Spain's (Bank) Bailout, Aussie Positioning And The Krona

What a funny five minutes we had today. I suspect the market read the headline without understanding it and thought Spain had asked for a sovereign bailout. To clarify, it hasn't. This is purely tapping the ESM fund. Being less sceptical, investors were buoyed by the potential that this could lead to a sovereign bailout but frankly we aren't so sure. Regardless, markets rallied well on the news.

Greece announced its terms for the $13 billion bond buyback and the key headline was that the minimum price was higher than expected.

We had a second minor rally in Cable (GBP/USD) when William and Kate announced that they were expecting but finally U.S. markets in the afternoon saw a bit of a sell off with poor ISM manufacturing causing a bit of risk off.

The Euro Group also met today, essentially they spent the day trying to decide when to re-convene, apparently in the end, December 13 works well for everyone, apart from that they re-iterated the Greek buyback program and Spanish bank aid. Essentially all eyes are now on the 13 for the Greek aid tranche and Cyprus bailout deal.

All eyes on the Aussie rate decision tonight with a 0.25% cut expected, remember no cut Bullish, bigger cut Bearish...normally, frankly Aussie has been seemingly overpriced for a while seems pretty challenging to know what it might do.

EUR/USD
Euro pushed higher today and failed to give us a nice entry short we were looking for. Small intraday short played out well but nothing of note. We therefore will continue to sit on the sidelines looking for a new entry signal. A break of the 1.3150/70 level negates our Bearish outlook.
EUR/USD Daily" title="$EURUSD (Daily) 04_09_2012 - 03_12_2012" width="500" height="431">
GBP/USD
Cable rallied well today, we currently sit on the sidelines with this pair, again similar to the Euro we prefer shorts from as we maintain our medium term Bearish outlook, that said we sit in the middle of a range, therefore ideally a push higher and rejection of pivot high will allow us to get short.
GBP/USD Daily" title="$GBPUSD (Daily) 31_08_2012 - 04_12_2012" width="500" height="431">
AUD/USD
At this stage on the Aussie I would probably say we should be looking for shorts however gI have a problem with this pair.

Check out the COT (Commitment of Traders) on the weekly chart (if you are unfamiliar with this report get in touch with me, I'll give you a free lesson, seriously not joking)
AUD/USD Weekly" title="$AUDUSD (Weekly) Week 1_2011 - Week 49_2012" width="500" height="449">
Essentially Commercials are positioning themselves long, historically if you look at what happens when Commercials position themselves that long we get a push higher, check out what happened in June this year (although granted sometimes it takes a bit of time).

So given the rules of do what the chart says I need to maintain a Neutral to Bullish outlook. I suspect in reality this means we chop sideways for a bit with a potential re-test of key support; which may in turn offer some good levels to buy from.

Here is a nice confusing daily chart to make that seem more complicated
AUD/USD Daily" title="$AUDUSD (Daily) 28_08_2012 - 04_12_2012" width="500" height="431">
USD/JPY
We maintain the view we are extended here on the Yen, we like shorts on retests of resistance and longs on a retracement and test of the 80.50/81 handle. Charts currently setting up for a nice divergence play off of a false break so one to watch for. Alternatively it could do neither of these and chop around for a bit then push higher or lower (this obviously gives us a nice little breakout play)
USD/JPY Daily" title="$USDJPY (Daily) 05_09_2012 - 04_12_2012" width="500" height="431">
GBP/JPY
We still like this as an alternative to USD/JPY shorts, as we are able to get a better risk reward ratio. Despite a push higher today the continued divergence still points to a small retracement before any larger move higher.
GBP/JPY Daily" title="$GBPJPY (Daily) 21_08_2012 - 04_12_2012" width="500" height="431">
EUR/SEK
Interesting setup on this pair which offers nice risk reward. Numerous failed attempts on the 8.70 handle has remaind strong resistance, if this continues to hold we could see a move lower with yearly lows not unreasonable if you could hold this for 6 months (we don't suggest that though). A break of the 8.70 would open up a large move higher but small risk for potential reward on this trade (word of warning though this is a lower probability setup so higher chance of failure for much greater reward)
EUR/SEK Daily" title="$EURSEK (Daily) 06_08_2012 - 04_12_2012" width="500" height="431">
EUR/SEK Weekly" title="$EURSEK (Weekly) Week 50_2010 - Week 49_2012" width="500" height="449">