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Thursday, March 28, 2024

Market Recap: 12.9.2010

Courtesy of Tyler Durden

  • Equities closed small up after trading in a narrow 8 point range all day.  That is 3 days in a row and new local highs for both the S+P and NASDAQ.  The market opened strong on the back of the good performance of various bourses overnight.  We then traded choppily, bouncing both on the back of the better bond auction (see below) and the BBG headline: “PIMCO raises US growth forecast on ‘massive’ stimulus.”  In terms of breadth, financials continue to rip, up another +1% today.
  • The VIX sank lower today to close -.42 at 17.32, a new seven-month low for the third consecutive day. Someone is aggresively selling vol, and the VIX does not even come close the reflecting the risk in various other asset classes.
  • A wide range in EURUSD today, but ultimately not much to show for it as the pair closes nearly unchanged. EURUSD briefly looked below 1.3200 – European CDS traded poorly and Irish politics back in focus – but a well-received 30y auction and another positive session in stocks had the greenback trading on its back foot. Elsewhere in FX, TRY trades poorly on the back of both technical and leveraged selling. BRL, too, suffers on the back of consistent but sneaky local demand for USDs. RUB, on the other hand, continues to trade well. Leveraged accounts continue to express interest in low premium, short vol, long RUB trades.
  • The rates market finally settled down today, finishing mixed with the front end .5 to 4bps weaker and the back end 2.5 to 4bps stronger.  Overnight the Asian real money bid provided support, but trading remained choppy going into the $13bn 30yr supply.  The auction cleared 4.6bps through mid, providing support for the market, and the back end rallied into the close.
  • In commodities, NatGas spiked briefly after slightly bullish stats, before changing course to close -4% on the day. We maintain our bearish stance and $4 target.  The rest of the complex caught a decent bid with RBOB outperforming on news of a refinery outage, and sending the Jan-Feb spread into backwardation. We saw a good amount of roll activity: real money long-rolling and leveraged short-rolling.  In metals, silver again traded higher, closing +1.14%, while copper headed lower, down -.76%, after a period of backwardation yesterday.  Wheat rallied as weather problems continued on three continents, up +.85% today. Flow-wise, we saw good leveraged selling of corn and buying of wheat.
  • The stabilization in rates brought some sellers of protection into the market, bringingcreditspreads lower today.  Some short-term players that had gone long risk a few days ago were quick to book profits on the move lower in spreads.  IG tightened by 0.75bps to close at 87.75 and HY rose 0.0625 to 101.50.
  • Tomorrow brings trade balances for the US and China, Indian IP, and Turkish GDP.

And detailed currency commentary:

  • EUR/USD
     
  • The EUR came under renewed selling pressure on Thursday amid reports that the Irish opposition party will vote against the bailout package. At the same time, the divisions in the Eurozone could not be more evident as some policy makers continued to argue for the need to expand the bailout mechanism and to introduce the Eurobond, while Germany continued to vehemently refuse to accept such proposals. The move lower saw the pair briefly slip below the 1.3200 level, with the next major support seen at the 1.3160/40 level. Thursday also saw Fitch ratings agency downgrade Irish sovereign debt, citing the additional costs of restructuring the country’s banking sector and public finances. As such, it is widely seen that other ratings agencies will follow suit. Going forward, Friday sees the release of Italian Industrial Production data alongside French Manufacturing and Industrial Production data. In terms of option expiries, 1.3400 and 1.3325 intraday options are due to expiry at the 10am NY cut (1500GMT).
     
  • GBP/USD
     
  • The pair finished the session lower amid not only an unexpected widening in the UK trade deficit but also following the release of worse than expected UK Halifax House Price Index data. In terms of the Y/Y figure, the UK Halifax House Price Index fell 0.7%, the first annual decline since November 2009 and reinforced the view that house prices are unlikely to rise in 2011 when the austerity measure begin to kick-in. The move lower saw the pair fall below the key support at 1.5735 which suggests that the Bearish pattern will persist in the coming sessions and the pair will stage a test on 1.5700. In terms of resistance levels, the 21DMA at 1.5816 and then 1.5850 levels are expected to restrain any short-term rallies. Also worth noting that an intraday option at 1.5750 is due to expire on Friday at 10am NY cut (1500GMT).
     
  • USD/JPY
     
  • Uncertainty over the whether the Democrats will back the Obama proposed tax cuts extension, together with above consensus Japanese GDP data saw the JPY strengthen against the USD on Thursday. The move lower saw the pair find support just below the 100DMA at 83.76 but above the 10DMA at 83.64. Should the downward price action persist in the coming session, further supports are seen at 83.50 and 82.30. To the upside, resistance levels are seen at 84.20/50 and then at 85.00, which is also the intraday option expiry on Friday at the 10am NY cut (1500GMT). Also worth noting is that that BOJ’s policy board member Yoshihisa Morimoto said that expanding the central bank’s asset buying fund is a strong policy option if the economy worsens more than expected.

Compiled from Goldman and Talking Forex data

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