Ole Hansen
Saxo Bank’s head of commodity strategy Ole Hansen considers the implications of pledges by Saudi Arabia and Russia to raise oil production despite the likes of Iran and Venezuela not backing the move.
Article / 26 November 2012 at 11:18 GMT

Spain votes, Greece waits, Belgian caterers work hard: FX for now

Director / Accumen Management
United Kingdom

It seems nothing is going quite right in Europe at the moment. I know this is hardly news, nor has it been such for near on two years now, but the tempo with which this is starting to bubble over may certainly prove cause for concern. I speak predominantly of the Catalonian elections held on Saturday where the result yielded an overwhelming supporter base for further serious movement towards some sort of independent state and certainly referendum on the topic. Admittedly this whole process could well drag into late 2014, but with austerity measures, further liquidity and bankruptcy issues, not to mention social decay and disorder, I can’t help but feel that these separatists simply now just need to bide their time and the underlying social and economic tensions will do most of the heavy lifting for them in shifting sentiment.

Elsewhere in Europe, a Greek “conference call” on Saturday, produced (as always) nothing, and we wait again today for the Belgian caterers to serve tea and cake to the burgeoning group of Eurocrats gathering in Brussels for yet another pointless chit chat about whether or not to give Greece its much needed cash. The meeting starts around 12pm London time and a press conference is scheduled for very late tonight around 11pm London. Of course we can safely expect the afternoon session to be buoyed by misinformed leaks, rumours and subsequent denials, which could well reverse Friday’s unwarranted move higher in various risk assets and classes.

In the JPY universe, previously staunch rhetoric regarding what the BoJ and the new government are likely to do by way of fiscal and monetary policy has now somewhat been scaled back, and with it the last minute JPY shorts that were taken on so fervently in the last 10 days. There still loom a ream of stop loss orders in both USDJPY and more importantly EURJPY not far from current market, and one wrong glance from an evil prop trader at a tier 1 house will have many running for the hills in gapped fills.

Turning to price action on Friday... well someone clearly had an axe, and got their wish come true. The pace and uniform directionality of the overall move was a clear indicator of exactly how thin the market was and shouldn’t have come as a surprise given the four day weekend most Americans took last week on the back of the turkey-stuffed shenanigans.

As far as today is concerned, with a distinct lack of tier 1 data out, a market waiting for more Greek headlines and a risk rally that for now has smalls run out of puff we are likely to drift sideways until a headline bomb defines the next 20/30 points. I personally would expect a good chunk of Friday’s move to be given back before bargain hunters come back into the fray and allow for consolidation to begin at slightly lower levels. Direction for the remainder of the week is likely to be similar to that of Friday, however the pace and uniformity of the move, will be less than smooth.

In the meantime, good luck and helmets on.


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