Long Live the USD!

US indices were in the red by close of business last night, giving a strong negative lead to their Asian counterparts. Not helping the overall picture was Chinese data, that while better than estimated still leaves few in doubt that things are indeed slowing right down in that particular economy. Commodities are the outperformers in the last 24 hours, with oil being the frontrunner, and gold not letting itself be put in a corner either. My call yesterday for 1580 on the yellow metal came to fruition and then some as stops were wiped in a thin market and people perhaps finally coming to the realisation that there simply isn’t enough physical gold to support the overinflated ETF pricing that had us running into that magical $2000 level not so long ago. Personally I expect more pain for the metal as the USD generally continues to strengthen.

And frankly why wouldn’t the USD continue its run higher when yesterday’s US 30 year auction produced the lowest yields in that particular instrument's history and had a b/c ratio over 3 times. Money these days isn’t just being put under mattresses but almost equally so into US government paper. Hard to imagine that a 30 year piece of paper can only yield around the 3 percent mark. Do you reckon there was much demand?

Credit Agricole being downgraded didn’t help France's aspirations of maintaining its current AAA rating and has continued to put further strain on expectation for downgrades of other French banks.

Elsewhere this morning the Swiss National Bank left rates and mechanisms untouched and unchanged and with Jordan on the wires now spruiking a dovish tone, the EURCHF runs almost counter intuitively lower, however as most punters out there were looking for a potential indication of a heightening of the EURCHF peg from current 1.2000 levels, the disappointment has seen traders clean out positions.

A heavy data slate ahead of us today with the following both in the European and US sessions likely to drive markets in their continued whipsaw fashion. Out of the UK we have retail sales, Eurozone core CPI, US PPI and weekly claims along with the Philly Fed index. While in Europe we also have 3 Spanish bond auctions, which will no doubt allow the ECB another opportunity to prop up the market. On that topic actually have another look at the Italian 10 year yield... Creeping, still creeping.

On the major pairs today, well what do you need to hear, the fact that the USD is running higher and will continue to do so? Well you’ve heard that from me already.

Elsewhere, yes now all of a sudden there is a lot of hype about the EURUSD running into 1.2500 and perhaps even 1.2000, sure, it’s possible, but is it likely?
The AUDUSD continues to struggle and 0.9750 as mentioned yesterday is still firmly in sight. Rally faders will keep coming out of the woodwork throughout the remainder of this year.

The Cable tracks the USD, however with EUR//GBP creeping ever lower the Sterling is looking far healthier than most of its contemporaries.
I remain long of an AUD/JPY put out to mid January and while it’s taken some time to cross the spread, it is now firmly in the money and looking healthy.
Helmets on folks, helmets on!