintains its in-

terest rates at 0.05%, the deposit rate facility at -0.30% and marginal lending rate at 0.30%.

● The central bank will also keep the asset purchase program unchanged at €60bn a month until 2017.

● ECB will likely to refrain from adding more easing this week but President Mario Draghi press conference which is to be

held after policy announcement will be watched closely for further easing in the future.

● Technically the pair is facing strong resistance around 1.1000 and break above will take the pair to next level

1.1060/1.1100 level.

● On the downside support is around 1.0800 and break below targets 1.0710/1.06700 level.

It is good to buy at dips around 1. 0850 with S L around 1.07980 for the TP of 1.0975/1.1000


Trade Idea

We prefer to long EUR/CAD at dips

Major support- 1.5690 (trend line joining 1.4957 and 1.5360)

Trend reversal Level- 1.5660 (200 day HMA)

● The pair has taken support around 1.5705 and started to recover from that level .It is currently trading around 1.5780.

● Any break below 1.5690 will take the pair down till 1.5660/1.5600.

● On the higher major resistance is around 1.5850 and break above targets 1.5905/1.6000.

It is good to buy at dips around 1. 5750-55 with S L around 1.5690 for the TP of 1.5845/1.5905

RESISTANCE LEVELS SUPPORT LEVELS

R1- 1.5850 S1-1.5690

R2-1.5905 S2-1.5660

R3-1.6000 S3- 1.5600

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economics monitor - january 21

Economy & Finance