economics monitor - january 22

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 rose about 0.3 percent to 99.356 against a basket of currencies as

increasing expectations of monetary easing by ECB and BoJ hit the yen and euro

while global oil and stock markets strongly recovered. It rose 0.3 percent against the

yen at 118.03 yen, pulling away from a one -year trough of 115.97 struck earlier this

week against the safe-haven Japanese currency.

● EUR/USD: The prospect of looser ECB policy kept the euro under pressure. It

traded at $1.0832, down about 0.7pct on the week, but up from a 2-week low of

$1.0776 touched in the wake of Draghi's comments on Thursday. Analysts at Gold-

man Sachs lowered their year end euro forecasts below parity to $0.95. Technically

the pair is facing resistance around 1.0870 and break above will take the pair to next

level 1.0950/1.0980/1.100 level. On the downside support is around 1.0780 and

break below targets 1.0710/1.06700 level.

● USD/JPY: The pair has broken minor resistance 118 and jumped till 118.31 at the

time of writing and was trading around 118.25. Short term trend is slightly bullish as

long as support 117.50 holds. The major support is around 117.50 and break below

targets 116.80/116. On the higher side minor resistance is around 118.60 and break

above will take it till 119.30/120.

● USD/CHF: The pair has broken major resistance 1.01250 yesterday and declined till

1.00532. Short term trend is bullish as long as support 1.000 holds. The major resis-

tance is around 1.0150 and any break above will take it to next level at around

1.018/1.0250. On the lower side major support is around 0.9980 and break below

will drag the pair till 0.9950/0.9920.The minor support is around 1.0040/1.0000,

overall bullish invalidation is only below 0.9920.

● GBP/USD: Sterling edged up after the data showed UK government borrowing

dropped sharply in December, while retail spending suffered its biggest year-on-year

fall in over six years. It initially dropped to $1.4253 after the data from $1.4273 be-

forehand and bounced back to more than $1.43 briefly before settling at around

$1.4285. Any break above 1.4250 will drag the pair up till 1.4300//1.4326 (55 day 4

EMA)/1.4340 level in short term. Overall bearish invalidation is only above 1.43600.

On the downside minor support is around 1.4210 (5 day MA) and any break below

targets 1.4160/1.4120/1.4070 level. The minor support is around 1.4240. Against

the euro it extended gains to trade up 0.8 percent on the day at 75.91 pence.

● AUD/USD: The Australian dollar stood at $0.6996, having climbed a cent on Thurs-

day. That was a marked turnaround from a 7-year trough of $0.6828 and left the

currency on track for the biggest weekly gain since October with an increase of 2

percent. It has broken minor resistance 0.7000 and jumped till 0.7035. On the higher

side major resistance is around 0.7060 and break above targets 0.7115/0.7170. The

minor support is around 0.6970 and break below will drag the pair till 0.6900/0.6820.

Short term trend is slightly bullish as long as support 0.6920. The Aussie regained

some ground against the euro and yen with weekly gains seen in excess of 2 percent.

The euro dropped 0.4 percent to A$1.5471, having touched a peak of A$1.6072 l ast

week. Against the yen, the Aussie rose to 82.37, up 2.4 percent for the week.

1

January 22nd, 2016


2 www. econotimes. com

Market Recap

● W orld stocks j umped on ECB's hint of addi tional

moneta ry easing and ba rga in-hunting from brui sed

investors.

● T he FT SEuroFirst 300 index of l eading Europea n

shares rose 2.2pct in early deal s, on track to record

a weekly gain of around 2 percent. Germa ny's DAX

cl imbed 2 percent and heading for a weekly gain of

2.2 percent. Brita in's FT SE 100 was up 1.8 percent

on the day and Fra nce's CAC 40 i nched higher 2.5

percent.

● Ja pa n's Nikkei ended up 5.9 percent, the most in

more than four months . Chinese stocks rose 1.3pct.

MSCI's broa dest index of Asia -Pa cific sha res out-

s ide Ja pa n j umped 2.4 percent on Friday, the most

s ince Oct.7 l ast year, after hi tt ing a 4-year low on

T hursday. HK 's Ha ng Seng Index l ost 2.3 pct for

the week.

● Oil climbed 5pct to above $30 in i ts l argest week ly

ral l y in three months, as f i rmer f ina ncial ma rkets

made the way for traders to cash in on record short

pos i t ions . Brent rose $1.58 at $30.83 per barre l by

0944 G MT , off thi s week 's 2003 low of $27.10 and

heading for a more than 6 percent week ly gain. U. S.

crude was up $1.35 at $30.88 per barre l, set for a

weekly ri se of over 4 percent.

● Gold dropped as the euro sl id after the ECB hinted

at further pol icy ea sing and weaker growth across

emerging economies . Spot gold fell 0.5 percent at

$1, 096.20 per ounce at 1030 GMT, while U. S. gold

futures for February delivery were down 60 cents

an ounce at $1, 097.60.

Treasuries

● U. S. 10-yea r T rea suries y ield rose 4 bas is points

to 2.06pct, and the yield curve - the gap between 2

- and 10-year y ie lds - s teepened from a mul ti -year

low to around 119 bas i s points .

● Germa n 5-yea r bond yield hi t record low at -0.246

percent, while 2-year bond yie ld hi t record low at -

0.456 percent.

● UK Ma rch Gil ts edged sl ightly higher on the UK

reta il sa les data to 119.00.

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

the 3-yea r bond contra ct off 4 ti cks at 98.060. T he

10-yea r contra ct dropped 3 t i cks to 97.2800, while

the 20-yea r contra ct l ost 3.5 ti cks to 96.7800. New

Zeala nd government bonds were s li ghtly fi rmer

wi th y ie lds down between hal f and 1.5 ti cks .

Market Briefs

● DXY fi rms on day, on track for s li ght weekly gain.

P lays 99.113-99.461.

● USD/JPY extends recovery to 118.32 fm year's

low (Wed) at 115.97.

● Euro pressured after Dra ghi s ignal s more easing.

EUR/USD 1.0900- 1.0813.

● GBP/USD recovery rall y extends to 1.4307 fm 7-

year 1.4080 low (T hurs ) .

● Brent gains 5.5% to $31.10/barre l . Off thi s week 's

2003 low of $27.10.

● Asia stocks end week rall y ing off 4-yr lows, helped

by ECB , oil bounce .

● UK Q4 Reta il Sales +1.1% q/q vs prev ious 0.9%.

Strongest calendar quarter s ince Q4 2014. 3.7% y/

y vs 4.9%.

● EZ Jan flash Mfg PMI 52.3 vs previous 53.2. 53.0

exp. Fla sh Services PMI 53.6 vs prev ious 54.2. 54.2

expected.

● EZ Jan fla sh Composite PMI 53.5 vs previous 54.3.

54.2 expected.

● PBOC Zha ng : China won't easi ly cut RRR - SINA.

Institutional Positions

● Morgan Stanley: Long USD/BRL, entry 3.9600, target

4.4000, stop 3.7000.

● Morgan Stanley: Long USD/PEN, entry 3.4200, target

3.6000, stop 3.3600.

● Morgan Stanley: Long USD/TRY, entry 2.9600, target

3.1500, stop 2.8800.

● Morgan Stanley: We recommend going long JPY/TWD, as

a complement to our long JPY/KRW position and in order

to diversify our risk to an extent.

● Morgan Stanley: Long EUR/AUD, entry 1.5410, target

1.6200, stop 1.4850.

● Morgan Stanley: Sell CHF/JPY, entry 119.50, target

112.00, stop 122.30.

● Morgan Stanley: We maintain our limit order to buy USD/

BRL on dips.

● Morgan Stanley: With a risk-off bias, adding short CHF/

JPY to our existing long JPY vs. KRW and TWD positions.

● Morgan Stanley: Sell NZD/USD and buy EUR/AUD.

● Morgan Stanley: We remain USD bulls even if US data

weaken over the next few months.

● Morgan Stanley: Trading long current-account surplus

currencies such as the JPY, EUR and SEK remains an im-

portant part of our investment strategy.

Economic Data Preview

● (0830 ET /1330 GMT ) Fed Reserve Ba nk of Chi-

ca go due to re lease Na tiona l Activ i ty Index for De-

cember.

● (0830 ET /1330 GMT ) Ca na da 's a nnua l infla tion

rate is l ikely to have risen to 1.7pct in December

from 1.4pct in November. Last month's a nnua l core

infla tion ra te i s estimated at 2.1 percent, up from 2

percent the prev ious month.

● (0830 ET /1330 G MT ) Ca na da 's November reta il

sa les l ikely rose 0.2pct in comparison to a 0.1 per-

cent gain in October.

● (0945 ET /1445 GMT ) T he f inancial f irm Ma rkit

re leases US ma nufa cturing PMI for January , which

i s expected to stay at 51.1, sl ightly down from 51.2

prior month.

● (1000 ET /1500 GMT ) T he Na tiona l Associa tion of

U. S. Rea l tors is expected to report existing home

sa les for December, which likely rose 8.9pct to an

annual rate of 5.20 mi ll ion uni ts, compared to No-

vember's sharp drop of 10.5pct to an annual rate of

4.76 mi ll ion uni ts.

● (1000 ET /1500 GMT ) T he Conference Boa rd will

re lease i ts Lea ding Economic Index , which i s l ikely

to have dropped 0.1pct in December, compared

wi th the 0.4 percent rise in November.

● (1300 ET /1800 GMT ) Ba ker Hughes US Oi l Rig

Count .

Key Events

● (1045 ET /1545 GMT ) FedT ra de Operation 30-yea r

Fa nnie Ma e / Freddie Ma c (max $1.950 bn) .

Top News

● Euro a rea infla tion expecta tions decl ined over the

past quarter and even longer -term forecasts are on

the decline, the ECB’s Survey of Professional Fore-

ca sters showed on Friday.

● Eurozone businesses had a much poorer start to

2016 th an expected as deeper price cuts and weak

euro mak ing goods and services cheaper abroad

fai l ed to drive any mea ningful dema nd , a survey

showed.

● Interna tional Moneta ry Fund ma na ging director

Christine La ga rde l aunched her ca mpa ign for a sec-

ond term on Friday wi th ringing endorsements from

a host of major economies and a court case against

her looming in her native Fra nce .

● Oil prices are unexpected to return to the highs of

recent years , and the strain on Russia ’s economy

wi ll leave the government facing di ffi cul t choices,

the head of the country 's central ba nk said on Fri -

day .

● UK reta i l spending suffered i ts biggest year -on-

year fal l i n over s i x years during the crucial Chri st-

mas se ll ing season, but there was more cheer for

f ina nce minister George Osborne after government

borrowing dropped sharply.

● Renewed turmoi l i n globa l ma rkets is beginning to

erode investor confidence i n Ja pa nese Prime Min-

ister Shinzo Abe's pledge to revital ise the economy

through his mass ive 'Abenomics ' stimulus pro-

gra mme .

● China 's money ra tes spiked this week as banks

hoarded cash in preparation for the long Lunar New

Year festival , but traders bel ieve the increase is

l argely seasonal and i s being tempered by ma ssive

injections by the central ba nk .

● Indonesia centra l ba nk expects temporary addi -

t ional infla tiona ry pressure due to a recently im-

posed value a dded ta x on imported cattl e, Gover-

nor Agus Ma rtowa rdojo said on Friday .

●T he India n government wi ll pay banks a 2.5 per-

cent commiss ion to unlock the country 's massive

stash of gold under a new moneti zation scheme,

the centra l ba nk said, as the ambi tious plan re-

ceived a poor response from banks and customers.

● Argentine President Ma uricio Ma cri said on Friday

that progress in talks wi th U. S. creditors i n a long-

running l egal battl e over unpaid debt was "not so

good", al though he hoped to reach a settl ement

early thi s year.



Fundamental Analysis

Risks skewed to the downside for Euro area

The ECB held rates at 0.05 pct in yesterday's meet and Draghi

at the post meeting press conference noted that there that

downside risks were increasing again. He expressed concern

over the poor inflation outlook and signaled that more quan-

titative easing might be in store when the central bank meets

in March. Growing concerns about the durability of the US

growth outlook and major geopolitical risks around Europe,

both external and internal, including the ongoing migration

crisis, the Russian-Ukraine conflict, terrorist attacks/threats

and rising populists and centrifugal-forces in Europe has

cooled the pace of growth in euro area business activity at

the start of 2016.

Data firm Markit released earlier today showed a slowdown

in manufacturing and services activity in the eurozone in

January. Markit manufacturing Purchasing Managers’ Index

hit a three-month low at 52.3, while its services PMI reached

a 12-month low at 53.6. Uncertainty caused by the marked

FX volatility and growth concerns coming from EM, in par-

ticular the weakness in the CNY and the uncertain growth

outlook of China have shifted the balance of risks more to the

downside. While China has declared that it is planning to fo-

cus on a stable NEER, implying a move in USD/CNY to 6.80

by year-end, the CNY (on NEER basis) has been depreciating

rapidly recently, and if China allows, for example, a 5% fall in

the CNY NEER by year-end, USD/CNY could move to as high

as 7.22.

The deterioration in business sentiment in both the US and

China, as well as in other large emerging markets, coupled

with a large sell-off in commodities and oil shows a very mod-

est pickup in global growth sustained by a gradual recovery in

Europe. The comparatively more positive outlook for Europe

is largely supported by low oil prices, ECB’s ultra-loose mone-

tary policy, and the euro below its “fair value”, all of which

support a relatively strong consumer demand.

Draghi at the presser also strongly defended the ECB's De-

cember’s stimulus package saying that the change that has

come about post its December meeting owing to sharp de-

cline in oil price. The plunge in the oil price to below $30 per

barrel means that CPI inflation could average as little as 0.2

percent this year – well below the ECB's current forecast of 1

per cent. In the current scenario, the ECB looks likely to revise

down inflation projections in March from the current level of

1 per cent for 2016 and 1.6 per cent for 2017. Concerns over

the poor inflation outlook have certainly increased the

chances of the ECB eventually providing more policy support.

European stocks jumped Friday, extended a rally founded on

the possibility the European Central Bank will enact more

stimulus measures for the eurozone economy. Europe's

FTSEurofirst 300 index jumped 2.1 per cent, while euro fell to

a two-week low against the dollar. On the day, EUR/USD was

little changed around $1.0845, down around -0.3494% from

Thursday's close.


Economy Watch

● ECB’s SPF maintains GDP growth forecasts for both 2016 and 2017 in 1.7-1.8 pct range.

● ECB’s SPF sees 2018 inflation at 1.6 pct; cuts longer term view to 1.8 pct from 1.9 pct.

● ECB’s SPF sees 2017 euro zone inflation at 1.4 pct vs 1.5 pct seen in Q4.

● ECB’s survey of professional forecasters sees 2016 euro zone inflation at 0.7 pct vs previous 1.0 pct seen in Q4 survey.

● German FinMin Schaeuble says he would prefer higher interest rates, the interest rate is no longer fulfilling its economic

function at present.

● Russia's Sberbank sees 2016 core tier 1 capital adequacy under Basel 1 for Sberbank group above 9 pct.

● Russia's Sberbank sees Russian economy declining by 2.2 pct in 2016 if oil averages $35 a barrel.

● Russian Deputy Finance Minister: 2016 borrowing plan on domestic markets will only be exceeded if 'acute necessity' – RIA.

● Russia c.bank governor says oil prices could change direction and jump higher at any stage.

● Brazil's economy sheds 596,208 jobs in December - Labor ministry (Reuters Survey -655,000).

● Reuters Survey- South Africa's average CPI seen at 6.0 pct in 2016 and 6.1 pct 2017 (5.9, 5.8 pct in Dec poll).

● Reuters Survey- South African GDP growth expected at 0.9 pct in 2016, 1.7 pct in 2017 (1.6, 2.1 pct in Dec poll).

● Greek economy to stay in recession in 2016, contracting a bit more than in 2015- IOBE think tank.

● PBoC: To expand macro-prudential management to cross-border financing.

● China Labor Ministry expects job market to maintain stable in 2016.

● Portugal government 2016 draft budget forecasts decline of 0.2 percentage points in structural budget deficit.

● Portugal government says draft budget sees 2.1 pct growth in 2016.

● Portugal government 2016 draft budget sees budget deficit at 2.6 pct/GDP.

Policy Watch

● RBADanmarks Nationalbank (DN) to mirror a 10bp ECB rate cut in March and lower the rate of interest on certificates of

deposit to minus 0.75%- Danske Bank.

● Reuters Survey - 5 of Canada's 11 primary dealers see another rate cut from Bank of Canada, three see cut before end of

Q2 2016.

● Reuters Survey- South Africa's repo rate seen ending 2016 at 7.25 pct, 7.00 pct end-2017 (6.75, 7.00 pct in Dec poll).

● Reuters Survey- South Africa's Reserve Bank to raise interest rates 50 basis points to 6.75 pct on Jan 28.

● PBoC: Financial institutions and firms in pilot areas no longer need approval for overseas borrowing.

● Russia c.bank governor says bank has all tools to prevent threats to financial stability.

● ECB's Draghi says there is still high level on non-performing loans in Greece, need changes in financial legislation.

● ECB's Draghi says we see recovery continuing at modest pace.

● ECB's Draghi says drivers of European recovery are monetary policy, also oil prices, neutral fiscal policy.

● Reuters Survey: All 12 economists surveyed see Bank of Israel holding key rate at 0.1 pct next week.

Trade Views

● The 7 January 10bp DN rate hike should be sufficient to stabilise EUR/DKK close to the central rate and we expect EUR/

DKK to trade at 7.4550 in 1m-12m- Danske Bank.

● Mexico's peso weakens more than 1 pct to 18.725 per dollar.

● The USD will likely stay supported against commodity currencies – Barclays.

● AUD and EM Asian currencies of economies with stronger trade links to china such as KRW, TWD, SGD and MYR are likely

to underperform- Barclays.

Forecasts


EUR/NOK

CONTRIBUTORS 1 MTH 3 MTHS 6 MTHS 12 MTHS

4CAST 9.5500 9.4000 9.1800 9.0000

BAYERNLB -- 9.3500 9.2000 9.0000

BBVA 9.5000 9.2000 8.9000 8.6000

BNP PARIBAS 9.5500 9.2000 9.0000 9.0000

BOFAML 9.1300 9.1000 9.0000 8.8000

BTMU 9.6500 9.6000 9.5000 9.2000

CA-CIB -- 9.3000 9.3000 9.2000

CIBC 9.5000 9.3000 9.1500 8.7500

CITIGROUP -- 9.6000 -- 8.9000

COMMERZBANK -- 9.6000 9.5000 9.3000

CREDIT SUISSE 9.5100 9.2500 9.1700 9.0000

DANSKE BANK 8.4000 8.4000 9.2500 8.8000

DEKABANK -- 9.3000 9.2000 9.0000

DEUTSCHE BANK -- 9.5800 9.5700 9.2100

DNB 9.4000 9.2000 9.0000 8.9000

DZ BANK 9.6500 9.2000 9.0000 8.8000

HANDELSBANK -- 9.5000 9.5000 9.5000

HELABA 9.4500 9.2000 9.0000 8.7000

HSBC 9.5100 9.3000 9.1000 8.7000

IFR MARKETS 9.7250 9.4000 9.2500 8.9000

ING FINANCIAL 9.3000 9.0000 8.8000 8.6000

JULIUS BAER 9.6000 9.3500 9.3000 9.2500

MORGAN STANLEY 9.5800 9.4500 9.6000 10.0000

NATIXIS -- 9.3500 9.2000 9.1000

NOMURA 9.5000 9.3000 9.3000 8.9000

NORDEA BANK 9.4946 9.2612 9.0561 8.8348

POHJOLA BANK 9.7000 9.7000 9.6000 9.5000

RABOBANK 9.6000 9.5500 9.5000 9.4500

RBC 9.6000 9.6000 9.4000 9.1000

RBS 9.7000 10.0000 9.6000 8.8000

SANTANDER 9.5000 9.1000 9.0000 8.8000

SAXO BANK 9.5000 9.7500 9.2500 9.2500

SEB 9.4000 9.3900 9.2400 8.8000

SOCIETE GENERALE -- 9.1500 8.9000 8.7000

SWEDBANK 9.5000 9.5000 9.2000 8.9000

UNICREDIT 9.0500 9.0500 9.0000 8.9000

WELLS FARGO 9.5500 9.5500 9.5500 9.6000

ZKB 9.6200 9.3000 9.2000 9.0000

NZD/USD

CONTRIBUTORS 1 MTH 3 MTHS 6 MTHS 12 MTHS

4CAST 0.6725 0.6800 0.6700 0.6700

ALLIED IRISH 0.6700 0.6700 0.6600 0.6500

ANZ BANK 0.6500 0.6300 0.6100 0.5900

BARCLAYS -- 0.6300 0.6100 0.5900

BBVA 0.6400 0.6500 0.6800 0.7000

BMO 0.6600 0.6500 0.6250 0.6500

BNP PARIBAS 0.6600 0.6000 0.6100 0.6400

BOFAML 0.6300 0.6200 0.6100 0.5900

BTMU 0.6600 0.6550 0.6450 0.6600

COMMERZBANK -- 0.6200 0.5900 0.6200

CREDIT SUISSE 0.6600 0.6400 0.6300 0.6200

DANSKE BANK 0.6400 0.6300 0.6500 0.6800

DEUTSCHE BANK -- 0.6400 0.6000 0.5200

DZ BANK 0.6700 0.6600 0.6400 0.6500

GOLDMAN SACHS 0.6800 0.6800 0.6400 0.6200

HELABA 0.6500 0.6300 0.6400 0.6500

HSBC 0.6800 0.6800 0.6800 0.6800

IFR MARKETS 0.6700 0.6500 0.6200 0.6000

IHS GLOBAL 0.6756 0.6637 0.6553 0.6553

INFORMA GLOBAL 0.6600 0.6400 0.6250 0.6350

ING FINANCIA 0.6600 0.6000 0.6200 0.6800

JULIUS BAER 0.6700 0.6500 0.6500 0.6500

MORGAN STANLEY 0.6500 0.6100 0.5900 0.5600

NOMURA 0.6600 0.6200 0.6200 0.6200

NORDEA MARKETS 0.6805 0.6720 0.6844 0.7148

OCBC 0.6750 0.6750 0.6600 0.6300

RABOBANK 0.6600 0.6400 0.6300 0.6100

RBC 0.6600 0.6400 0.6300 0.6300

RBS 0.6600 0.6300 0.6100 0.5800

SANTANDER 0.6600 0.6200 0.6000 0.5700

SAXO BANK 0.6400 0.6000 0.5600 0.5200

SCOTIABANK 0.6500 0.6500 0.6000 0.6000

SEB 0.6500 0.5800 0.5500 0.5600

ST GEORGE BANK 0.6500 0.6200 0.6200 0.6400

SWEDBANK 0.6500 0.6400 0.6200 0.6000

UNICREDIT 0.6700 0.6700 0.6800 0.7000

WELLS FARGO 0.6700 0.6700 0.6600 0.6400

ZKB 0.6850 0.6500 0.6400 0.6300


Hedging Perspectives

Hedge open Aussie export payable exposure via AUD/USD PRBS:

If you are running an open Aussie export deal and you want to make sure the certain profit or curb the losses, and keep your

foreign trade active without forex hassles, you could hedge this ongoing bearish trend in AUD with an option. The effect of an

option hedge is to keep the profit potential open, yet limit (hedge) any loss.

AUD/USD has dropped from the high of 0.7327 up to 0.6926 and still have more downside potential as per the OTC market

sentiments, with the current levels of 0.7033 one can build hedging strategy as explained below contemplating above IVs and

risk reversal computations.

From the IV & delta risk reversal table, it is understood that AUD/USD is the pair to perceive highest IVs with most expensiv e

puts for hedging downside risks.

25- Delta risk reversal points out the premiums of AUD/USD puts and calls on the most liquid OTM contracts due the differ-

ence vols, which in turn divulge the relative costliness of the downside protection for the underlying spot FX, so we can an-

ticipate next underlying market downward direction with help of these negative numbers.

Hedging strategy: AUD/USD Put Ratio Back Spread

Options are generally used by private investors and businesses to hedge open or future deals. The latter is useful for compa-

nies who have overseas invoices to pay or profits to receive in a foreign currency.

We now capitalize upon higher IVS and any upswings in abrupt can be utilized by employing 2 lots of 1.5% ITM shorts in puts

with shorter expiries.

We stated to maintain the same strategy for hedgers by using these small bounces from then to help our ITM shorts, this

would have certainly ensured returns in the form of premiums.

Having said that, stay firm with any existing longs on at the money -0.50 delta puts as it would begin functioning effectively

from recent past. Add one more long on 1% out of the money put in order to give leveraging effects to the portfolio with

lesser cost of trade since we prefer OTM instrument.

Hence, as shown in the diagram the strategy is constructed in the ratio of 3:2 for net credit with net delta at -0.50.

Trade Positions


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

RESIST3 1.1000 117.37 1.4316 1.0104 0.7003 0.7831

RESIST2 1.0997 117.05 1.4282 1.0092 0.6962 0.7799

RESIST1 1.0985 116.99 1.4271 1.0082 0.6957 0.7781

SUPPT1 1.0894 115.85 1.4125 0.9993 0.6839 0.7588

SUPPT2 1.0862 115.53 1.4000 0.9962 0.6827 0.7583

SUPPT3 1.0860 115.45 1.3655 0.9958 0.6790 0.7581

Strategy SHORT SELL SELL BUY SHORT LONG

Price 1.0900 117.20 1.4286 0.9958 0.6900 0.7610

Target 1.0715 - - - 0.6530 0.8060

Stop 1.1005 - - - 0.7050 0.7570

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

RESIST3 129.04 1.1000 1.4670 184.65 9.7725 9.3250

RESIST2 128.75 1.0985 1.4650 183.95 9.7475 9.3150

RESIST1 128.40 1.0980 1.4559 183.37 9.6460 9.3120

SUPPT1 127.80 1.0913 1.4487 182.19 9.5315 9.2925

SUPPT2 127.38 1.0871 1.4433 181.04 9.5125 9.2815

SUPPT3 127.33 1.0852 1.4400 180.00 9.4815 9.2798

Strategy SELL SHORT BUY SHORT SELL SHORT

Price 128.95 1.0940 1.4360 182.62 9.7400 9.3300

Target - 1.0871 - 180.10 - 9.2520

Stop - 1.0990 - 184.30 - 9.3360

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

RESIST3 0.6585 1.0783 101.24 - - 16.9970

RESIST2 0.6529 1.0707 99.91 - - 16.9710

RESIST1 0.6516 1.0657 99.01 - - 16.8500

SUPPT1 0.6417 1.0650 95.17 - - 16.6960

SUPPT2 0.6382 1.0609 94.78 - - 16.5085

SUPPT3 0.6340 1.0576 94.00 - - 16.3825

Strategy SHORT LONG - SELL - SELL

Price 0.6510 1.0735 - - - 16.7200

Target 0.6200 1.1260 - - - -

Stop- 0.6600 1.0490 - - - -

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


Technical Analysis

GBP/USD breaks minor resistance around 1. 4250, jump till 1.4330 is possible

Major resistance – 1.4250

● The pair has broken major resistance around 1.4250 and jumped till 1.42725 at the time of writing. Any break above 1.4250

will drag the pair up till 1.4300//1.4326 (55 day 4 EMA)/1.4340 level in short term.

● Overall bearish invalidation is only above 1.43600.

● On the downside minor support is around 1.4210 (5 day MA) and any break below targets 1.4160/1.4120/1.4070 level. The

minor support is around 1.4240.

It is good to buy at dips around 1. 4250-55 with S L around 1.4200 for the TP of 1. 4330/ 1.4358


Trade Idea

We prefer to long GBP/JPY at dips

Major resistance – 167.85 (Tenken-Sen)

Major intraday Support -166.80 (5 day MA)

● GBP/JPY has broken major resistance around 167.85 and jumped till 169. It is currently trading around 168.72.

● It is facing resistance around 169.10 and any break above confirms major trend reversal, a jump till 170.50/172 is possible.

● On the lower side major intraday support is around 166.80 and break below targets 166/164.

● Overall trend reversal can happen if it closes above 172 level.

It is good to buy at dips around 168 with SL around 166.80 for the TP of 170.50/172

RESISTANCE LEVELS SUPPORT LEVELS

R1-169.10 S1-166.80

R2-170.50 S2-165.00

R3-172.00 S3- 164.00

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economics monitor - january 22

Economy & Finance