Pivotfarm's blog

The European Union next week unveils its third broadside against credit rating agencies since the financial crisis began, and this time the Big Three face a direct hit where it hurts.

Thursday's mistaken downgrade by Standard & Poor's of France's sovereign debt won't help a sector seen by policymakers as an "oligopoly" that fomented and exacerbated market turmoil globally and more recently in the euro zone.

European Central Bank policy makers said the bank can’t do much more to stem the region’s sovereign debt crisis, suggesting they are reluctant to significantly ramp up bond purchases to lower Italy’s borrowing costs.

Italian borrowing costs reached breaking point on Wednesday after Prime Minister Silvio Berlusconi's promise to resign failed to raise optimism about the country's ability to deliver on long-promised economic reforms.

Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable, reflecting investors' concerns that they may not get their money back, a fear that also showed up in a jump in the cost of insuring against Italian debt default.

BNP Paribas SA and Commerzbank AG (CBK) are unloading sovereign bonds at a loss, leading European lenders in a government-debt flight that threatens to exacerbate the region’s crisis.

BNP Paribas, France’s biggest bank, booked a loss of 812 million euros ($1 billion) in the past four months from reducing its holdings of European sovereign debt, while Commerzbank took losses as it cut its Greek, Irish, Italian, Portuguese and Spanish bonds by 22 percent to 13 billion euros this year.

The global economy is showing signs of withstanding a European recession triggered by the debt debacle in Greece.

FX traders are gearing up to test Jun Azumi’s resolve to keep intervening in currency markets to weaken the yen from its postwar high.

While Japan’s Finance Minister directed the central bank on Oct. 31 to sell what analysts estimate was about 8 trillion yen ($102 billion), sending it down as much as 4.7 percent against the dollar, the move failed to increase volatility. Traders avoid currencies with increasing price swings because they boost the odds of sudden losses.

The U.S. jobless rate unexpectedly fell in October while employers added the fewest workers in four months, reinforcing Federal Reserve Chairman Ben S. Bernanke’s prediction of a “frustratingly slow” recovery.

Greece's government was on the brink of collapse on Thursday, casting doubt on plans to hold a referendum on staying in the euro zone, as European leaders contemplated a Greek exit to preserve their single currency.

Prime Minister George Papandreou's shock decision to call a referendum on Greece's bailout drew veiled threats from Germany on Tuesday and hammered markets edgy over the euro zone crisis.

A strong shift in sentiment against the Euro was the theme of yesterdays action, this has resulted in a big shift in retail positioning in the EURGBP today which went from over 60% of retail traders being short (and correct) to now over 60% being long (and wrong as they are most of the time). In keeping with our contrarian view we maintain a short bias on EURGBP.

While household-sentiment measures are at levels typically observed during a recession, an increase in spending during the third quarter boosted growth to the highest level of the year, Commerce Department figures showed Oct. 27. The schism partly reflects consumer ire with the government’s failure to reduce 9.1 percent unemployment or stem rising deficits, said James Paulsen, chief investment strategist at Minneapolis-based Wells Capital Management.

We ended last week with 88%+ of USDJPY traders long and wrong for many months now. Today Japan sold the yen for the second time in less than three months after it hit another all time high against the dollar last week.  As usual...retail traders are quickly moving position and we are seeing a strong drop in overall long positions to 70.83%. We expect this trend to continue but its important to note that past interventions haven't done a whole lot to stem the tide.

USDJPY continues to push the high 80s in terms of percentage of traders long. AUDUSD with 59.55% of retail traders short has pushed into the long bias zone.