COMMERZBANK - Sold EUR/USD From 1.3490, Sold Cable From 1.6220

EUR/USD’s recent high at 1.3584 is viewed as an intermediate peak, notes Commerzbank

"We look for the 1.3295/94 zone to be retested (current November low and the 50% retracement of the move up from July) and would again allow for this to hold the initial test. However following Wednesday’s key day reversal to the downside the risk has increased for a break lower to the 200 day moving average at 1.3219 and below here we target the 1.3167/05 region which is made out of the 61.8% retracement and the September low," CB outlines its immediate bias on the pair.

In line with this view, CB entered into a fresh short EUR/USD from 1.3490 with a stop at 1.3585, and a target at 1.3220.

Meanwhile, CB notes that GBP/USD continues to push into the upper echelons of its trading range, notes Commerzbank.

"We are not clear at this stage if this is a potential top or not but we are biased towards the top theory, given the 4 year downtrend is located just above here at 1.6305. As a consequence we continue to look for failure at the 1.6256/59 recent highs," CB outlines its immediate bias on the pair.

In line with this view, CB attempted tiny GBP/USD short from 1.6220 with a stop at 1.6370.

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CITI - Added More JPY Shorts To Its Overlay Portfolio

Citi maintained most of the positions in its overlay portfolio for the coming week with only adding more downside JPY exposure and NOK upside as an offset.

"This week one of the notable themes has been Yen depreciation. No specific catalyst caused the initial move, but weaker than expected trade data, and technicals have most likely intensified the selling. We expect Yen selling to continue and have therefore decreased our positioning by 5 (now -10)," Citi clarifies.

"We see some upside risks for NOK, as resilient risk sentiment and a less dovish Norges Bank alleviate concerns over weak external economic activity," Citi adds.

 Citi's portfolio’s rolling one-year return is -0.46% while its annualized volatility of daily returns on a rolling one-year basis comes in at 2.89%.

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UBS - Keep Buying USD/JPY Dips Into Next Wk; Sell EUR/USD On 1.3460 Break

Once again the main indicator for yen's move was the Nikkei as futures were up 1.5% when USD/JPY traded up to 101.36, but it's Friday, and after a few days of one-way street, some profit taking kicked but USD/JPY is back trading comfortably above 101, notes UBS.

"Expect 100-101.50 range going into Thanksgiving Day end of next week with a favour of buying dips. 100.60 is the first support, then 99.70/80 in the "bigger" picture. Topside should be 101.40/50 as 101.39 is the 76.4% retracement of the May-June correction and 101.54 is the July 8 high," UBS adds.

For EUR/USD, UBS thinks that it could come under renewed pressure next week especially giving the recent reports about the ECB considering negative rates on bank's excess cash

"We look to be short some EURUSD on a break of 1.3460 and adding to that, if it breaks through 1.3400," UBS recommends. 

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GOLDMAN SACHS- Why We Don't Expect Pronounced Dollar Strength N-Term?

In the near to medium term, Goldman Sachs projects that European currencies still have some scope to strengthen against the USD and may generally outperform in the near term until EUR appreciation forces the ECB to act more strongly to limit the tightening of financial conditions. In line with this view,GS expects EUR/USD to trade around 1.38, 1.40, and 140 in 3, 6, and 12 months.

"The reason why we do not expect very pronounced Dollar strength during that phase is quite simply that accelerating growth in the US would also trigger a renewed deterioration in the current account position. Moreover, improving risk sentiment in the US, together with stable growth in the rest of the world, often leads to increasing overseas allocations by US investors. These balance of payments dynamics will – as in the past – limit the ability for the Dollar to outperform strongly," GS clarifies the main rationale behind this view

However, as we go through 2014, GS expects markets will focus increasingly on the FX impact of reduced monetary accommodation, although they expect this to become a bigger theme in 2015.

"When we look out a bit further towards 2015 and 2016, the exit strategies from ultra-accommodative monetary policies will become a key driver of FX markets. Our assumption is that better growth in the US and possibly in the UK will lead to a steeper, and probably earlier, tightening from the Fed and BoE than from the ECB. No policy tightening is expected in Japan in the foreseeable future. Most other central banks are likely to struggle to tighten their monetary policies in a meaningful way before the Fed. As a result, we see moderate Dollar strength from 2015 onwards," GS projects.

In line with this view, GS expects EUR/USD to trade around 1.35, 1.25, and 1.20 by end of 2015, 2016, and 2017.

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November Hasn't Been A Great Month For The Global Economy

For the most part, October was a pretty good month for the global economy. Most economic reports reflected resilience despite elevated political uncertainty and a lengthy government shutdown in the world's largest economy: the U.S.

"Did the consumer even realize there was a federal government shutdown?" asked Mitsubishi economist Chris Rupkey after Wednesday's extraordinary October retail sales report.

However, the early November readings on the economy are looking a bit jittery.

First, we just learned that China's HSBC Flash manufacturing PMI missed expectations and fell to a two-month low of 50.4 in November from 50.9 in October, signaling a significant deceleration in growth.

"Although the headline figure of 50.4 still indicated expansion, we caution that the acceleration trend of activity growth is reaching its end," warned Societe Generale economist Wei Yao.

Then there was the euro zone, whose Flash Composite Output Index fell to 51.5 in November from 51.9 in October. Economists were expecting a reading of 52.0.

“Any improvements were largely confined to Germany, where the PMI has notched up the best growth since mid-2011 so far in the fourth quarter, signaling a 0.5% increase in GDP," said Markit economist Chris Williamson. France, on the other hand, showed further signs of being the sick man of Europe‟ with output showing a renewed decline and raising the risk that GDP could fall again in the fourth quarter, constituting a renewed recession. Meanwhile growth outside the big two‟ slowed to near-stagnation.”

Later today, we'll get the U.S. Flash PMI report. Let's hope this doesn't turn into a trifecta of bad news.

Read more: http://www.businessinsider.com/china-euro-zone-economic-warning-signs-2013-11#ixzz2lJiPAeuv

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BARCLAYS: Sell AUD/USD Into RBA & FOMC Minutes

Investors following short-term macro strategies should consider selling AUD/USD this week, advises Barclays Capital in its weekly FX pick to clients. The trade is a tactical short around the minutes of the RBA and the FOMC this week.

"The RBA communication this week is likely to weigh on the AUD. Minutes from its November policy statement (Tuesday) are likely to reiterate the central bank’s concerns about the high level of the AUD. In addition, Governor Stevens is scheduled to speak on “The Australian dollar: Thirty years of floating” (Thursday). The governor will probably go on to argue that in the current circumstances, a lower exchange rate would help the economy deal with the end of the boom in mining investment," Barclays clarifies.

"As for the FOMC minutes (Wednesday), the focus is whether there is any discussion of lowering unemployment rate threshold and if so, the degree of consensus. We believe the Minutes will show such a policy move is not an imminent, and some knee-jerk USD buying is likely, given that recently published Fed Staff papers raised expectations for doing so," Barclays adds.

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What Yellen Didn't Tell Congress And Why It Matters

WASHINGTON (Reuters) - The most revealing thing about Janet Yellen's widely praised Senate confirmation hearing performance last week might not have been what she said, but what she didn't say - and how she didn't say it.

President Barack Obama's nominee to be the next chair of the Federal Reserve smiled and nodded her way through a two-hour hearing on Thursday without giving the Senate Banking Committee any real clues as to how she views near-term monetary policy choices.

She made plain that she thought it important to maintain aggressive efforts to spur U.S. economic growth and hiring. But her comments went no further than last month's statement from the Fed's policy-setting committee.

Senators asked her how long the central bank could keep buying bonds, and seemed satisfied with her mild observation that purchases could not go on forever. She provided no clues to whether she leans toward reducing them next month, or next year.

Economists had not expected her to intentionally front-run decisions yet to be made by the Fed's policy-setting committee. For one thing, current Fed chief Ben Bernanke doesn't step down until January 31. Yellen is expected to comfortably secure confirmation by the full Senate to replace him.

But successfully parrying questions before Congress without accidentally hinting on future policy was seen as an important first success for the 67-year-old former professor.

"She understood how to give an answer that was at least somewhat responsive to the question, without betraying any new information. It was an impressive performance," said Stephen Oliner, a former senior Fed economist.

A second thing she didn't say anything about was her view on strengthening the Fed's forward guidance on when it might eventually raise interest rates.

Here she owes a big assist to the senators. No one asked about it even though speculation is rife that the Fed will soon decide to keep rates near zero at least until the jobless rate drops to 6.0 percent. Its current threshold is 6.5 percent.

Still, Yellen's performance on other issues left little doubt that if she had been asked, she would have offered an even-handed discussion on the economic literature around the issue, with scant information on where she stood.

That was how she dealt with the query from Virginia Senator Mark Warner on lowering the interest the Fed pays on the excess reserves it holds for banks, which some officials think would be a way to give the economy a bit more stimulus.

Yellen explained the pros and cons, reminded lawmakers that reducing IOER, as it is called, could be problematic for the money market mutual fund industry, and left them none the wiser.

YELLEN FED

Keeping calm under pressure is an important quality for a successful central banker.

Fed watchers reckoned that it took Bernanke a year to really settle into the role, and recall the tell-tale quaver in his voice that betrayed the strain of being grilled by lawmakers.

To be sure, Yellen got far kinder treatment than Bernanke often received. Perhaps that was because the Fed's Republican critics did not want to be seen baiting the first woman nominated to lead the central bank. Or perhaps they felt it would draw attention away from Obama's health care woes.

But there was also interest in whether her reticence on shedding light on future policy might reflect a desire to avoid building expectations, which her colleagues at the Fed would subsequently have to either validate or ignore.

In essence, will the Yellen Fed be more like the Bernanke Fed or the Fed under Alan Greenspan? Greenspan was much more likely to offer clues on where he wanted to lead policy.

"Greenspan would give a little wink and nod and then the committee would have to go along after the fact," said Michael Feroli, an economist at JPMorgan in New York.

"It is a probably good thing for the committee overall that she can sit in front of Congress and answer questions in a way that does not make the committee feel like their next move has to deliver on expectations set by what the chairman had already said."

(Reporting by Alister Bull; Editing by Tim Ahmann and Chizu Nomiyama)

Read more: http://www.businessinsider.com/what-yellen-didnt-tell-congress-and-why-it-matters-2013-11#ixzz2kvZ9z9ji

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Here's Where Investors Think We Are In The Global Economic Cycle

According to BofA Merrill Lynch's November Global Fund Manager Survey, a majority of investors believe the global economy is half-way from the last recession to the next one.

"With respect to the economic cycle, an overwhelming 54% of investors think the global economy is in mid-cycle," write BAML strategists in a note to clients. "Only 1% thinks we are currently in recession."

The remaining 45% are split pretty evenly between "early cycle" and "late cycle."

The chart below shows fund managers' monthly views on where the global economy is in the business cycle going back to 2004.

A key inflection in views seems to have occurred in the summer of 2012, when European Central Bank president Mario Draghi reassured market participants that the ECB would do "whatever it takes to save the euro," and just before the Federal Reserve launched its third round of quantitative easing.

That's when the percentage of fund managers perceiving the global economy as in a "late cycle" stage began falling, and the percentage of fund managers perceiving the global economy as in a "mid cycle" stage began rising.

Read more: http://www.businessinsider.com/current-position-global-economic-cycle-2013-11#ixzz2kTIzTJYG

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The #1 Thing Hedge Fund Managers Are Worried About Right Now

The results of BofA Merrill Lynch's November Global Fund Manager Survey are out.

Each month, the survey asks clients that manage hedge funds, institutional funds, and mutual funds what they perceive to be the biggest "tail risk" to markets — i.e., which low-probability event would have the biggest impact on the way investors are positioned?

Last month, amid the government shutdown in the United States, it was U.S. fiscal tightening.

This month, it's China once again.

"With the US govt shutdown & debt ceiling debate behind us, investors are now most worried about a China hard landing and/or collapse in commodity prices," write BAML strategists in a note to clients.

Read more: http://www.businessinsider.com/china-the-biggest-tail-risk-to-markets-2013-11#ixzz2kSuJmpsQ

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ECB May Soon Join The Flight Of The Doves

Even as the euro zone economy shows faint signs of stirring, the European Central Bank is likely to send a dovish message this week that more monetary help will be on the way before long.

After a plunge in inflation to 0.7 percent in the year to October, well below the ECB's target of just under 2 percent, UBS and RBS are among those who reckon a rate cut could come as soon as Thursday's policy-setting meeting.

At the very least economists expect ECB President Mario Draghi to indicate that the balance of risk has tilted toward further easing, partly because the recent strength of the euro will hurt exports with a lag.

But many believe it would make more sense for the ECB to hold fire until December, when the bank's staff updates its growth and inflation forecasts.

"A significant downward revision to its inflation number for next year - let's say at or below 1 percent, from 1.3 percent currently - may push the ECB to act," said Giuseppe Maraffino, a bond analyst at Barclays.

ALL OPTIONS OPEN

A cut in the ECB's main refinancing rate, now at 0.50 percent, would have the greatest headline impact.

Other options include a reduction in the deposit rate to below zero, which would have a bigger effect on money market rates, or a promise of another long-term refinancing operation to ensurebanks have plentiful liquidity.

Sarah Hewin, an economist with Standard Chartered Bank in London, agreed that disinflation made the case for a rate cut more compelling. But she said there were signs the euro zone'seconomy was turning up.

The ECB's latest bank lending survey provided evidence that credit constraints might soon ease, while struggling members of the euro zone periphery appear to be touching bottom. Spainreturned to modest growth in the third quarter.

"We haven't changed out forecast, which is for no rate cut, taking into consideration way the ECB has approached policy previously," Hewin said.

Although the strong euro might be weighing on prices, the drop in inflation fundamentally reflects immense slack in the euro zone. Unemployment in September was a record 12.2 percent.

Other central banks are also grappling with sub-par growth, reduced pressure on commodityprices because of slower Chinese demand and improved energy buffers, notably in the United States, said Alan Ruskin, chief currency strategist at Deutsche Bank in New York.

"Though a few central banks will write off disinflation as a lagged response to output gaps, generally G10 monetary policy will remain easier for longer on a global scale," he said.

ALL EYES ON CHINA'S PLENUM

Economists unanimously expect the Bank of England this week to keep its short-term policy rate at 0.5 percent and its asset purchases at 375 billion pounds, even though the British economy has logged two consecutive quarters of robust growth and house prices are surging in and around London.

And many believe the Federal Reserve, which held policy unchanged last week, is unlikely to start reducing its bond purchases from $85 billion a month until 2014, not least because economic statistics have been muddied by last month's partial government shutdown in a row over the federal budget.

Friday's U.S. employment report for October is likely to show that nonfarm payroll growth slowed to 125,000 from an already unimpressive average over the previous three months of just under 150,000.

Economists polled by Reuters are also forecasting the unemployment rate to tick up to 7.3 percent from 7.2 percent.

Julia Coronado with BNP Paribas in New York expects employers to have added only 100,000 jobs, partly because the government closure slowed private sector hiring momentum.

"Coming as it will with the slowing in the interest rate-sensitive sectors of housing, businessinvestment, and auto sales, such a reading would effectively eliminate the possibility of a December taper," she said.

With the Fed waiting to examine ‘clean' data, the preliminary report of third-quarter GDP will be less important than usual. Economists expect a growth rate of 1.9 percent, down from 2.5 percent in the April-June quarter.

Far more important in the longer run for the global economy will be a gathering of the Chinese Communist Party's Central Committee to plot economic strategy for the next few years.

Whereas Western central banks have embraced forward guidance with gusto, the CCP remains frustratingly opaque: expectations that the November 9-12 meeting will provide a blueprint for policy reform are likely to be disappointed.

The key gauge of success should be whether the leadership presents a coherent plan to shift the economy from investment to consumption that can provide clear direction to officials over the years ahead, according to Nicholas Consonery and Michal Meidan with Eurasia Group, a consultancy.

"By contrast, a piecemeal approach would signal that the leadership has been unable to agree on a framework for how reform should progress," they said in a report.

(Editing by John Stonestreet)

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BARCLAYS: Sell EUR/USD Into ECB, Sell USD/JPY Into NFP

Investors following short-term macro strategies should consider selling EUR/USD and selling USD/JPY this week, advises Barclays Capital in its weekly FX pick(s) to clients. 

On the EUR/USD trade, it's a tactical short into the ECB meeting on Thursday. Barclays' rationale behind this call is as follows.

 "Although market expectations for ECB action (Thurs) have grown due to the weak inflation print, we think a December move is much more likely than at next week’s meeting. As such, an unchanged rate setting may lead to a knee-jerk EUR/USD move higher. However, we expect dovish rhetoric at the press conference from ECB President Draghi to keep a December move in play. We would therefore recommend using any EUR rally as a better entry level to re-engage in EUR/USD downside," Barclays clarifies.

On the USD/JPY trade, it's a tactical short into the US jobs report on Friday.  Barclays' rationale behind this call is as follows. 

"We look for headline NFP of 125K and unemployment rate of 7.5% (consensus: 125K, 7.3%). While the three-tenth rise in unemployment rate we expect is due to the federal government shutdown and transitory, knee-jerk USD selling is likely post-data release," Barclays adds.

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INTERVIEW: The World According To Jim Rogers

Back in 1970, Jim Rogers, along with George Soros, founded the Quantum Fund, which went on to be one of the most successful hedge funds of all time. Ten years later, Rogers “retired” and set out to travel the world by motorcycle “to learn what people and countries were doing and to see how well they were doing it.” In the years since, Rogers has written six books, appeared frequently on television and made two more globetrotting treks. Mike Wilson, chief investment officer of Morgan Stanley Wealth Management, recently spoke with Rogers about the state of the world. The following is an edited version of their conversation.

MIKE WILSON (MW): We are coming out of the economic crisis. Where do you think we’re going?

JIM ROGERS (JR): The world is floating on a huge sea of artificial liquidity—the first time in recorded history that every major central bank is printing money as fast as it can to debase its currency. The people getting that money are happy, but the rest of us are going to have a problem down the road because the debt is going through the roof. When it ends, some people are going to get hurt.

MW: There’ve been pockets of deleveraging debt through default, etc., and [there are] folks who say we’re in a “new normal”—maybe 10-plus years of 2% GDP growth in the US, maybe lower in some underdeveloped regions. Is that a possible outcome, or do you think it has to be reconciled with another crisis?

JR: Throughout American history we’ve had economic slowdowns every four to six years, and that’s going to continue, but America is now the largest debtor nation in the history of the world. In 2001/2002, we had a slowdown. The 2007-to-2009 slowdown was worse because the debt was higher. The Federal Reserve has quadrupled its balance sheet in just five years—staggering for a central bank. US debt has more than doubled. I’m afraid the next time around is going to be much worse.

MW: Do you think we’re getting close to a slowdown?

JR: There is some skepticism— people worried the high might end anytime. But what’s happened historically is everybody agrees that happy days are here again and we’ve solved our problems. Back in 1999/2000, people got excited, but even then it went on much longer than expected, and the NASDAQ doubled in less than a year. We can have some big moves, especially toward the end. As Keynes said, the market can stay irrational longer than you can stay solvent.

MW: Are there pockets that still look attractive with or without this liquidity? 

JR: I find unpopular things and see if there’s a reason to buy them. Russia is one of the most hated economies, and greatly depressed, so I’ve been buying there. Likewise, sugar is down 75% from its all-time high—not a popular place to be—but I think positive thingsare happening. The Chinese market is down maybe 60% or 70% from its all- time high of nearly five years ago. I don’t usually buy China except when it collapses, but there are some opportunities. In 2012 the Chinese government decided they wanted to emphasize the renewal of Chinese culture and make it grow 20% a year. They’re also putting a huge emphasis on railroads, and their railroad technology is probably now the best in the world.

MW: In 2007 you said that if you were smart in 1807, you moved to London; if you were smart in 1907, you moved to New York City; and if you’re smart in 2007, you move to Asia. Do you still feel that way about Asia?

JR: I did move to Asia (Singapore) in 2007 because I wanted my children to grow up speaking Chinese. Another historic shift is taking place. The largest creditor nations are China, Korea, Taiwan, Singapore, Hong Kong, and Japan—the assets are in Asia now. As America goes deeper into debt, the Asians are going deeper into solvency.

MW: Do you think Japan can turn the corner, or are they going to be a victim of the liquidity pump?

JR: I sold all my assets in Japan, but I’m starting to look again. I think I sold too soon. That market is still down 60% or 70% from its all-time high. My view is that we’ll look back in 20 years and say the final deathblow for Japan was [Prime Minister Shinzo] Abe and his policies. In the meantime, he is printing and spending huge amounts of money. He just gave Japanese citizens around $10,000 of tax-free investments if they invest in the stock market.

MW: Why is gold weak, and do you think it will stabilize given the acceleration in money printing?

JR: Back in December 2011, I was quite vocal that $1,200 [an ounce] wascoming. One guy wrote that I was demented—but gold did go to $1,200 and I bought a bit more. I haven’t bought any since but I’m planning to if it goes under $1,000. I have owned gold for many years and haven’t sold an ounce, same with silver. One reason I’m waiting is I know of no other asset in world history except gold that’s gone up 12 years in a row without a decline. I think it’s having a correction that will also be different from most. The other reason is India, which has been the largest buyer of gold in the world. The Indian government is blaming its balance-of- trade problems on gold—the country’s second-largest import after oil. They can't stop oil imports so they’re attacking gold. They added taxes. They made it hard for people to buy gold or for banks to lend against it. Now they’re trying to get people—and even temples—to sell gold, which would be a huge shift. You’re taking the largest buyer of a product out of the market and maybe even turning it into a seller. If that happens, who knows how low gold could go. Even in bull markets, 50% corrections are common.

MW: What’s been the biggest change in the last 15 years for hedge funds?

JR: The staggering amount of competition. With thousands of hedge funds around the world, performance has gone down dramatically. I’m not even sure the average hedge fund keeps up with the market these days. Throughout history, when everybody jumps into something, it’s more likely a good time to get out. There are plenty of smart people who can make fortunes in the investment community, but I don’t know who they are right now. You’ve got to be very careful finding the right smart person.

MW: How has market liquidity been affected in the last few years because of the increase in regulation? Does it concern you more than it has in the past from a trading perspective?

JR: I’m not particularly happy about what’s going to happen. Historically, we’ve had long periods when the financial types were the masters of the universe followed by the producers of real goods, then followed by the financial types again.

When I went into the stock markets in the ‘50s, ‘60s and ‘70s, Wall Street and the City of London were backwaters—a big trading day was 3 million shares [in trading volume]. In my view, we’re going into a period when financial types will decline again and be replaced by producers of real goods. To your point, governments around the world are not very happy about financial types these days. They’re blaming us for their problems; they put in new controls, new regulations and new taxes.

In America, fewer than 10,000 people study agriculture now, but over 200,000 get MBAs in the US alone every year. We’ve got staggering competition in finance. Nobody is studying agriculture. In America, the average age of farmers is 58, the average age of an MBA is probably around 42. I’m afraid the trends you’re talking about in the drawing up of liquidity are going to get worse, especially if we have serious bear markets in the next decade, which I fully expect.

MW: How do you think about what currency you want to have your cash in, or do you split it around?

JR: Five or six years ago, many people put their money in cash—for example, Icelandic krona—and gotwiped out. You could have put your money in several currencies and gotten destroyed, even in the last decade.

I urge folks to learn about currencies because we’re going to have a lot more currency turmoil. The fact that the yen is down 25% has lots of consequences, not just for the currency trade but for anybody, such as automobile manufacturers, who has to keep up with the Japanese or who sells to them. I don’t see many currencies on the horizon that will solve all our problems. The Chinese renminbi is not convertible at the moment. I may buy some Russian currency. I’m pessimistic about the US dollar but I own them because where else do you go?

MW: Any thoughts on emerging markets?

JR: For the most part, I’m short emerging markets. Turkey, India and Indonesia and others have gotten very hot and everybody raced into them. That creates a problem, especially the ones with balance-of-trade deficits such as Indonesia. The trade deficits are easier to finance with low interest rates but now that’s changing. Some emerging markets will be great in the future, such as Myanmar, but it’s impossible for most people to invest there now. My main message is be careful because whatever happens in the next five to 10 years is going to be complicated. We may enter a bubble, we may have a collapse. We’ll probably have both sometime in some parts of the world.

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