30th June 2011
Currency overview
Focus on the Euro vs. the Swiss Franc (EUR/CHF)

The Euro vs. the Swiss Franc has staged a modest comeback over recent days and is trading just shy of the 1.2100 handle this morning. The catalyst for these moves has been the naive euphoria surrounding developments in Greece. Yesterday the Greek parliament voted to implement the next round of austerity measures.

Thoughts from the trading floor

The EUR/CHF is trading just above the 1.2050 handle, with the record low being marked around the 1.1800 handle. The recent failure from the 1.2320 level marks this as a good short term resistance. Also the 1.2400-27 level is the major resistance and short-term market pivot. If bulls are to avoid further liquidation they must look to take back this area of the market. Below here, it remains liable to big capitulations, as seen yesterday. Technically, the market looks set to continue to trade lower, with the break below 1.2400 marking the potential of this next leg lower to be aggressive and violent in its nature. Invariably this will mean that choppy price action will be seen until the market can make a clear run away from the 1.2400 handle. Immediate term resistance above the 1.2100 handle is 1.2142-50. Bears looking for the market to make successive lower highs on the weekly timeframe must look to defend this level. Thus a short position around here with a tight stop has a favourable risk/reward. If this level holds, look for the 1.1800 handle to give soon. A move through here would mean that the market has formed an outside bar on the weekly charts, which also coincides with an outside week on the German Bund. Thus a move through the 1.2150 handle and a break of this week’s lows in the bunds may signal an extended move higher for the EUR/CHF with a target of around the 1.2400 handle.

Yesterday saw the Greek parliament pass the new austerity package in order for Greece to clam its next round of aid tranche form the EU and IMF. There is talk that the EU are looking into further aid, with the most likely outcome to be fresh loans to Greece combined with some sort of decent Private sector involvement. There has been talk that the Eurozone countries will encourage the Greek debt holders to roll over maturing debt into longer term durations to help with Greece’s insolvency issues. Also Greece is being encouraged to speed up privatisation measures to raise capital.
Although, ultimately this measure will be just another case of “kicking the can down the road”, the short-term reaction for the markets is likely to be risk friendly. It seems at the moment that the EU is looking more towards the restructuring/re-profiling route and are trying to figure out a way to do so without leading to a technical default.

Bull View

The bulls will look for the market to stabilise around the current levels before the market can stage a comeback. A move back through the 1.2500 handle should stabilise the market.

Bear View

The bears will look to maintain pressure below the 1.2400 handle. The market has consistently made lower highs and lower lows on a weekly/monthly basis since 2010, and below 1.2403-89 the market remains liable to a fresh and violent leg lower over coming weeks.

Futex View

We favour the short, medium and long term bears. We feel that the Eurozone debt crises will approach the endgame scenario heading into the coming weeks.

21st June 2011
Bond Overview

The German Bund markets have continued to see consolidation over the last week, albeit with an upward trajectory. The market made a high last week around the key 126.50-62 area. The Eurozone peripheral situation remains a worry for markets and has kept the Bund firm despite the strength seen in risk over the last 2 days.

Thoughts from the Trading Floor

From a technical perspective, German Bunds have potentially staged a key weekly reversal. The market has recovered from firm support at 3.5%, which coincided with the 119.85-95 area, and has closed in on the 3.00% yield level. This is a crucial medium term pivot for the market. If prices can continue through the 2.94-96% yield level, the market signals that it may have turned in the medium term to a firm bullish stance. Although we would expect the market to be relatively choppy around this level until we can get a firm confirmation. The market is also interestingly poised in the short-term. The 2.96% yield level is the 38.2% retracement of the move from the August 2010 yield lows to the recent yield highs at 3.5%. This area remains important for the short-term. Despite multiple attempts to breach this area the market has stalled, although it has been unable break support around the 126.00 handle and thus is likely to push higher soon.

Tonight sees an important vote of confidence for the Greek PM by the Greek parliament. The condition for the Greeks to receive the full allotment of the next trance of aid form the EU and IMF depend on whether Greece can pass the next round of austerity measures and thus this vote of confidence is important. If, as expected, it passes without any issues and the Greeks pass new austerity measures it is likely that the Greeks will also receive a new bailout package to supplement their existing package. There has been talk of this being around $150 bln. Thus if the vote of confidence passes we may see Bunds have a deep retreat from the current levels. However, over recent days we have seen a side story with the other peripheral bonds taking a hit. Portuguese 10yr bond yields hit Euro lifetime highs. Thus it seems that the markets have been pricing in a contagion risk and those peripheral bonds are likely to come under pressure regardless of the conclusion reached with regards to Greece. Also, of more concerning, we have started to see interbank lending rates edge higher raising fears of a credit crunch type scenario. This needs to be monitored very closely. These factors should be supportive of Bunds on deep retracements lower.

Bull View

Bulls will need to protect the 124.37 level if they are to build a base for further short-term bullish action. The market has now built value above here, and thus any deterioration to back below here may be significantly worrying for bulls.

Bear View

Bears will need to protect the 126.62 level. The market has yet to make a convincing breach of the 2.94%-2.96% yield area. If this is achieved they will need a swift move to back below the 124.37 level in order to signal that the recent move higher was potentially short-term corrective action.

Futex View

We are bearish the German Bund in the medium- long term. The market has settled into a steady rhythm of weekly lower highs and lower lows since making the August 2010 highs. However, the ongoing issues in the Eurozone leave us to believe that a good short-term run higher is likely. If the bunds breach the 2.94-96% yield level or if the Eurozone debt issues deteriorate further we should see the medium term outlook adjust accordingly.

Overview

In the last week we have seen a huge spike in the VIX Index as panic has once again taken hold of the world financial markets. (more...)

Overview

Over the last five days we have seen the Bund rally aggressively and in doing so break all time highs, trading 126.59 yesterday afternoon. (more...)

Overview

Over the last five days trading conditions have been choppy as we have seen volatility increase. Despite the ongoing concerns in Greece (more...)

This month we have managed to drag Olly Thomas kicking and screaming away from his screens and the Greek Sovereign debt crisis to talk to us about his trading. Olly joined Futex in 2007 and currently trades the Bund.

(more...)

20^th January 2010

Currency overview

Focus on the Euro (EUR/USD)

The Euro has continued to be under-pressure this month, a follow on from the bear trend it had settled in over the course of December. Whereas most USD crosses the USD had retraced the best part of the moves seen over December, the Euro only just managed to retrace to the significant 38.2% Fibonacci level. The start of this week has thus seen the market move markedly lower. (more...)

8^th December 2009

Bond Futures

Overview

Over the last five days we have seen the Government Bond futures under pressure as fears surrounding Dubai waned and a strong payrolls number increased fears surrounding the timing of monetary policy unwinding. This week could be relatively quiet in comparison but it is worth noting there are several large US supply auctions and that the German bond futures roll today. (more...)

17^th November 2009

Bond Futures

Overview

Last week was quiet in terms of economic releases although we did see 3 large auctions in the US. Demand for these was seen as satisfactory by market participants and commentators although they provided little more than volatility for short term participants. Over the last five days we have seen the Bund predominantly trade sideways with the exception of yesterday morning when fears surrounding Greek government bonds provided the stimulus for an aggressive 60 tick drive higher.

A similar sideways trading pattern has been seen in the US Ten Year although a significant rally was seen last night on the back of some dovish comments out of Fed Chairman Ben Bernanke.

(more...)