5/11 - Ken Veksler's daily comment

Prepared by Ken Veksler, Head Trader, Saxo Bank

Well the FOMC proved to be pretty much a non event almost as expected. The tone of the language was not at all different to the last message in September and despite a small spike (basically on stops being cleared) in the EURUSD to 1.4883 and a slightly more buoyant equity market, things stabilized fairly quickly. The DOW then returned almost all of its 150 gains to end the session only slightly (30 points) up. Asia was subdued for the most part but data out of both New Zealand and Australia gave the antipodeans something to think about as both currencies were hit with whipsaw price action. Overall the NZD wore the bulk of the pain and this has given the AUDNZD cross an even bigger boost into overbought territory. On that note I would begin scaling into shorts on this cross and look for 1.2650 to be my ideal short level.

On the day we look for BoE and ECB decisions along with initial and continuing claims from the US, UK manufacturing production and Euro Zone retail sales. The market is pricing in at least another 25bn of QE extension for the UK and really I think the market would in some ways be pleased to see the whole 50bn that’s been spoken about in recent times. Nothing done will see the Cable shoot higher, while 50bn would mean that a nervously long market is cleaned out savagely and we trade 3 figures lower.

The ECB will do nothing and the rhetoric might just mention the need to monitor the situation as it develops, while keeping stimulus programs in place. As always look for a small sell off in the EURUSD on the back of Trichet comments. I would expect the 1.4770/80 level to hold on the day as the market will not do anything of real value ahead of tomorrow’s NFP numbers.

On the day I stand aside as for the last few days I have not been able to get a clean read on this market. For your guide however I am currently short some EURUSD at an average of 1.4867 and also equally short EURJPY. On the former I look for 1.4770 as noted and with the EURJPY I now revise my downside target for the remaining chunk of my position and will take it back around the 132.50 level.

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