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Deutsche: Commitments of Traders: Weekly Update

While geopolitical fears increased in the last week, the coming week will be dominated by six major central bank interest rate decisions. US Payroll data should be strong and we expect nonfarm payroll growth at 245,000 and the unemployment rate tick down a tenth to 6.1%.

We expect the ECB to keep rates unchanged at 0.15% with, ABS purchases to take place within 12 months, and QE by next June. The Bank of England should leave interest rates at 0.50% and QE on hold. The Bank of Japan should keep rates on hold at 0.10%. The Reserve Bank of Australia should keep rates on hold at 2.5% and any slight potential changes have been foreshadowed by either the governor himself or in the Statement of Monetary Policy. The Bank of Canada should keep rates on hold at 1.00%. We expect the Swedish Riksbank to keep rates on hold at 0.25% after the 50bps cut during the last meeting. In Poland, we expect a 50bp cut before year-end, but probably in Oct-Nov.

In US rates, US regulators are set to vote on a final LCR rule on September 3. We expect bank demand for Treasuries to remain strong for the time being, absent substantive changes to the LCR.

In FX, our Quant signals suggest further USD buying. This is despite CFTC data suggesting in the last six weeks $24.6bn USD have been bought increasing net long USD positioning to $30.6bn, the largest in more than a year. We note however, Equity and HY funds have both seen inflows in Europe, the first time in 8 weeks.

In EM, liquidity conditions have improved so far in 2014. We are neutral on EMFX and still like DNT options in USD/BRL. In Brazil, we expect a -0.1% qoq GDP print in 3Q and a positive number in 4Q. We like short EUR/KRW and tactical RUB longs. In rates, we like payers in Korea (5y), Malaysia (5y), and Chile (6m), linkers in Brazil and receiving the 10y Hungary/Poland spread. We continue to expect the RBI to hold Rs58-62/USD if EURUSD continues to trade in the low 1.30s.
[EUR/CHF] (CH) SNB Pres Jordan: CHF is highly overvalued; Minimum exchange rate vs EUR remains SNB’s primary policy instrument – Swiss press – Says: We do not exclude any measure which might be necessary to secure adequate monetary conditions… SNB isn’t pursuing a fine-tuning monetary policy…; Will not exclude measures to secure price stability.
50% retrace of GBPJPY from 175.35 to 170.40 comes in just above circa 172.87-88..also falling trendline off that 175.35 high at same lvl
JP Morgan economist Ben Jarman says the surprise in terms of trade
for Q3 (+0.3% vs MNI median -3.5%) was the fact that implied export prices in
USD terms were flat, given the capitulation in prices for key agricultural
exports, in particular, dairy. According to him, dairy price weakness was only
partially reflected, with this group down 4.3%q/q in the June quarter. “Of
course, spot prices for dairy are down over 40%, and as we wrote in a research
note last week, unit prices in NZD terms are already down 19-26% as recorded in
Stats NZ’s own monthly trade data. So the relative stability in the terms of
trade in 2Q appears very much a timing issue. The weakness in prices is already
starting to be reflected in monthly trade outcomes, and will result in a
pronounced decline in the official terms of trade measure in 3Q,” Jarman wrote
in a note.
Fundamental levels (orders, options, technicals)
*Y105.44 2014 high – 2 Jan
*Y105.00 Offers on approach, barrier, stops
*Y104.84 23 Jan high
*Y104.50 Offers on approach, barrier, stops (Y104.49 – 25 Aug high)
*Y104.20/25 Medium offers, stops
*Y104.21 Intraday high Asia
*Y104.18 ***Current mkt rate***
*Y104.12 Intraday low Asia
*Y103.81 US low Fri
*Y103.50 Medium demand, stops (Y103.56 – 28 Aug low)
*Y103.40 Market stops
*Y103.20 Medium demand
*Y103.00 Strong demand, light stops
*Y102.97/89 21-day ma, 20 Aug low
*Y102.80 Strong demand
NOK; Vrey strong Norwegian data, Manufacturing PMI 51.8 up from a revised 50.8 in July. Again, this is in sharp contrast to the Swedish number which was significantly weaker than expected. We continue to target 8.10 in EUR/NOK and 1.14 in NOK/SEK
Taylor – The cycles tell us the dollar climbs to the start of December at a
minimum and possibly the first half of January. Our target is not
clear, but it looks higher than any others out there. The near term
cycles say dollar up today and part of Tuesday, then it declines to
early next week. We still expect the dollar to hold above 103.50 and
if it gets near that we would buy a ton. The next high for USD/JPY is
the start of October around 105.60. The move has all of the technical
bells and whistles working so we should pile on. And we do continue to
expect terrible fundamentals as well.
MS going long USD/CHF at 0.9170, s/l 0.9120, for 0.9300 as trade of the week

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