Aussie

Is the dollar trending or is it moving broadly sideways?

Switzerland is the place that has traditionally stood above all the rest in its reputation for financial stability. Why? Because the currency was well-managed, the banking system was sound, and the country had a long tradition of treating capital well. Over the last few years, however, these advantages have collapsed. Just a small handful of countries inspire confidence in the marketplace. And the most popular seems to be Australia. Now, there’s really no such thing as a “good” fiat currency. But given such fundamentals, it’s easy to see why Australia is replacing Switzerland as a global safe haven.

It is the yen, not the dollar, that is the key currency in the foreign exchange market.  

• Finally the MSM catches up to reality: Workers Stuck in Disability Stunt Economic Recovery (WSJ)
• China opens Aussie dollar direct trading (FT)
• National Bank and Eurobank Fall as Merger Halted (BBG)
• Why Making Europe German Won’t Fix the Crisis - The Bulgarian case study (BBG)
• Nikkei hits new highs as yen slides (FT)
• Housing Prices Are on a Tear, Thanks to the Fed (WSJ)
• Why is Moody's exempt from justice, or the "Big Question in U.S. vs. S&P" (WSJ)
• Central banks move into riskier assets (FT)
• N. Korea May Conduct Joint Missile-Nuclear Tests, South Says (BBG)
• North Korea Pulls Workers From Factories It Runs With South (NYT)
• Illinois pension fix faces political, legal hurdles (Reuters)
• IPO Bankers Become Frogs in Hot Water Amid China Market Halt (BBG)
• Portugal Seeks New Cuts to Stay on Course (WSJ)

The downside technical correction in the dollar that we have been anticipating appears to have begun against most of the major currencies.  The drift lower against the yen over the past month has ended, and although we are skpetical of the impact of the stimulative monetary and fiscal policies in Japan, technically it is difficult to resist the momentum for additional yen weakness.  

• Helicopter QE will never be reversed (Evans-Pritchard)
• Bank of Japan Launches Easing Campaign under new leadership (WSJ)
• Draghi Considers Plan B as Sentiment Dims After Cyprus Fumble (BBG)
• Spain threatened by resurgent credit crunch (FT)
• U.S. Dials Back on Korean Show of Force (WSJ)
• Gillard Urges Aussie Firms to Emulate German Deutschmark Success (BBG)
• Bank watchdog warns on retail branches (FT)
• Xi's Russia visit confirms continuity of ties (China Daily)
• Portuguese Government Survives No-Confidence Vote (WSJ)
• Mortgage rates set for fall, Bank of England survey shows (Telegraph)
• Russia’s bank chief warns on economy (FT)
• Fed member hints at summer slowing of QE3 (FT)

An oveview of the technical condition of the major currencies.  Offered as a compliment to macro analysis.  

A review of the implications of the new deal struck on Cyprus. We think three of the worst pitfalls have ultimately been avoided--small depositors protected, orthodox seniority of claims respected, and extensive capital controls averted. The political will to preserve EMU has once again triumphed over ideological purity. We review the economic calendar for the week ahead.

An overview of the technical condition of the major currencies. See why we anticipate a heavier US dollar in the week ahead.

A weekly overview of the technical condition of a number of currencies against the US dollar. It is meant to compliment and supplement fundamental analysis. We retain a mostly favorable outlook for the US dollar, though skeptical of the scope for additional significant gains against the Japanese yen.

Here is a quick overview of what is going on. Besides reviewing the key developments, we explain why the EU Summit, which is not attracting much attention, is in fact important.

The Reserve Bank of Australia’s computer networks have been repeatedly and successfully hacked in a series of cyber-attacks to infiltrate sensitive internal information. The RBA disclosed to The Australian Financial Review (after their investigation) that multiple computers within the RBA’s network were had been infiltrated by a Chinese-developed malicious software. While no details were given on what information was stolen, a defense department official warned, that "the targeting of high profile events, such as the G20, by state-sponsored adversaries... is a real and persistent threat. Cyber intruders are looking for information on... the government’s intentions." The hack appears related to the 2011 G-20 summit, at which the French government have already confirmed over 150 computers were hacked for months with files "redirected to Chinese sites." Australia’s cyber-spy agency, the Defense Signals Directorate, said “there are many examples of [Australian] entities being targeted due to involvement in high profile events” like the G20. Currency wars meet cyber wars - or is it the other way around?

If Friday and yesterday it was Europe's reporting of ugly and below expectation economic data that pushed US stock futures ultimately higher, today it will be Europe's modest economic data beats that will send futures, where else, higher, and result in the Dow Jones breaking its nominal all time highs at the open or shortly thereafter. Following the Chinese economic update in its State of the Union address, which as we reported earlier, saw China set more moderate growth targets for itself resulting in the SHCOMP nearly wiping out Monday's losses, it was Europe's turn to shine which it did following the report of various Service PMI, which unlike last week's horrible manufacturing PMI data, were better than expected with the natural exception of Spain which printed at 44.7, well below the January 47.0, the first drop since September driven by the sharpest job losses since March of 2009, and Italy which dropped from 43.9 to 43.6, same as expected. The core countries' Services PMI beat: France coming at 43.7, on expectation of an unchanged print from last month's 42.7, and Germany printing at 54.7 vs also an expectation of an unchanged 54.1. Not very surprisingly, however, it was not the EURUSD which benefited the most from this data, which has lost nearly 50 pips from its overnight highs following the better economic news, but the various equity futures which have one centrally-planned goal: to take out all time DJIA highs or else, and unless something changes in the next three hours, precisely this will happen.

Today's drivers and their implications.

While the sell-side has been vociferous about the fact that earnings are troughing, that consensus growth expectations are not miraculous, that equities are discounting that awesome reality; it appears Goldman Sachs' 'Swirlogram" - which we initially discussed here - is pointing to what we have been seeing for months - a slowdown in their global leading indicator dead-ahead.