Goldman: Reason To Be USD Bear Amid A Bullish Mkt Sentiment

"On a 12-month horizon our FX forecasts imply a 2% weakening in the trade-weighted USD. Part of the rationale for this view, besides our belief that the Fed continues to 'out-dove' other central banks (notably the ECB), stems from the weak BBoP, reflecting the fact that ongoing large current account deficits continue to hold the Dollar hostage to portfolio inflows. Against this backdrop, we update our monthly BBoP measure for the Treasury International Capital (TIC) data through June. 2012).

The TIC data measure long-term portfolio flows into and out of the US. They capture foreign buying of US Treasuries, agency and corporate debt, and stocks. In addition, they reflect US buying of foreign stocks and bonds. As we have argued previously, we see private inflows to the US (as opposed to official purchases of US securities by foreign entities) as a driver of USD strength, as it is these flows that are driven by market-based investment decisions.

The 12-month rolling private non-UST BBoP has deteriorated from a deficit of -3.7% of GDP in December 2012 to -4.5% of GDP in June 2013, a drop of 0.9 percentage points. This level is still quite a bit above the all-time low in November 2011 (-5.6%), when large safe haven flows into US Treasuries (around the possible Greek exit referendum) crowded out flows into other US assets. What is striking, though, is that the deterioration year-to-date has been at a similar pace as during 2011.

Overall, the US flow picture has continued to look surprisingly weak, even as sentiment has shifted to be fairly broadly USD bullish. What is especially notable is that foreign flows into US equities have been weak, when during previous USD strength episodes – most notably in 2000/01 – these inflows were very strong. Much as in our analysis on speculative positioning, hard data tend to paint a more cautious picture than sentiment."

Robin Brooks, Goldman Sachs.

regards,

oscarjp

my technical analysis of fSP500

hello Traders,

Below a brief info about the most important events of the past week and the technical analysis of the futures SP500 index.

Non-Farm Employment Change disappointed the second month. However, the unemployment rate is only 7.3%. Not long ago, members of the Fed signaled that the 7% QE should be completely FINISHED. Addition, there has been a revision for July from 162 thousand. to 104 thousand.! Also negative for the dollar. Recall that the Fed has promised that when the unemployment rate reaches 6.5% then  will consider interest rate hike (paying attention also on inflation and other variables). Meanwhile, members of the FOMC said recently (tentatively) that 6.5% can be achieved only in mid-2015! 

First Reaction: 'US Jobs Report Soft, But The March To Septaper continues' - Barclays; "The August employment report was softer than expected, but, in our estimation, is sufficient to keep the Fed on track for a tapering in the pace of its purchases at the September meeting. Our baseline outlook is that the Fed will taper the pace of purchases to $70bn ($35bn Treasuries and $35bn in agency mortgage-backed securities) at its September meeting, and based on our forecast that the unemployment rate will reach 7.0% in Q1 14, we expect the Fed to conclude its purchases in March of next year."

Kansas City Federal Reserve Bank President Esther George said the Fed should begin to pullback on asset buying beginning in September, and suggested an "appropriate next step" would be tapering purchases to $70 billion a month. Fed George Suggests Tapering To $70Bln In Sep Vs $85Bln.

After the data from the U.S. by recent reports Bloomberg consensus fell from $ 15 billion to $ 10 billion.

Managing the largest bond fund in the world Bill Gross from Pimco, in comments said it expected shear QE3 in September by $ 10 billion. The market consensus is around $ 15 billion.

Chicago Federal Reserve Bank President Charles Evans, while sounding decidedly bullish on the outlook for the U.S. economy, said Friday the Fed should only begin dialing back its aggressive asset purchases once it is sure growth "gained traction" in the third quarter and that the factors keeping inflation low are indeed transitory. And although he still believes the central bank will begin tapering its $85 billion a month in asset purchases later this year, Evans went to great lengths to stress that monetary policy will remain highly accommodative "for some time," with the possibility the Fed will not hike interest rates even after unemployment falls below its 6.5% threshold.

So, easy to conclude that the markets already discounted information about reducing the QE of 10 - 15 billion per month. Discounted information has already been a desire to start a private war by Mr Obama and Israel.

It seems that the start of the occurrence of Bernanke nothing should happen and correction of the SP500 has been successfully completed. At present, banks are expected to be strong element and they should pull among other world index up.

Currently on the chart, we should see the end of the correction at the level of 1620 points. Significant resistance is located at 1664 points. Overcoming this resistance will open the door to new heights this year. Now I do not see any threats to the declines on the stock markets of developed economies. The question is how the economy of emergin markets will reduce of QE. It appears that the process of outflow of capital has already begun. This is particularly the weakening of local currencies and higher yields of individual countries.

Chart 1, SP500, H4, 2013-09-08

best regards,
oscarjp



The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects oscarjp-chrimatistikos current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.

currently situation of FWIG20 - part II (after the panic sell-off)

hello,

full version link - Reuters

Confiscate - the bulk of assets owned by the country's private pension funds (many of them owned by such foreign firms as PIMCO parent Allianz, AXA, Generali, ING and Aviva), without offering any compensation. In effect, the state just nationalized roughly half of the private sector pension fund assets, although it had a more politically correct name for it: pension overhaul.

Poland has a hybrid pension system: mandatory contributions are made into both the state pension vehicle, known as ZUS, and the private funds, which are collectively known by the Polish acronym OFE. Bonds make up roughly half the private funds' portfolios, with the rest company stocks.

On Wednesday, Prime Minister Donald Tusk said private funds within the state-guaranteed system would have their bond holdings transferred to a state pension vehicle, but keep their equity holdings. The funds would effectively be left with only the equities portions of their assets, even this would be depleted, and there will be uncertainty about the number of new savers joining.

But why is Poland engaging in behavior that will ultimately be disastrous to future capital allocation in non-public pension funds (the type that can at least on paper generate some returns as opposed to "public" funds which are guaranteed to lose)? After all, this is a last ditch step which no rational person would engage in unless there were no other option. Simple: there were no other option, and the driver is the same reason the world everywhere else is broke too - too much debt.

By shifting some assets from the private funds into ZUS, the government can book those assets on the state balance sheet to offset public debt, giving it more scope to borrow and spend. Finance Minister Jacek Rostowski said the changes will reduce public debt by about eight percent of GDP. This in turn, he said, would allow the lowering of two thresholds that deter the government from allowing debt to raise over 50 percent, and then 55 percent, of GDP. Public debt last year stood at 52.7 percent of GDP, according to the government's own calculations.

And of course, once Poland borrows like a drunken sailor using the new window of opportunity, and maxes out its new and improved limits, it will have no choice but to confiscate more assets, and to make its balance sheet appear better, until one day, there is nothing left in the private sector to confiscate. At that point the limit itself will have to be legislated away, and Poland will simply continue borrowing until one day there are no foreign lenders willing to take the same risk as the nation's private pensioners. At that point, Poland, which is in the EU but still has the Zloty, can just go ahead and monetize its own debt by printing unlimited amounts of its currency.

But best of all, in the aftermath of Cyprus, we now know what the two most recent European blueprints for preserving the myth of solvency are: bail-ins, which confiscate deposits, and pension fund "overhauls", which confiscate, well, pension funds.

Of course, we all know how that story ends.

Unfortunately, the Polish stock market was panic (chart 1). On Wednesday and Thursday, all indexes on the market dropping,. Within two days the main index WIG20 lost nearly 8 percent. There was total panic sell-off. The largest decreases of value were recorded the banks and the largest insurer in Poland - PZU. Yield on 10-year bonds reached a level of 5 percent. We had a similar situation in 2010 in Hungary, where he also destroyed private pension funds (chart2 and chart 4).

Given the rate of return on pension funds in Poland and commissions charged for the money set aside for them (this is in the range 5-6 percent a year), I believe that these funds did not provide high added value and the results ranged between 1 - 3 percent per annum. But that is not my principal concern. The problem is that a change in the long term interest of foreign investors in Polish stock exchange. I hope that will not be a second Hungary.

chart 1, FWIG20, H1, after panic sell off

chart 2, BUX Index, Daily, destruction of the pension system in 2010

chart 3, Daily, 10Y GOV POL BOND

chart 4, Weekly, 10Y GOV HUN BOND

regards,

oscarjp

currently situation of FWIG20

hello Traders,

today the Polish market was the weakest market in the region, and probably in all developed markets. The main reason for decline was the announcement by the Prime Minister of Poland regarding partial liquidation of Open Pension Fund but more on that another time. On the below graph was formed double extended ABC correction which is at the same time the wave number four.

Now, we have fell to the maximum level which is 2287 points where we encountered significant resistance. I think the correction is over and as of tomorrow we should go up. The important information is that the U.S. markets had a very good session today. On the market We received a lot of good economic data. This may mean opening contracts with a positive gap.

In the case when a drop in tomorrow below indicated resistance and closes the hourly candles will change the signs of the Elliott Wave.

FWIG20, H1, 2013-09-04

comments are welcome :)

best regards,
oscarjp

The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects oscarjp-chrimatistikos current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.

interesting information from the market: John Williams and car sales

John Williams, head of the FED from San Francisco spoke today in Portland: (main topics)

- support reduction of QE this year

- Reduction of data-dependent

- Bernanke plan (QE withdrawal by mid-2014) real

- Reduction of QE does not mean tightening, rates will remain lowSo ... we are waiting for payroll!

Car sales in the U.S. up

In August:

Toyota 22.8% y/y, the consensus of 15%

Nissan 22.3% y/y, the consensus 17%

GM 14.7% y/y, the consensus 11%

Ford +12% y/y, the consensus of 10%

Porsche 10% y/y

Honda 27% y/y
interesting how much it on credit?

regards,

oscarjp

FX Trades of JP Morgan and Citi

The following is a list of JP Morgan's current open technical FX trades as of September 04, 2013.

- Long 2 units USD/JPY from 97.76 avg., target 101.50, stop at 97.85.

- Short 1 unit EUR/RUB from 43.822, add at 44.65, targets 40.00 & 37.20, stop at 45.60.

- Long 2 units USD/CAD from 1.0411 avg., target 1.0850, stop at 1.0430.

- Long 2 units USD/NOK from 5.6000 avg., target 7.500, stop at 5.8700.

- Long 1 unit CAD/JPY from 82.22, target 103.50, stop at 91.15.

Citibank is positioning ahead of the FOMC meeting on Sep 17-18 via adding a long USD/CHF trade to its portfolio via options.

"We buy a 2-week (September 18) 0.9450/0.9659/1.0050 USDCHF call fly in 1x1.5x0.5 notional for a cost of 0.3050%USD and spot reference (0.9365)," Citi clarifies.

"We allocate a 2%VaR risk weight to the position," Citi adds.

regards,

oscarjp

The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects oscarjp-chrimatistikos current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.

why JP Morgan need (buy) Gold ?

In the period from August 7 to August 12 appeared in the depository of JP Morgan bank 63.5K ounces of registered gold (16% of total). In a few days, the inventory in JPM's gold vault will drop to another record low of only 380K ounces and the JPM "rescue" pleas from HSBC and other Comex members will become ever louder and more desperate until one day they may just go straight to voicemail.

chart 1

And like the last time JPM plundered 20K ounces of Scotia gold on August 8

chart 2

next transactions on August 12

chart 3

and finally on August 23 once again from Scotia Mocatta 28K

chart 4

The chart below have been selected moments in which JP Morgan transfer the gold to your account. Clearly increase in the value of gold by over $ 200. Is this the end of the correction in gold, which is September 4 will have a second birthday?

chart 5, Daily

What is really going on behind the scenes, however, nobody knows. Reports from the website COMEX exchange.


regards,
oscarjp

Euro short part 2

hello,

on my last post which I recommended buying short. [link below]

Euro Short !!!; 13rd August 2013

after my analysis, market generated an additional wave that reached a new high in the currently correction. This wave had form three movements A-B-C (red rectangle on the chart). Which means the weakness of the Euro and probably currently  shaped wedge bullish, which is its end should be at the level of 3475.

Risk to this scenario is, of course, the war in Syria. Americans gave to the public that they have plenty of evidence to the fact that the Syrian regime used chemical weapons. Among other things, they have to be a satellite image. This evidence is to be a response to the Russian argument that we do not know which side used a weapon. The U.S. has not only the support of the UK. Definitely for action declared by France. And in Israel, there was a concern that Assad could use chemical weapons against the citizens of this country, although it is possible that the regime decides to take such a step was in response to an attack. For Israel, the answer is clear, however desirable - the Syrian regime is supported by Tehran, so it would be a warning sign for the new Iranian president. Finally, the overwhelming response flowed from the Arab League. The representatives agreed that chemical weapons was obviously used and the countries of the West should answer that.

EUR/USD H4, 28-08-2013

regards,

oscarjp

The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects oscarjp-chrimatistikos current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.

Structure of the Bank of England

just like in a post below I put the structure of the Bank of England:

structure of BoE

regards,
oscarjp

Structure of the Federal Reserve System

The Federal Reserve System is composed of five parts:

1. The presidentially appointed Board of Governors (or Federal Reserve Board), an independent federal government agency located in Washington, D.C.
2. The Federal Open Market Committee (FOMC), composed of the seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank presidents, which oversees open market operations, the principal tool of U.S. monetary policy.
3. Twelve regional Federal Reserve Banks located in major cities throughout the nation, which divide the nation into twelve Federal Reserve districts. The Federal Reserve Banks act as fiscal agents for the U.S. Treasury, and each has its own nine-member board of directors.

4. Numerous other private U.S. member banks, which own required amounts of non-transferable stock in their regional Federal Reserve Banks.

5. Various advisory councils.

Outline

Whole

• The nation's central bank,
• A regional structure with 12 districts,

Board of Governors

• Seven members serving staggered 14-year terms
  

Federal Reserve Banks

• 12 regional banks with 25 branches,
  
• Each independently incorporated with a nine member board of directors, with six of them elected by the member banks while the remaining three are designated by the Board of Governors.

The current members of the Board of Governors are as follows:

List of Federal Reserve Banks

source: wikipedia; federalreserve


regards,
oscarjp