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Articles by Mark De La Paz

November 20th, 2014 @ 2:11 pm by Mark De La Paz

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Less than thirty minutes after the mixed US numbers and we have the dollar reversing its knee-jerk gains across the board with the Japanese Yen leading the charge reversing its earlier rally. Note that while the Weekly Claimant Count disappointed reading 291K against the consensus forecast of 285K markets were more interested with the inflation metrics that saw a slightly firmer read of 0.2% for month-on-month Core CPI and the headline figure coming in flat zero against expectations of a contraction of -0.1%, stronger triggering the dollars jump.

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A second look at the numbers however suggests this does not change the dynamics as far as expectations of Fed action are concerned. The labor market continues to recover yes but is far from overheating as the claimant count showed while inflation levels are far from reads that require a close eye of the Fed on borrowing rates.

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November 19th, 2014 @ 9:40 am by Mark De La Paz

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Knee-jerk response to the BoE minutes has been for a big surge despite the lack of changes in the number for the votes with an as expected 7 unchanged and 2 hikes in the split with McCafferty and Weale still calling for a tightening. Note however that contrary to the recent forecasts by the BoE of a benign inflation scenario, the minutes actually spoke of the slack in the economy as likely to disappear soon which in our world we see as a precursor for inflation. however things turnout in the future for now we have a case for a stronger BritishPound.

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At this point, we have already nearly seen as much as the daily average range in Cable though this turn of events suggest we may be seeing more. As it is the news could provide a turning point for GBP with recent lows likely defining the near to medium term trough. For now look for a buy on dips to the 1.5625 region. Given the time we have spent at the lows risks going forward calls for some mean reversion to the 21D EMA for the rest of the week.

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November 18th, 2014 @ 11:18 am by Mark De La Paz

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On a day of broad dollar weakness Euro has managed to make the most of its respite following better than expected soft economic data that saw the ZEW Economic sentiment Index up 11.0 for the region against consensus forecasts of 4.3 and the prior 4.1 while Germany’s own figure also exceeded expectations an even better 11.5 against the 0.9 bounce market was looking for. Note we appear to be seeing a near term bottom off recent lows as markets may have aggressively priced in the notion of us tightening and real European quantitative easing.

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From the chart the argument of a near term low will require a clear push past the 21D EMA a close above the said 1.2544 region suggesting markets should look at 1.2611 next, a previous consolidation floor. Key for us however will be a 38.2 Fib retracement of the sell-off from July at 1.2871. Interestingly it appears that with todays price action we are now forming a bullish divergence in the weekly charts even as the candlesticks have been hammer’s reinforcing the whole idea.

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November 14th, 2014 @ 11:19 am by Mark De La Paz

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Knee-jerk reaction to the slightly better than expected GDP figures out of Europe has been limited with attempts to move up failing to push the days highs ahead of what could be more significant US results. Note While European CPI was inline with expectations at 0.4% year-on-year we had final GDP surprising on the upside to read 0.2% quarter on quarter and an annualized 0.8% against expectations of 0.1% and 0.7% respectively. Unimpressive numbers still for an economy that should be coming out of the trough.

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Ahead we will be looking at some critical US data with Retail Sales expected to bounce off the previous months contraction. Consensus forecast for the core figure has us looking for an 0.2% with the headline numbers seen reading the same. We of course would like to see reads topping these expectations as the jobs market has continued to expand strongly. Note the US economy is mostly consumption driven thus we would attach a lot of significance to a strong read and would start looking for new highs in the greenback.

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November 12th, 2014 @ 10:59 am by Mark De La Paz

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After the pre-release jitters which saw Cable firmer across the board reality appears to bite seeing a reverse of the earlier price action and then some. Again disappointing fans of the BoE rate hike story for H1 in 2015 we had the latest BoE inflation report actually painting an opposite picture of what Cable bulls need. In its latest assessment the BoE according to Governor Carney sees the possibility of stagnation in Europe and the UK economy weighed along with it. While the UK expects to continue its path to normalization, i.e. no more Asset Purchase Facility hikes or rate cuts, it is clear that we are unlikely to see the UK raising rates along with the US. Note CPI expectations for 2015 has been cut to 1.4% against the earlier forecasts if 1.7% heading to the lower boundaries of its assymentric target, 2.0%. This as outlook for the economy as a whole has weakened inline with the Euro area’s downside risk amd a moribond global economy.

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Technically it looks like wewill be heading back to the swing lows after all. Setting sights again to the 1.5789 area.

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November 12th, 2014 @ 10:02 am by Mark De La Paz

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Less than an hour from the days big event we have Cable gaining ground across the board even bouncing against the dollar which has shaken off the NFP funk to focus on promises of a tightening from Charles Plosser. While the UK is actually seen among those that should pace the US once monetary policy begins to normalize we note that the disappoint from before over the failure to actually communicate such an approaching policy shift by Governor Mark Carney has lead to an extreme sell-off from the highs of 1.7191 back in July to just around the consolidation floor for the September-November period from last year. For now we are seeing some speculation that the inflation report will provide hawks some more excuse to sound the alarm thus the current position squaring of prior shorts. Note we already have two hawks within the MPC who have consistently been voting for a tightening, the inflation report may lead to a third such voice in the next meeting.

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November 12th, 2014 @ 8:25 am by Mark De La Paz

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With very little in the data calendar to move the market the Fed’s usual hawk, Philadelphia Fed Pres. Charles Plosser is stirring the pot with his standard comments though this time from across the pond in London. Mr. Plosser is predicting rate hikes by the Fed next year which is already a given for the market though as usual calling for early preparations for the eventual move. He describes the US economy as having progressed well to the Fed’s objectives and sees US GDP pushing 3% once data goes out for H2 and well into next year. The latter is interesting because for a large developed economy like the US such a read would suggest that main street will soon be feeling the recovery hopefully not in the form of ¬†inflation.

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For the markets we are already seeing earlier dollar losses being reversed though this is a far cry from a ground breaking news event where we would expect to see new highs for the greenback. For now we do not expect things gaining traction.

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November 10th, 2014 @ 8:36 am by Mark De La Paz

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A weekend after the mixed US Jobs numbers we have the majors opening firmer against the dollar with some minimal gaps but largely unable to get a follow through to the dollar dumping response. Recall Friday’s figures saw the Non-farm Payrolls figures short of consensus at 214K against expectations of 235K with some upside revision to the prior read to 256K. Meanwhile the household survey side of things saw the Unemployment Rate improving, down to 5.8% against expectations of a steady 5.9% print. Note Friday’s knee-jerk action suggested then a lot of confusion before finally resolving into dollar weakness. While indeed we saw a weak print for NFP it should be pointed out that sustained reads of above 200,000 are still to be considered impressive with historically very little period that could be considered comparable.

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Ahead with very little in the way of market catalyst and Friday’s dollar dumping likely more of position squaring given the pre-release gains, i.e. “buy the rumor, sell the fact” we expect market to remain technical with limited potential for dollar loses.

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