The Fed's Shift, Disappointing BoJ, BRICS' Move

The current week will start the month of February with two very important macroeconomic data from the United States, even if everything has been already anticipated by the FOMC of the Federal Reserve. On January 30th, in fact, Bernanke will provide new guidelines for the monetary policy, but as early as Friday February 1st, we will be able to know the economic performance of the first month of 2013 thanks to the ISM manufacturing and unemployment. In the same week, on Monday, January 28th, the focus will be on durable goods orders and home sales, on Tuesday January 29th the consumer confidence and house prices, and on Wednesday, January 30th, GDP of the first quarter.

The graph compares EUR/USD with the spread between CDS, USA and Germany. As we can see, when this spread rises above zero, as now, EUR/USD begins to enter a possible top zone and is then subjected to a probable market correction. It happened in 2009, in 2010 and 2011. Considering the values of the resistances of 1.349 (overcoming them would mean a boost up to 1.39), we believe the best trade is as follows:

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European Confidence

Little to report from Europe. On Monday, January 28th,the M3 money supply, on January 30th the consumer and business confidence in the Euro area, on January 31st the inflation and unemployment in Germany.

After the disappointment BoJ

The disappointment due to the last meeting of the Bank of Japan was linked not only to the new monetary policy measures and target inflation largely discounted, but most of all to the decision to implement these operations in 2014. The market has ignored this decision and JPY has broken 90 against USD and 122 against EUR. In the coming week, pay attention to manufacturing (January 31st ) and unemployment (February 1st ).

Too much optimism on the Mexican Peso

The sentiment on the Mexican Peso is very intense, with a great optimism. Technically, there are margins of depreciation for USD/MXN with area 12.45 considered as a support in the long term. Anyway, the sentiment still arouses some concerns. Practically the percentage of net long positions held by the hedge funds in the open interest ratio is close to 80% with the balance of net long at the highest point of all time. Speculators are all on one side and we wonder who will still support the purchase of MXN. In these cases, the best thing is to adopt a contrarian strategy. Here is the trade we are going to open:


BRICS

The coming week is going to be a very rich one, due to different incoming data which may move the currency markets of the BRICS.

China: Pmi Manufacturing (government) February 1st
Brazil: Pmi Manufacturing (January 30th) - industrial production (February 1st)
South Africa: Prices production and trade balance (January 31st )
India: Rates announcement (planned cut to 7.75%) January 29th

LAST TRADES – COMMENT

While XAU/USD is still trapped between 1650 and 1690 also because of the extension of the legal date for fixing the debt ceiling, EurTry and NzdUsd currently do not offer great ideas to stay close to the entry levels, while the trend of EUR/CAD, close to the stop levels, was disappointing. Luckily, the strong rise of USD/ZAR has produced a very important profit, on which we decide to close due to the achievement of key resistance levels as 9.10.

Concerning JPY, we can note a stop in its fall, but the weakness of the Japanese currency remains strong, therefore we keep on waiting the rebound phase that sentiment and oscillators seem to anticipate from several days.