Papandreou Wins Confidence, but not Greece

When US markets closed on Friday, hardly anyone expected PM Papandreou would win the confidence vote. Now that he won it, it is uncertain as to the structure of the new coalition govt. The good news is that no referendum will be held and the 8 bln tranche remains en route to Athens. On Friday, USD and JPY were the top performers while CAD and CHF were the laggards. Fridays CFTC report (see more below) showed JPY longs scrambling for the exits but, otherwise, the US dollar was unwanted. See our late Friday trades ahead of Sundays open.

The headline number on non-farm payrolls missed expectations, climbing 80K versus the 95K expected but the prior two months were revised higher by a combined 102K and unemployment fell to 9.0% from 9.1%.

Risk was off in the broader market after NFP and due to growing concerns about discord in Italian politics. The S&P 500 fell 0.6% to 1253.

We warned yesterday that EUR/CHF was nearing levels of concern for the SNB but officials clearly didnt need prompting as the pair jumped 100 pips in an apparent intervention, underscoring the danger in shorting this pair.

Weekly Charts

EUR/USD closed at the lowest in two weeks but the bias isnt overly negative as the four week reversal/rally remains the dominant feature on the charts.

GBP/USD formed an outside week, exceeded both the highs and lows from the prior week, but closed precisely in the middle of the weekly range. Theres no strong signal here but the bias is sideways or higher.

With the intervention in USD/JPY, there is obviously a huge bullish candlestick on the chart but the pair was unable to break downtrending resistance from the May high.

USD/CAD jumped on Friday after the soft Canadian jobs data but the gains werent quite enough to convince us that a return to 1.06 is a sure thing before we see a return to parity. A break above 1.0263 would generate a buy signal.

Looking at the week as a whole, it comes off as a minor consolidation after four weeks of risk appetite. This generally points to a return to risk appetite but that scenario is difficult to reconcile with the host of dangers on the fundamental side. But if the past several weeks of trading has taught us anything, its that technicals are a better indicator in an environment where fundamentals and sentiment are so volatile.

Commitment of Traders

Speculative traders appeared to be caught offside in the JPY intervention. We warned last Friday that Japan may be looking to punish speculators after yen longs nearly doubled in the CFTC report. On Monday that is precisely what happened and traders proceeded to dump more than half their longs.

The sharp rebound in EUR/USD late last week sparked some short covering as the net EUR position improved 16K but still remains deeply negative at -60K. Similarly, sterling climbed to -47K from -50K and CAD to -15k from -18K.

Specs continue to hold the antipodeans long as AUD rose 3K to 26K and NZD by 1K to 11K. The data covers through the close on Tuesday.

WHAT IT MEANS FOR NEXT WEEK's TRADING? See our latest trades on Silver, EURUSD & EURJPY for Asia's Monday trades in here: http://ashraflaidi.com/products/sub01/access/?a=543 Non subscribers: http://ashraflaidi.com/products/sub01

Adam Buttom