FOPLADE- La Birmanie confirme la détention d'Aung San Suu Kyi

Mots clés : Than Shwe, Elections, LND, Birmanie, Aung San Suu Kyi, Cour suprême
Par Flore Galaud
26/02/2010 |

Une activiste tend le portrait d'Aung San Suu Kyi lors d'une manifestation de soutien en aout dernier. Crédits photo : AFP
La cour suprême a ignoré vendredi les appels de la communauté internationale en rejetant le recours de ses avocats et en confirmant la condamnation de l'opposante birmane à 18 mois d'assignation à résidence.

Sans réelle surprise, la Birmanie continue d'ignorer les appels de la communauté internationale pour la libération de l'opposante Aung San Suu Kyi. Elle a confirmé vendredi sa condamnation à 18 mois d'assignation à résidence alors que se profilent les premières élections dans le pays depuis 20 ans.

La cour suprême a rejeté le recours de ses avocats, qui soulevaient notamment des arguments constitutionnels. «Nous ignorons pourquoi le recours a été rejeté», a simplement commenté Nyan Win, porte-parole de son parti, la Ligue nationale pour la démocratie (LND).

«Than Shwe avait déjà décidé du verdict»

Cette nouvelle décision ne manquera pas de susciter une vague de protestations de la communauté internationale, qui demande des gages d'ouverture avant les élections promises dans les prochains mois et réclame la libération d'Aung Suu Kyi, privée de liberté pendant plus de 14 des 20 dernières années.

«Ce n'est pas une surprise», a reconnu l'ambassadeur de France à Rangoon, Jean-Pierre Lafosse, présent à la cour. «Elle devrait être libérée immédiatement, c'est l'une des conditions pour une véritable réconciliation nationale».

Une décision judiciaire qui confirme en tout cas que le généralissime Than Shwe, homme fort de la junte, n'a pas voulu prendre le risque de libérer quelques mois avant les élections une militante qu'il sait infatigable, indomptable et surtout très populaire. «Than Shwe avait déjà décidé du verdict et aucun juge n'aura le courage de le modifier», a ainsi regretté Aung Din, directeur exécutif de l'organisation américaine Campaign for Burma. «Le système judiciaire en Birmanie n'est qu'un élément du mécanisme d'oppression du régime».

Lourdes peines pour plusieurs dissidents

Depuis six mois, la junte multiplie les signes contradictoires. En dépit de sa condamnation, Aung Suu Kyi a ainsi pu reprendre un début d'activité politique en s'entretenant avec l'officier de liaison de la junte et des diplomates étrangers, et en obtenant l'autorisation de rendre visite aux cadres de la LND.

Simultanément, plusieurs dissidents écopaient de lourdes peines, pendant que le numéro 2 de la LND Tin Oo, arrêté avec Suu Kyi en 2003, était libéré. La semaine dernière, un envoyé spécial de l'ONU en visite en Birmanie, n'a pas été autorisé à la voir. Washington, qui a entamé l'an passé un dialogue politique avec les militaires après plus de dix ans de silence, a plusieurs fois déploré l'absence de résultat de sa politique d'ouverture.

Les élections, un simulacre ?

Aung Suu Kyi a pour l'instant refusé de se prononcer sur la participation ou non de sa formation aux élections, dont les dates sont inconnues, et que la communauté internationale craint qu'elles ne soient qu'un simulacre visant à légitimer le maintien des militaires au pouvoir.

La lauréate du prix Nobel de la paix, 64 ans, avait été condamnée en août 2009 à trois ans de réclusion et de travaux forcés pour avoir brièvement hébergé un Américain qui avait réussi à nager jusqu'à son domicile, situé sur les rives d'un lac. La sanction avait été immédiatement commuée en une prolongation de la résidence surveillée à laquelle elle est astreinte sans discontinuer depuis 2003. Une cour d'appel a confirmé la sentence en octobre dernier. Les deux femmes qui vivent avec la dissidente ont elles aussi vu leur condamnation confirmée vendredi.


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FOPLADE-
Mots clés : Than Shwe, Elections, LND, Birmanie, Aung San Suu Kyi, Cour suprême
Par Flore Galaud
26/02/2010 | Mise à jour :

Une activiste tend le portrait d'Aung San Suu Kyi lors d'une manifestation de soutien en aout dernier. Crédits photo : AFP
La cour suprême a ignoré vendredi les appels de la communauté internationale en rejetant le recours de ses avocats et en confirmant la condamnation de l'opposante birmane à 18 mois d'assignation à résidence.

Sans réelle surprise, la Birmanie continue d'ignorer les appels de la communauté internationale pour la libération de l'opposante Aung San Suu Kyi. Elle a confirmé vendredi sa condamnation à 18 mois d'assignation à résidence alors que se profilent les premières élections dans le pays depuis 20 ans.

La cour suprême a rejeté le recours de ses avocats, qui soulevaient notamment des arguments constitutionnels. «Nous ignorons pourquoi le recours a été rejeté», a simplement commenté Nyan Win, porte-parole de son parti, la Ligue nationale pour la démocratie (LND).

«Than Shwe avait déjà décidé du verdict»

Cette nouvelle décision ne manquera pas de susciter une vague de protestations de la communauté internationale, qui demande des gages d'ouverture avant les élections promises dans les prochains mois et réclame la libération d'Aung Suu Kyi, privée de liberté pendant plus de 14 des 20 dernières années.

«Ce n'est pas une surprise», a reconnu l'ambassadeur de France à Rangoon, Jean-Pierre Lafosse, présent à la cour. «Elle devrait être libérée immédiatement, c'est l'une des conditions pour une véritable réconciliation nationale».

Une décision judiciaire qui confirme en tout cas que le généralissime Than Shwe, homme fort de la junte, n'a pas voulu prendre le risque de libérer quelques mois avant les élections une militante qu'il sait infatigable, indomptable et surtout très populaire. «Than Shwe avait déjà décidé du verdict et aucun juge n'aura le courage de le modifier», a ainsi regretté Aung Din, directeur exécutif de l'organisation américaine Campaign for Burma. «Le système judiciaire en Birmanie n'est qu'un élément du mécanisme d'oppression du régime».

Lourdes peines pour plusieurs dissidents

Depuis six mois, la junte multiplie les signes contradictoires. En dépit de sa condamnation, Aung Suu Kyi a ainsi pu reprendre un début d'activité politique en s'entretenant avec l'officier de liaison de la junte et des diplomates étrangers, et en obtenant l'autorisation de rendre visite aux cadres de la LND.

Simultanément, plusieurs dissidents écopaient de lourdes peines, pendant que le numéro 2 de la LND Tin Oo, arrêté avec Suu Kyi en 2003, était libéré. La semaine dernière, un envoyé spécial de l'ONU en visite en Birmanie, n'a pas été autorisé à la voir. Washington, qui a entamé l'an passé un dialogue politique avec les militaires après plus de dix ans de silence, a plusieurs fois déploré l'absence de résultat de sa politique d'ouverture.

Les élections, un simulacre ?

Aung Suu Kyi a pour l'instant refusé de se prononcer sur la participation ou non de sa formation aux élections, dont les dates sont inconnues, et que la communauté internationale craint qu'elles ne soient qu'un simulacre visant à légitimer le maintien des militaires au pouvoir.

La lauréate du prix Nobel de la paix, 64 ans, avait été condamnée en août 2009 à trois ans de réclusion et de travaux forcés pour avoir brièvement hébergé un Américain qui avait réussi à nager jusqu'à son domicile, situé sur les rives d'un lac. La sanction avait été immédiatement commuée en une prolongation de la résidence surveillée à laquelle elle est astreinte sans discontinuer depuis 2003. Une cour d'appel a confirmé la sentence en octobre dernier. Les deux femmes qui vivent avec la dissidente ont elles aussi vu leur condamnation confirmée vendredi.


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FOCUS SHIFTS TO CHAIRMAN BERNANKE

• Market is likely to shift back to risk taking, once Bernanke’s report is behind us.
• No Canadian data leaves USDCAD trading off of broader market themes.
• Eurozone industrial orders surprise to the upside, helping buoy EURUSD.
• Options market shows GBP risk sentiment well placed to the downside.

FX Market Update

Markets are mixed as they await Fed Chairman Bernanke’s testimony. A soft Portuguese
bond auction, rumours that the ECB will extend the availability of
unlimited funds at the March meeting and the soft US consumer confidence
release are the focus as we move into the North American open. US equities are
close to flat, oil is weaker and the USD is mixed, with EUR, NOK and CHF outperforming,
CAD, GBP and JPY flat and AUD and NZD underperforming. • Today’s highlight will
come with Bernanke’s semi-annual report to the House Financial Services
Committee, where he is expected to reiterate that the increase in the discount rate
should not be construed as tightening or bringing forward the timing of tighter monetary
policy. In addition, he is likely to spend some time on exit strategies, the path of the
recovery to date and unemployment. A shift away from emergency level overnight rates,
towards higher interest rates is rapidly approaching. The USD has already rallied on the
expectation that relative interest rates will move in its favour. From here it is the magnitude
of interest rate hikes that will be important for currencies. Scotia Economics is
forecasting that the first interest rate hike will come in Q3 and that by yearend
both US and Canadian overnight rates will be at 1.25%. This is more
aggressive than the market and accordingly should it come to fruition will have a
currency impact. • The market’s muted reaction to yesterday’s US Treasury announcement
that it was restarting the supplementary financing program
was appropriate. The decision was simply reinstating a program that had been halted
as the debt ceiling approached; however now that it has been raised, the Treasury will
once again begin issuing T-bills to finance some of the Fed’s activities. • Since November
26th (the recent low in the USD), there has been a clear pattern in
returns. MXN and CAD have outperformed, JPY and GBP have been mid performers
and EUR has underperformed, losing 10% - see top chart. As we look out to midyear,
we expect CAD to continue to lead markets in performance. The combination
of low sovereign risk, a relatively strong economic base and favourable sentiment
should support the currency. EUR is showing early signs of stabilizing, which
should limit further downside and see it enter more of a range bound trading pattern.
Finally, we expect GBP will now enter a phase of underperforming EUR as the
market increasingly turns its attention to the UK’s underlying fiscal issues combined
with a dovish sounding central bank. • Purchasing power parity (PPP) is a difficult
tool for FX traders to use, as a currency can remain over or undervalued for years. However
it can be used to signal extremes and trends in the market. The middle chart
highlights that EUR’s PPP has dropped from its high of 28 in April 2008
(anything over 20% is considered extremely overvalued), to 15% today. This brings the
PPP valuation of EUR more in line with many of the other currencies (CHF is at 14%,
CAD is at 11%). C.S.

Americas

USDCAD (1.0583) • Yesterday’s round of risk aversion pressured USDCAD to break and
close above its 100-day moving average of 1.0528 and took several technical studies
closer to buy signals. A disappointing development for USDCAD bears. There is no
data expected from Canada until Friday, which will leave USDCAD trading off of
broader market trends. We would expect that once the risk of Chairman Bernanke’s
report has passed USDCAD will favour the downside (a stronger CAD).
C.S.

Europe
EURUSD (1.3543) • EURUSD traded down to 1.35 yesterday but has managed to remain above that level today as EUR is up 0.3% against the USD. EURUSD has not closed below the 1.35 price point since May of last year, and even under the massive pressure the currency has experienced so far in 2010, the pair’s ability to sustain closes above that price point is encouraging. Indicators of downside pressure on EUR have stabilized somewhat, though the market remains very short the currency. One should look for intraday support first at the 1.35 level and then near last week’s lows around 1.3450. • EUR’s fortunes have been boosted today by a much better than expected read on December industrial new orders which rose 0.8% m/m against expectations of a 1% decline. Even more impressive was the increase in the November estimate which was revised up from 1.6% m/m to 2.7% m/m. Essentially we have a constructive EURUSD outlook from current levels given the pace and degree of decline. However, sentiment is the prime driver of EURUSD at the moment, and without a definite turn, stabilization may be the best that can be
hoped for in the very near term. S.T.
GBPUSD (1.5440) • Sterling is holding its ground and benefitting from USD weakness today, gaining 0.1% against the greenback. Bank of England policymaker Adam Posen remarked today that he believes that there is no reason to think the pound will move a lot from currently levels. Though he and his colleagues at the Bank of England have left the door open to additional quantitative easing, he also stated that those betting that inflation would be higher over the
next decades would lose money. • Cable looks quite heavy with the trade through 1.55, though 1.54 has been supportive over the past two sessions. GBPUSD risk reversals are ticking lower, with the premium paid for puts over calls reaching near an 11- month year high (see graphic). Downside pressure remains ahead of the UK’s second (detailed) Q4 GDP estimate due on Friday with markets expecting a very modest 0.2% q/q rate of growth. S.T.

Asia / Oceania

USDJPY (90.05) • The yen continues to gain ground against the USD, up 0.2% in today’s trading following yesterday’s 1% surge higher on risk aversion and yields. January Japanese merchandise exports grew at their most rapid pace in 30 years, up 40.9% y/y (though in line with expectations). The rebound in exports is crucial for helping to boost Japan’s growth engine and fight deflationary pressures, an encouraging sign in the face of a historically strong yen. Uptrend support for USDJPY has been broken with yesterday’s push lower, neutralizing the short term trend. Intraday downtrend resistance for USDJPY looks to keep the pair pressured below the 90.50 to 90.30 range through North American trading. S.T.
AUDUSD (0.8891) • AUD is one of the weakest performing currencies today, down 0.3% against the USD as the pair came under pressure with European equity selling. Wage growth data from Q4 2009 came in at 0.6% q/q, the lowest quarterly rate of growth in almost a decade (the market
expected a still historically weak read of 0.8% q/q). AUDUSD failed on a test of yesterday’s
100-day moving average at 0.9071 and has pushed intraday below support near 0.8880.
Look for the 0.8850 to 0.8860 range to show some congestion ahead of 0.8800. S.T.

Commodities

Oil ($78.68) • Crude is losing ground yet again today, though uptrend support on oil’s most
recent surge is coming in a hair above $77 on the daily charts. S.T.




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FOPLADE- Nicolas Sarkozy scelle la réconciliation avec le Rwanda

Par Alain Barluet
23/02/2010 | Mise à jour : 22:05 Réactions (15)



Paul Kagamé, le président du Rwanda en novembre dernier. Crédits photo : AFP
C'est jeudi la première visite d'un président français à Kigali depuis le génocide de 1994.

Cliquez sur l'image pour l'agrandir.

Comme à son habitude, Nicolas Sarkozy ira vite : trois heures au Rwanda, jeudi après-midi, pour tourner la page sur trois ans de rupture diplomatique et un long contentieux nourri par des accusations réciproques autour du génocide de 1994. C'est dire si les gestes du chef de l'État, qui déposera une gerbe au monument des victimes, seront scrutés à la loupe. Ses mots, surtout, seront écoutés avec attention, lors de la conférence de presse conjointe qu'il tiendra avec son homologue Paul Kagamé.

En novembre 2006, ce dernier avait pris l'initiative de rompre les relations avec la France après l'émission par le juge Jean-Louis Bruguière de mandats d'arrêts contre neuf de ses proches, soupçonnés d'avoir fomenté l'attentat contre l'avion du président Juvénal Habyarimana, le 6 avril 1994, un événement qui a donné le coup d'envoi de massacres qui ont fait 800.000 morts, en grande majorité d'ethnie tutsie, en trois mois.

Le Rwanda, de son côté, a toujours accusé la France d'avoir une responsabilité dans ces événements tragiques pour avoir soutenu le régime Habyarimana.

Sur cette question pesante, Nicolas Sarkozy avait parlé, il y a deux ans, «des faiblesses ou des erreurs» de la France. À Kigali, «ses propos s'inscriront dans cette ligne», indique-t-on à l'Élysée. «Il dira des choses fortes», ajoute-t-on dans son entourage, «mais pas d'excuses». On sait le chef de l'État peu porté sur la repentance.

Création d'une commission d'historiens

Pour «regarder vers l'avenir sans oublier le passé», comme on le souligne à l'Élysée, Nicolas Sarkozy évoquera avec son homologue rwandais la création d'une commission d'historiens. «On verra si les Rwandais reprendront cette proposition à leur compte, nous y sommes prêts», précise-t-on à la présidence de la République. Dès son arrivée à l'Élysée, en 2007, Nicolas Sarkozy avait inscrit le rabibochage avec le Rwanda sur la liste de ses chantiers africains. Deux tête-à-tête avec Paul Kagamé ont eu lieu ensuite, en 2007 et 2008. Bernard Kouchner, bon connaisseur du Rwanda, s'est rendu sur place à trois reprises entre janvier 2008 et janvier 2010. Et en novembre dernier, le coup de pouce décisif a été donné par un déplacement éclair de Claude Guéant à Kigali. La visite de demain vient «couronner» ce processus, se félicite-t-on à l'Élysée.

Il aura fallu pour cela désamorcer laborieusement le champ de mines judiciaires qui pourrissaient les relations franco-rwandaises. Toujours pendante, la procédure ouverte par le juge Bruguière a néanmoins été sévèrement affaiblie par le départ à la retraite de son initiateur et par la rétractation de deux de ses témoins à charge. «L'état d'esprit a changé. Les Rwandais admettent aujourd'hui que la main du pouvoir n'est pas derrière la justice», affirme-t-on sobrement à l'Élysée. Une manière de confirmer la mise sous le boisseau implicite des actions entreprises par Jean-Louis Bruguière.

En réponse à l'initiative Bruguière, Kigali avait publié en 2008 le rapport Mucyo qui accusait une trentaine de personnalités politiques, dont Édouard Balladur, Hubert Védrine et Alain Juppé, et des chefs militaires d'avoir «participé à l'exécution» du génocide. En renouant avec Kigali, Nicolas Sarkozy veut écarter cette épée de Damoclès. Ce qui conduit tout de même, à Paris, certains politiques et militaires mis en cause à s'inquiéter quelque peu à la veille de la visite présidentielle : quel sera le véritable prix de la réconciliation avec le Rwanda ?

Autre geste à l'égard de Kigali, les enquêtes françaises visant des personnes accueillies dans l'Hexagone et soupçonnées de complicité de génocide ont été accélérées même si elles peinent à déboucher.

Avec les retrouvailles rwandaises, l'ambition est aussi d'inscrire la France dans la région des Grands Lacs, un peu plus stable ces derniers mois et toujours riche de son sous-sol minier. Nicolas Sarkozy entend promouvoir la coopération frontalière, notamment avec la République démocratique du Congo. Il promet depuis un an une conférence réunissant les pays de la région et leurs bailleurs de fonds internationaux. La première étape est prévue lors du sommet Afrique-France, en mai à Nice.


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Tuesday, February 23, 2010 Camilla_Sutton@scotiacapital.com Sacha_Tihanyi@scotiacapital.com

USD BID AS EQUITIES AND COMMODITIES UNDER PRESSURE

• GBP moving with EUR suggesting GBP sovereign risk remains on market’s mind.
• USDCAD downtrend still intact, 1.0470 and 1.0500 are key topside levels.
• Early signs of stabilization in EUR provided by options, shorts and CDS levels.
• Sentiment is turning rapidly against GBP; the risk is further near-term downside.

FX Market Update

Despite a good deal of USD selling in Asian and European trading, the FX market has
snapped back and nearly all majors have given up their gains against the greenback as
the dollar index has rapidly pushed back into positive territory on the day. EUR and GBP
have had wide ranging days, while AUD and NOK and JPY have been better able to
hold on to their value. The laggards today are GBP, CHF and NZD, though sterling remains
deepest in the red moving into North American trading. • The financial market
environment is not incredibly supportive of a “risk on” move today and is instead displaying
a much more neutral to negative tone as European equities are down and US
index futures are showing US equity softness. The commodity space is negative as oil is
trading back below $80 and copper is beating a hasty retreat after gaining ground earlier.
Gold has fallen precipitously as the USD surged higher. It appears that the
greenback is dictating the pace for commodities today in the absence of
any other market drivers. • The USD index (trading near 80.54) has fallen back into
the top end of the previous two week range that held before late last week’s buying
drove it higher. We now see range support at the 79.56 level, though an uptrend support
line off of the 76.93 low on January 19th has held today near the USD index’s
intraday low at 80. • The rolling one-month negative correlation between the
dollar index and global equities (as measured by the MSCI world index) has fallen
to its lowest level since early January (at –0.29), though this feature is really being
driven by the EUR and GBP components of the index as the all other major USD
pairs (save for CHF) are showing a much stronger correlation with equities. Short term
interest rates in the US have ceased to produce a meaningfully strong correlation
with the USD index, but again when looking at the impact of US short rates
against other USD pairs, the same pattern materializes. It is really only EURUSD and
GBPUSD that have seen their shorter term correlations with US short rates collapse,
other currency pairs are much stronger with USDJPY leading the way (as one would
expect from historical precedent). The lack of equity and rates correlation with
EURUSD and GBPUSD tells us that other factors are still playing a predominant
role with these pairs. It is obvious that EUR is continuing to suffer from its
crisis of confidence, but GBP seems to be moving in this direction as well. GBP is a very
likely candidate for the currency market’s next target on fiscal issues and its propensity
to show the same lack of correlations with equities and rates against
the USD that EUR is displaying (see top chart) highlights this macro risk
factor. If the risk to GBP is not obvious because most stories in the press are still more
focused on Greece and Eurozone periphery countries, this very basic study should raise
a few flags that GBP’s future is fraught with risk. S.T.

Americas

USDCAD (1.0440) • CAD is currently holding in, down 0.2% against the USD. Despite
CAD underperformance yesterday (the weakest of all majors), Friday’s push lower has
helped re-solidify the two week downtrend in USDCAD. Downtrend resistance off
of the February 9th and Friday’s intraday high comes in at 1.0470 today, but
as long as USDCAD remains below 1.05 we’d suggest the downside remains
the path of least resistance. There is added resistance coming in above that level at
1.0505 and 1.0527 with USDCAD’s 50 and 100-day moving averages. There is no data
out in Canada today, however the US will see the December S&P/Case-Shiller housing
price index as well as the February Richmond Manufacturing Index and Consumer Confidence.
S.T.

Europe
EURUSD (1.3600) • After rallying through the Asian and early European sessions, a disappointing German IFO combined with news that Greece has not provided the details of their currency hedges before the deadline have taken EUR back below yesterday’s North American close.
Today, the highlight will come from President Trichet who will speak to the European Parliament Committee on Economic and Monetary Affairs (9am EST). • There are some early signs of stabilization in the weakening EUR. Last week the net short EUR position climbed to a new record of $10bn, however the week-over-week change was marginal compared to previous weeks. This implies that there is a declining appetite to add to short positions. In the options market, risk reversals are still favouring protection against EUR downside, however they have come well off their lows. CDS levels have fallen well off their highs, with Greece now at 350bpts (high was 425), Portugal at 162 (high was 240) and Spain at 125 (high was 174). Finally, technicals are highlighting not only a loss in downside momentum, but the MACD has
generated a buy signal and is showing positive divergence - see bottom chart on page 1. Accordingly, technicals are turning increasing bullish EUR. To date, the currency has been unable to close below 1.3500, should this level continue to hold as support, we would expect EUR to stabilize and trade between 1.35 and 1.40. We hold a EUR year-end target of 1.44. C.S.
GBPUSD (1.5425) • GBP is underperforming today as the BoE’s King sounds dovish and the market is turning its focus to the negative fiscal position of the UK. In many ways, the stars
are aligning against GBP as sentiment is quickly shifting towards bearish GBP positioning.
Since last Wednesday’s release of net borrowing in January, markets have refocus on the difficult UK fiscal position. Yesterday, Kenneth Rogoff commented that eventually the US and UK will face Greece’s problems.
We think both GBP and USD are vulnerable to a swing in investor sentiment. In many ways,
the market has provided a window for countries to bring in fiscal responsibility should they
fail to do so they could easily be hit with the same fate as Greece. • Weakness in GBP is
particularly obvious against the commodity currencies, as both GBPCAD and GBPAUD are now trading at 25 year lows. However, even GBPUSD is technically weak. The currency is in a downtrend with lower lows and lower highs, the candlestick pattern is negative and the MACD remains in sell territory with no signs of positive divergence.
Accordingly, we would expect to see further GBP downside before it has the ability to stabilize. • For near-term traders today’s pivots are indicating buying
pressure will emerge at 1.5362 and selling at 1.5541. C.S.
EURCHF (1.4660) • EURCHF shot up a dramatic 50 points late in the Asian session, which introduced some speculation of intervention; however we have not seen anything that would confirm this. See middle chart on page 1. C.S.
Commodities
Oil (79.25) • In futures, as of today April has rolled to the front month, but even this hasn’t
helped to sustain oil above $80/barrel. The current rolling 45-day correlation between CAD
and oil is strong at 0.81. Accordingly oil and CAD are still moving in tandem. C.S.


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QUIET MARKETS, EVEN AS SOROS GOES BEARISH EUR

• CFTC speculative positioning data highlights that traders are short EUR & long CAD.
• No Canadian data until Friday; USDCAD is biased for downside.
• Greece to test the market with bond issuance.
• NZDUSD finding better support as New Zealand rates stabilize.

FX Market Update

Currency markets have had a quiet Asian and European session. The bias today is for
short USD positions as the markets digest George Soros bearish EUR comment
in the FT - see Suggested Readings. • On a year-to-date basis, MXN, JPY,
CAD and AUD have outperformed all the primary currencies and GBP and
EUR have underperformed. We expect to see ongoing outperformance by this same
group through the end of the first quarter and into the second. The combination of
better than expected US economic releases (which benefits CAD and MXN specifically),
a global recovery that is ongoing (which boosts commodity prices and decreases risk
aversion) and relatively hawkish central banks should maintain momentum behind these
currencies. • This week’s CFTC speculative positioning data saw a further
move away from the USD as a one way bet and instead the relative currency
outlook increase in importance. Speculators continue to favour AUD and CAD over
EUR and GBP. • This week’s highlight will come with developments in the Greek bond
market and Chairman Bernanke’s testimony. Last week’s increase in the discount rate
created a stir, even though the Fed had warned that this was approaching and that it
should not be interpreted as tighter monetary policy. • Today’s WSJ article “Low Inflation
Always Best?” - see Suggested Reading, provides a solid overview of why many
policy makers are beginning to argue that we should be comfortable with a higher inflation
rate. C.S.

Americas

USDCAD (1.0381) • It has been a quiet Asian and European session for USDCAD as it
moves into the North American session essentially where it closed on Friday. •
USDCAD has moved into the lower half of its five month 1.0207 to 1.0870
range and we think it will continue to be biased to move lower (strong
CAD). In the current environment, the most important driver for CAD is the outlook for
global growth. As long as the recovery story remains intact, which we think it has - CAD
should be strengthening. Forty-five day rolling correlations (see top chart) are a useful
tool to help us examine what is currently driving the market. Currently, the strongest
positive correlation is between CAD and the S&P index, followed closely
by oil, the strongest negative correlation is with the VIX. Essentially, as risk appetite
improves, fears over the outlook for global growth diminish, equities and oil move
higher, the VIX drops and CAD strengthens. We expect the global growth story to
remain intact and hence expect CAD to continue to strengthen. The drop in
correlation between CAD and EUR is a reassuring signal, as it highlights that no longer
are euro specific issues driving the whole market, but instead are impacting just
the EUR. This is a healthy sign for markets generally, but also increases the chance that
a CAD rally materializes. The low correlation between CAD and 2-year bond yield
spreads is reflecting the market’s comfort with the priced in path of the Fed and BoC.
The importance of interest rates as a driver of CAD should begin to increase in the coming
months. We expect that when USDCAD does break its five month range, it
will be to the downside (CAD strength) and that it will sustainably reach
parity mid-year and close 2010 at 0.97. For near-term traders, pivot points suggest
that today’s buying pressure will emerge at 1.0331 and selling at 1.0490. • This
will be a light data week for Canada, with only the current account expected on Friday.
Today, the BoC’s Jenkins will speak on a panel, but there is no media access, press
conference or published remarks and accordingly it should be a non-event for the currency.
C.S.

Europe

EURUSD (1.3613) • EUR is trading near flat to 0.1% lower after cutting gains in Asian trading when the USD was pressured lower by robust equity performance. There is a lack of Eurozone economic data today to help guide the euro’s performance, however EURUSD is trading back above the 1.35 level after USD buying following the Fed’s discount rate move last week pushed the pair below 1.35 to a nine month low. Intraday resistance sits near the 1.3655 level while the pair has failed to breach 1.3600 in trading today.
• Speculative positioning has shown that no relief is in sight for the euro as the net short position reaches yet another historical high (see middle graphic) at nearly 60K contracts or $10.2bn, by far the largest net short position of all the majors. Thus the market remains extremely short EUR as IMM data shows that shorts outnumber longs by a ratio of 2.7 to 1. This helps to suggest that EURUSD shorts are at risk of being hit by a squeeze. However, it would likely take very strong and broadly based USD selling pressures to entice a squeeze on euro positioning as it is difficult to find a reason why the market should get excited about the euro’s prospects in the very near term. • Monetary and inflation data this week willprovide perhaps the potential for an upside surprise to spur expectations for the ECB, however
given weak economic and credit conditions in the Eurozone, we doubt this is likely.
Additionally, it is expected that Greece could launch a multi-billion euro bond
issue in coming days which will test the market’s faith in Greece and its faith in weakly
implied Eurozone support. Greek Prime Minister Papandreou stated that if it is unable
to borrow money at similar rates as other Eurozone members, it would seek help from other European countries. S.T.
GBPUSD (1.5482) • Sterling has failed to gain any upside momentum in today’s trading and
is underperforming, down 0.1%. Support in the 1.5550 area that had previously helped to arrest GBPUSD’s decline was broken last week with the Fed discount rate announcement, pushing cable back below 1.55 for the first time since May of last year. The pair has yet to find its legs though buyers are coming in at 1.5430 today ahead of last week’s low near 1.5357. S.T.

Asia / Oceania

USDJPY (91.26) • JPY is up 0.3% after USDJPY failed to challenge its 200-day moving average
last week (currently at 92.25). While the pair is under pressure, uptrend support off of the
February 4th low is currently protecting the 90 level (trend support at 90.30). S.T.
NZDUSD (0.7013) • The kiwi found support against the USD at its 200-day moving average last week, and is now a top performing currency as NZDUSD is up 0.3% today. The rate outlook in New Zealand has stabilized as the 2-year swap rate has found support at the 4.2% yield level over the past two weeks, the same period over which NZDUSD has been able to stabilize and find upside impetus (see bottom graphic). Look for support in the pair at the 200-day (0.6930) while the topside is constrained at the intraday high at 0.7040 which corresponds to downtrend resistance off of the January 20th high. S.T.

Commodities

Oil ($79.85) • Crude is flirting with the $80 level, pushing as high as $80.50 in Asian rading.
The strong two week uptrend in crude is still intact, with the 2010 high at $83.95
within striking distance. S.T.




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FED DISCOUNT MOVE GIVES USD FURTHER SHORT TERM UPSIDE IMPETUS
• US Dollar index hits its highest level since June of 2009, breaking topside resistance.
• USDCAD downside momentum sapped in the short term, look to retail sales for hope.
• EUR under pressure and breaks below 1.3500, even as sovereign risks fade.
• IMF releases staff report favouring capital controls in developing nations.

FX Market Update

The USD has retained its bid tone following the Federal Reserve’s “surprise” change to
the discount rate, announced Thursday in the late North American afternoon. The Fed
announced that the discount rate would be raised to 0.75% from 0.5% (effective
today) and that the maximum duration of primary credit loans would be shortened
to overnight (previously 90 days), effective March 18th. The market reacted by
driving the USD higher against the majors, along with US short yields as the 2-year US
government bond yield briefly peaked out at over 0.96% (1-month high), whilst equity
futures and commodities fell lower. Yesterday’s impact is still well felt as JPY, CHF and
EUR are all down against the USD, but leading the majors, while NOK, SEK and GBP are
lagging. • Despite efforts by the Fed to prepare the market for this move via repeated
indications that this would only represent a further normalization in monetary policy
along the lines of previous steps, there has been a sharp knee jerk reaction. However, if
one were to pick a bias for such a reaction it would indeed be what followed the announcement,
a stronger USD and higher US short yields, with equities/commodities
lower. The Fed noted in their release that they do not expect this move to
lead to tighter financial conditions, but rather help incent normal market function
for short term financing. However, any hint of monetary policy normalization helps to
reduce the sentiment of worry towards the longer term impact of easy liquidity provision
and loose monetary policy on inflation, thus providing the USD with a measure of support
against other countervailing forces (fiscal and external deficits). Though short rates and
the USD may move higher in the near term, this may also lead to opportunities to
eventually trade against these developments at attractive levels as it currently
appears that the market has forgotten the Fed’s message that this doesn’t signal that
tighter policy is imminent, and that policy signals are more likely to come via the interest
rate paid on reserves than anything else at this point. Fed Chief Bernanke will appear
next Thursday before a Senate panel to testify on monetary policy
(rescheduled from last week), which could provide a catalyst for a rates/USD retracement
should he take the opportunity to deflate market expectations that this current
move would lead to an imminent tightening of policy. • It cannot be denied however
that the policy measures of ‘08 and ‘09 are slowly being cast away, something that the
market has been reflecting with incrementally higher US rate pricing and a stronger USD.
For instance, the spread between 3mth USD and JPY LIBOR has been shrinking
and is currently just a hair below 0% (see top graphic), the closest to zero the
spread has been since August of 2009 when it moved negative. This stabilization and
move upwards in the spread has coincided with a stabilization in USDJPY above multiyear
lows, though volatility remains elevated. Monetary policy normalization is still proving
itself to be a strong driver of relative FX performance (and should continue to be),
with the USD perhaps having most to gain from a normalization in policy. With the USD
index reaching its highest level since June 16th and index trend support (78.90) far below
the current 81.20, it appears that the medium term USD rally is not something to get
in front of just yet. S.T.

Americas

USDCAD (1.0523) • USDCAD is up 0.4% and feeling the impact of yesterday’s Fed
move. The pair had briefly (and only marginally) broken support at 1.0410, but has been
unable to hold on to any gains. Downside momentum for USDCAD has faded and
a generally well bid USD moves the near term risk to the upside (beware
yesterday’s doji). Look to today’s Canadian retail sales to be a factor that could reverse
sentiment and boost CAD’s fortunes. S.T.

Europe

EURUSD (1.3495) • EUR dropped 100 points on the Fed’s announcement and has been relatively
stable since. Data out of Europe was mixed with services PMI coming in weaker than expected, manufacturing PMI stronger and the trade balance climbing to 1.9bn. • Greece’s CDS levels have dropped 85bpts from their late January 425bpt high, which reflects a market that is increasingly comfortablewith its the fiscal outlook - see bottom chart on page 1. According to the WSJ Greece is planning a $7bn 10-year bond sale next week, the results of which will be a key indicator of sentiment and could foreshadow EUR’s next move. Since Greek CDS spreads peaked, EUR has been unable to stabilize and has slowly drifted lower. Yesterday’s change to the Fed’s discount window combined with relatively strong data from the US have aggravated downward pressure on EUR. There is a lot of bad news now priced into EUR and fundamentally we would expect stabilization in the currency to materialize; however technicals have yet to show any signs of bottoming, which implies it is still too early to enter a long position. A close today below the psychological 1.3500 would be bearish. C.S.
GBPUSD (1.5385) • Sterling has fallen dramatically out of its eight month range and has also broken below the psychological 1.5500. A stronger USD, backed by yesterday’s Fed decision and better than expected economic data, combined with increasing concerns over the UK’s financial position has weighed on GBP. The near-term outlook for GBP is increasingly concerning. Technically, the 50% retrace-ment of the March to August rally lies at 1.5350, a close below here would open up a test to 1.5000. C.S.

Asia / Oceania

USDJPY (92.00) • Yen has lost 0.2% against the USD but is outperforming all the other primary currencies as we move into the North American session. USDJPY is testing its 200- day moving average of 92.28, a close above would be bullish. C.S.
AUDUSD (0.8910) • AUD has lost 1.5% since failing to break above its 100-day moving average of 0.9068 earlier this week. Today’s hawkish comments from RBA Governor Stevens that “if economic conditions evolve roughly as we expect, further adjustments to monetary policy will probably be needed over time to ensure that inflation remains consistent with the target over the medium term”, were overshadowed by USD strength. We expect AUD to move higher over the next several months, but for now it is trading comfortably between its 100 and 200-day moving
average (0.9068 and 0.8645, respectively). C.S.
Capital Controls - The IMF has released a staff paper on capital controls in development
nations. It highlights that capitals controls should be used as part of the toolkit available
and that they are encouraging developing countries to review them. See suggested readings.
C.S.

Commodities

Oil (78.00) • Oil continues to trade above its 100-day moving average of 76.20, which is positive for CAD. The ability of oil to hang on to recent gains even as the USD has rallied over the last 24hours is encouraging for bulls. C.S.
CRB Index (276.15) • Reflecting the increasingly bullish tone for commodities, the CRB
index has broken above its 100-day moving average of 274.31. The current 45-day rolling
correlation between the CRB and CAD is high at 0.81. Accordingly, positive pricing pressure
in commodities is also providing a boost to CAD. C.S.

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CANADIAN CPI STRONGER THAN EXPECTED, GIVING A LIFT TO CAD

• Canadian CPI increased 0.3%m/m on the headline and 0.1%m/m on core.
• Recent developments (solid economic releases, gold & minutes) good for USD & CAD.
• Blizzards in northeast could play havoc with jobless claims.
• UK fiscal position is weighing on GBP today.
• IMF rattles gold prices as it turns to the open market for remaining gold sale.

FX Market Update

Markets have been quiet since yesterday’s North American close. The USD is mixed,
with JPY, MXN and CAD having gained ground and EUR, AUD, GBP and NOK having
lost; however most asset classes are close to yesterday’s North American closing levels.
• Developments yesterday were generally USD positive as US economic
data was firm, with stronger than expected housing starts and industrial production.
The FOMC minutes provided few new clues as to Fed timing, but highlighted that
there appears to be an increased desire to begin selling some of the assets accumulated
during the financial crisis. In addition, there are clear indications that the discount
rate will soon begin to move higher. Finally, the IMF announced that it has sold
212 tonnes of the 403 tonnes of gold it had announced it would sell in September
and that it will now begin selling the remaining 191 tons on the open market. • Technically,
yesterday’s strong up move in the USD (DXY index) was encouraging, however the
index will need to break above the February 12th high of 80.75 for upward pressure to
be maintained. • Today’s releases include jobless claims for the week ending February
13th (cons. 438k). Blizzards in the US northeast will play havoc with the
result, even if the government makes some manual adjustments. Accordingly it is likely
that the release will quickly be discounted. This issue will also be a factor in the February
non-farm payroll release. The more important factor for employment is that the
trends are in the right direction, with the deterioration appearing to have ended. C.S.
Americas
USDCAD (1.0445) • USDCAD has been pressured lower on the back of stronger than
expected Canadian CPI; however the pair has only moved 25 points from yesterday’s
North American close. Headline CPI increased 0.3%m/m, core increased 0.1%m/m and
on a seasonally adjusted basis CPI increased 0.4%. Should this be the beginning of a
trend it will increase pressure on the Bank of Canada to tighten policy and add a lift to
CAD. • On a year-to-date basis USDCAD has been fairly range bound, trading
within a 556 point range between 1.0225 and 1.0781. Historically, the last
several years have seen much wider than average annual ranges in USDCAD
- see top chart. These large ranges have created opportunities for tactical players but
increased the complexity for hedgers. Even though this year has started with a quiet
rangie feel to it, we would expect that by mid-year USDCAD will have broken
through its current range to the downside (stronger CAD). • Today, international
securities transactions are expected to increase $6.5bn. This would be
the twelfth monthly rise and provide further evidence of the global demand for Canadian
financial assets. Sentiment towards Canadian based assets (financial and commodities)
remains strong and this should help support CAD over the coming quarters. •
Technically, the outlook for USDCAD is increasingly bearish, however with the
ADX at just 17 (the ADX attempts to quantify whether or not an asset is in a trending or
range trading environment, with a reading over 25 generally interpreted to indicate the
presence of a trend), it indicates that USDCAD is still a long way from breaking its
range. We expect USDCAD to favour the lower-end of its range in the nearterm.
Today’s pivots - see table on page 2 - suggest buying pressure at
1.0417 and selling pressure at 1.0504. C.S.

Europe
EURUSD (1.3575) • EURUSD is trading back to early week levels with a 1.35 handle after yesterday’s North American losses completely reversed Tuesday’s surge higher. Currently, EUR is off 0.2%, leaving it in the middle of the performance charts. With this week’s failure to trade below the 1.35 level, EURUSD has broken the steep downtrend resistance level off of the January 14th intraday high (actually achieved with Tuesday’s surge), however the pair is currently trading back below this previous resistance level. While 1.3800 looks to hold some stiff topside resistance, it appears that a trade through the 1.3850 is required to turn the environment more bullish on the euro. S.T.
GBPUSD (1.5600) • The GBP is a laggard today, trading down 0.4% to break the short-lived uptrend that had seen higher intraday lows for GBP over the previous four sessions. The UK earned a rather dubious accolade today by recording its first January budget deficit since 1993, as January is normally a peak month for tax collection. The data release sent cable down through 1.56 for the first time since

Friday, though GBP has recovered some marginal ground since then. Intraday support for GBP has
held in the 1.5550 to 1.5570 range over the past two weeks, though the slight uptrend in cable
has now been nullified, exposing further downside weakness. S.T.
EURNOK (8.0485) • The krone is the weakest performing currency today, down 0.7% against
the USD and 0.5% against EUR. This has sent EURNOK shooting higher off of support at 8.00
after the pair hit its lowest level since September of 2008. Norway was negatively impacted by the release of the Norwegian statistics office’s economic forecast that downgraded the 2010
growth outlook for the mainland economy (ex oil, gas and shipping sectors) by 0.2 percentage points to 2%. The 2-year Norwegian interest rate swap has fallen sharply from yesterday, down 6.5 basis points, leaving the rate down nearly 25bps from the early January 2010 high at 3.5%. S.T.
Asia / Oceania
USDJPY (90.80) • The yen is gaining back ground after yesterday’s surge in USDJPY that sent the
pair through its 50-day moving average, though long term downtrend resistance remains well
above at 92.90 today. The Bank of Japan refrained from enacting monetary policy changes as neither the interest rate, lending measures nor asset purchase schemes were altered. There seemed to be some degree of push back from Governor Shirakawa against the government’s public pressure for the BoJ to do more to fight deflationary forces in Japan.
Shirakawa put the focus back on the government suggesting that it is important for the overnment to focus on fiscal consolidation and respect the monetary policy goals of the BoJ. S.T.

Commodities

Oil (76.60) • Crude is lower from yesterday’s close as API gasoline inventories rose to their highest since March 1999. Expectations are that the Department of Energy will show a 1725K build in their inventories for the week ended February 12th. S.T.
Gold (1106.85) • Gold has recovered from weakness in Asian and European trading after esterday’s sharp sell-off on the news that the IMF has 191.3 metric tonnes left to sell on the open market.
The IMF said that the sales will take place in a phased manner over time, which should help to offset any impact on the metal’s supply demand dynamics. However, this price collapse has broken the sharp eight session uptrend that had been in play since February 8th.
Psychological support holds near $1100 today.
S.T


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US CAPITAL INFLOWS IMPROVING BUT CHINA BACKS OFF
• USD looking better bid after yesterday’s selling.
• US financial inflows more supportive, but official buyers back off Treasuries.
• Several asset classes break their 100-day moving averages in favour of risk taking.
• MPC votes unanimously to leave rates on hold and maintain asset purchase program.

FX Market Update

There has been solid follow through in Asian and European markets from yesterday’s
North American surge in risk appetite that provided global equities with their biggest
gain in some time, whilst sending crude oil up near 4% and copper up near 4.5%. The
commodity currencies were well bid yesterday, save for an underperforming CAD, and
EUR had its best one day gain since July 31st. Today presents a less robust picture
for the FX market, reflecting weaker, but still positive, US equity futures moving
into the North American open. SEK and NOK are gaining though the USD is generally
well supported and pushing higher against most other majors. JPY is weakest of the
bunch while EUR and CHF also struggle. There is a more neutral risk environment when
compared with yesterday’s North American trading. • A typical weight on the back of
the USD, and a factor giving many people fits over the currency’s future, is the United
States’ persistent current account deficit. While this is a factor that has a negative (if not
more abstract) implication, the greater importance for a currency’s nearer term
fortunes is a country’s ability to finance such an external deficit. We have
seen a near term improvement in monthly financial flows into the US, as depicted by the
US Treasury’s International Capital System (TIC) data. In fact, long term capital
flows for the month of December proved to be quite robust at $63.3bn,
above the average monthly net inflow level over the past six years. Furthermore, the
data shows strong net demand for US government debt (concentrated in Treasuries)
and strong net private inflows. This has helped close the gap between external financing
demand (the current account deficit) and the supply of financing as exhibited by the
TIC data (see top graphic). However, there are two caveats to be taken into account.
While there has been an improvement in the US current account deficit, the economic
recovery is likely to place pressure on it once again. This will not be a necessary USD
negative if financial flows continue to prove as supportive as they have in November
and December, however that brings us to caveat number two. It seems that China,
the most important market for US government debt when it comes to implications
for the USD, has now been a net seller of Treasury securities for
the months of November and December (at $9.3bn and $34.2bn respectively).
While December net buying of Treasury bonds and notes was robust, there was a dropoff
in official buying which was down $30.4bn as $21.9bn in Treasury bond purchases
was offset by a $52.3bn liquidation in T-bills. Should official interest in US assets wane,
and this could be taken as evidence of efforts towards reserve diversification, those
seeing an improvement in the US current account deficit as a USD positive
factor during a period of substantial expansion in new US debt issuance,
may be perceiving nothing more than a mirage. • The Fed’s Hoenig fired a stern
warning in a speech yesterday on the necessity of pre-emptive action to address the
US’s rising debt problem, or risk another crisis that could place the Fed’s independence
under sharp pressure. Today’s FOMC minutes from the January meeting, at which Mr.
Hoenig dissented, are made all the more interesting by yesterday’s speech. S.T.

Americas

USDCAD (1.0430) •USDCAD is holding near flat, leaving CAD in the upper half of majors
currencies today. USDCAD’s MACD provided a sell signal on the 11th, however we
will need to see yesterday’s intraday low near 1.0410 breached to keep the
downside momentum in the pair strong. 1.04 will be an obvious point of support
while 1.0460 holds the intraday topside level. Crude’s break higher past its 50-day m.a.
yesterday also provides CAD with further upside support. S.T.

Europe

EURUSD (1.3725) • EUR has lost 0.3% against the USD and is underperforming most of the primary currencies.
• It is noteworthy how many asset classes are attempting or have broken through their 100-
day moving averages in favour of risk taking. These include oil, S&P, gold, CAD, AUD, JPY, the VIX.
The price action hints that markets are turning and it is an early sign that high beta currencies, like CAD & AUD are preparing to rally. However, EUR continues to trade well below its 100-day moving average of 1.4531, hinting that investors are still unwilling to go materially long the currency. We also think this pattern confirms our view that the market is now separating bad news for EUR from the broader market. Accordingly, EUR rallies will still be limited by the sovereign overhang, but we could be entering a period of risk taking for other currencies. • Today, the Eurozone trade balance came in tighter than expected at 4.4bn. On a seasonally adjusted basis exports climbed 3.1%m/m and imports climbed 1.7%m/m. Accordingly the details were encouraging as they provide ongoing evidence that the recovery in Europe is taking hold. They also hint that weakness in the EUR will be an unforeseen boost to
the trade and economic backdrop. • There is increasing focus today on whether or not the investment bank-ers who underwrote the recent Greek bond issues had any responsibility to report previously entered into currency swaps. These swaps used historical exchange rates, thereby allowing an upfront cash payment to Greece, which many view as adding to the country’s
debt burden. Regardless of the responsibility owed, this issue should have only a limited
impact on EUR. The more important issue is waiting for the March 16th deadline for Greece
to comply with its austerity measures. C.S.
GBPUSD (1.5750) • After several economic releases, sterling is trading very close to esterday’s
North American close. The minutes from the February 3rd and 4th MPC meeting revealed that the vote to leave the asset purchase program at £200bn was unanimous.

There appears to have been discussions on both sides, but the committee decided that with the option to increase it at a later date leaving it unchanged was the best course of immediate action. Also released today was an as expected unemployment rate of 7.8% and a rise in jobless claims to 23.5k. Sterling has only had a muted reaction to the releases. C.S.

Asia / Oceania

USDJPY (90.70) • USDJPY has broken above its 100-day moving average (90.15) and is now testing its 50-day (90.75). • Yesterday’s TIC data highlighted that for the first time in almost 2-years, Japan’s holdings of US Treasurys has surpassed China’s - see chart on page 1. This reflects more on the drop in China’s holdings, but is still an important development. • Japan’s Finance Minister has stated that they are aiming for an inflation rate of 1%. This is the first time the ministry has specifically named a target. The BoJ will release its interest rate decision today in tomorrow’s Asian session. They are widely expected to remain on hold at 0.1%. C.S.

Commodities

Oil (77.30) • In a positive development for oil, the commodity has broken and closed above
its 100-day moving average of 75.95. The current rolling 45-day correlation between oil
and CAD is high at 0.82, implying that positive developments in oil prices are having a similar
impact on CAD levels. C.S.
Gold (1118.60) • Gold in EUR (814.73) has reached a new high, and in USD it has broken
above its 100-day moving average of 1103.30.C.S.

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RISK APPETITE INCREASES; PRESSURING THE USD LOWER

• Solid earnings from Barclays & reassurance from the EU have increased risk appetite.
• Speculators record largest ever net short EUR position but remain net long CAD.
• Inflation hits 3.5% in UK, Bank of England not concerned about temporary factors.
• German investor confidence continues to increase slowly.

FX Market Update

Markets were thin yesterday with the combination of North American and Asian holidays
(China is closed all week as it rings in the New Year). Since Friday’s close the
USD has weakened, with AUD gaining 0.7%, CAD up 0.4% and EUR up 0.1%. Risk
aversion has moved to the background as the combination of strong earnings from
Barclays and ongoing attempts by the EU to soothe fears over Greece have eased investors
concerns. Accordingly commodities are stronger, with oil making an attempt to
break up above its 100-day moving average of 75.85, and equities are firm as we move
into the North American open. • Today’s net long-term TIC flows are expected to increase
$35.4b and will be closely watched for changes in flows from the foreign official
sector and China in particular - see top chart. • Friday’s weekly CFTC speculative
positioning data showed that the net short EUR position has reached a new
all time high of $9.9bn. With sentiment so extreme it cautions that the market is
vulnerable to short covering, which would exaggerate a move higher in EUR. The net
long CAD position dropped down to just $0.8bn (8.9k contracts). It is encouraging that
CAD traders remain net long and it implies that speculators have removed some risk
from their portfolios, but still favour CAD in terms of sentiment. C.S.

Americas

USDCAD (1.0460) • CAD has gained ground against the USD today, but is underperforming
the other commodity currencies. USDCAD has broken below its 50 and 100-day
moving averages (1.0519 and 1.0542, respectively) and is trading at the lowest level in
18 sessions. These are all bearish indications and provide further evidence
that USDCAD is going to favour the bottom half of its range this week. A
close below 1.0464 (January 20th’s close) and a crossing of the 9-day moving average
below the 21-day (1.0605 and 1.0588, respectively) would provide added downside
pressure to USDCAD as would oil breaking above its 100-day moving average of 75.85.
However, these events would simply provide confirmation of what we believe are already
sufficient bearish technical signals to be short USDCAD on a near-term
basis. • Today’s announcement by Finance Minister Flaherty (8am EST) where he is
expected to provide the details behind plans to bring in tighter real estate lending
rules, including an affordability test, could be offsetting some of the more positive
developments we have seen for CAD. The M&A front is favouring a weaker USDCAD,
as both BP and Reliance Industries reported to be considering a $1.2bn to $2.0bn stake
in the Canadian oil sands’ Value Creation. • On a year-to-date basis, there are only
three currencies to have gained against the USD. These are JPY, which has benefited
from risk aversion; MXN which has recovered from negative sentiment at the end of
2009 and improving US fundamentals and CAD, which has managed to gain 1%, even
as other commodity currencies have weakened. As we look out to year-end, we
expect CAD will continue to outperform for many reasons: 1) improving fundamentals
in the US are good for the Canadian economic backdrop; 2) on a relative basis
Canada outperforms on almost every measure, including economic, fiscal and the aftershocks
from the financial crisis; 3) there is limited sovereign risk in Canada; 4) there is a
global appetite for Canadian assets - both as a diversification and a commodity play;
and 5) sentiment towards CAD remains positive. Accordingly, we have made no change
to our forecast that CAD will reach parity mid-year and appreciate through
here by year-end. We hold a year-end 0.97 USDCAD forecast. C.S.

Europe
EURUSD (1.3651) • EUR is finding itself supported today, but by no greater a degree than other well performing majors against a weaker USD, as EURUSD gains 0.4%. EUR has been buoyed by the more positive trading environment today, though CFTC speculative positioning data including information available up to last Tuesday (when EURUSD briefly jumped higher) showed a record net speculative short EUR position at -57K contracts ($9.9bn). Though it appears that longs had reentered the market somewhat, they were no match for the continuingly large build in shorts. This of course raises the risk of a sharp short squeeze in EURUSD as positioning remains extremely stretched. However, there is still little risk that policymakers in the European Union will provide the impetus for such a move in the short term as talk remains mildly supportive, but very stern regarding Greece’s fiscal problems. Gradual demonstration by Greece that it is willing and able to meet its fiscal responsibilities and hold to its plan of fiscal austerity seems to be the only thing that can provide the market with comfort. Over the past three sessions, Greek spreads to German bonds (10-year) have shot back higher and now stand near 330bps. EURUSD has tested close to downtrend resistance off of the January 14th intraday high, near 1.3690 today. The market has been unable to push EURUSD past 1.36 for
an extended period of time over the past two sessions, though Friday’s price action keeps 1.3550 and below a threat. S.T.
GBPUSD (1.5697) • Sterling is an underperformer, up only 0.2% against the USD and is showing no propensity to break out of its eight session trading range bounded by 1.5536 and 1.5776, though it appears that 1.5650 is supportive in the short term. Inflation in the UK rose 3.5% y/y in the month of January, the highest rate of price increase since November of 2008. In a published letter to Chancellor Darling, BoE Governor King pointed to short term factors such as the restoration of the VAT to 17.5% and oil prices (up 70% from one year ago) as the key reasons as to why prices have breached more than 1% higher than the Bank’s target rate, though the impact of a weaker currency was still feeding through to prices. The Bank foresees that the effect of these factors on inflation will be temporary and expects the impact of spare economic capacity to “bear down on inflationary pressure over time,” predicting that inflation will fall back to the target in H2 of 2010. Upside and downside inflation risks always exist, but at this point in time it seems that Bank of England is still predominantly concerned
with downside inflation pressures more than the short term upside pressures currently being seen.
S.T.

Asia / Oceania

USDJPY (89.90) • USDJPY is trading near flat after yen strength disintegrated heading into
North American trading. The yen has not benefitted to a great degree from better than expected
Q4 GDP data which came in at 1.1% quarter over quarter. The upside surprise (from the 0.9%
expected) fully offset the downward revision to the prior quarter’s 0.3% gain to 0% growth.
Perhaps the most notable result was the drop in Japan’s GDP deflator which crumbled to
-3% y/y, a record rate of contraction in this broad measure of prices. The Bank of
Japan meets to decide on policy late today and expectations are that it will keep policy on hold.
Look for topside resistance to come in at the 100-day moving average in USDJPY at
90.13 today, corresponding to the downtrend off of the January 8th intraday high in the pair.
S.T.
AUDUSD (0.8937) • AUD is up solidly today, gaining 0.7% against the USD. The RBA’s minutes
from its most recent meeting suggested that rate increases would likely to be necessary if
economic conditions continued to improve as expected, but that rate increases were not
required at every meeting. AUDUSD has rebounded soundly away from its 200-day moving
average (at 0.8623 today) towards its 50- day which holds at 0.8988. Uptrend support for
the pair off of the Feb. 9th intraday low comes in a bit below 0.89 and should keep AUDUSD
above that level through the remainder of today’s session should pro-risk market conditions
hold. S.T.

Plaza Group.


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FOPLADE- Occidente condena en la ONU la represión a la oposición iraní
Las ONG piden a Teherán que prohíba las lapidaciones

R. CARRIZO COUTO - Ginebra - 16/02/2010


Los países occidentales denunciaron ayer ante el Consejo de Derechos Humanos (CDH) de la ONU la "sangrienta represión" con la que Teherán ahoga las protestas de los opositores al régimen. La comunidad internacional se muestra convencida de que Irán está inmerso en una carrera para hacerse con el arma atómica, a pesar de las promesas del régimen de que sólo quiere desarrollar un programa nuclear para usos pacíficos.

Irán comparece por primera vez ante el Consejo de Derechos Humanos

A pesar de ello, Mohamed Javad Lariyaní, secretario general del Consejo de Derechos Humanos de Irán, no perdió tiempo en proclamar en Ginebra "el genuino compromiso de Irán en favor de la promoción y protección de los derechos humanos". Lariyaní acusó a Occidente de "usar los derechos humanos como herramienta política de presión" contra su país.

En la primera revisión que realiza el CDH de la ONU a la República Islámica, se estudian demandas de las organizaciones humanitarias que incluyen "poner límites a las condenas a muerte" en Irán o "la abolición de la pena capital en el caso de jóvenes delincuentes". Igualmente se pide a Teherán que proscriba "las lapidaciones, amputaciones y flagelaciones" al mismo tiempo que se pide "el respeto a la libertad de expresión", la libertad religiosa y la realización "de juicios con garantías conformes a las reglas del Derecho internacional". Frente a la sede de la ONU se manifestaron ayer más de 200 opositores al régimen iraní.

El embajador de Francia, Jean-Baptiste Mattéi, denunció "la represión sangrienta que el régimen practica contra su propia población, que se manifiesta de forma pacífica". Según el diplomático francés, desde la controvertida reelección en junio de 2009 del presidente Mahmud Ahmadineyad, decenas de personas han sido sido ejecutadas, y miles encarceladas. Una vez en prisión, las torturas y las violaciones han sido moneda corriente. Mattéi solicita "la creación de un mecanismo de investigación internacional sobre estas constantes violaciones de los derechos humanos".

A Francia se unieron las voces de EE UU y Reino Unido, que piden a Irán que permita la entrada a su territorio del Relator Especial para la Tortura de la ONU. Desde hace cinco años, los observadores internacionales no pueden entrar al país.

Otra voz que se alzó contra el régimen de Teherán fue la del premio Nobel de la Paz Shirín Ebadí. La abogada iraní pide un incremento de las sanciones políticas, pero alertó al mismo tiempo contra el riesgo de que ulteriores sanciones económicas sólo sirvan para dificultar aún más la vida del pueblo iraní.


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FOPLADE- Irán.




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FOPLADE- Anláisis Financiero

CHINA’S RESERVE RATIO INCREASE DEFLATES MARKETS China increases reserve requirements; creating a temporary move to risk aversion.
-US retail sales (postponed from Thursday) will be released today.
-EUR breaks links to broader market and continues to sink. Next support is at 1.3500.
-Weaker than expected Eurozone GDP and IP puts additional pressure on EUR.

FX Market Update

The FX market is seeing some very prominent selling of risk today, though for once it isn’t wholly due to developments in Europe. China announced that the reserve ratio of its banks will increase by 50 basis points, with the change becoming effective on the 25th of the month. SEK, NOK and AUD have borne the brunt of the selling, not surprising as these currencies have been three of the four best performing majors over the past five trading sessions. CAD, the other top performing currency over that same time period, continues to do well on the crosses during periods of strong USD buying (the greenback is gaining against all majors today), and is lagging only the USD and JPY. Commodities are also down sharply with copper leading the charge, while crude is down well over a percentage point along with gold.
• This is a logical, if not knee jerk reaction from the market as the global leader in growth continues to move its monetary policy in a tightening direction. However, too negative a reaction on the reserve ratio requirement increase alone probably suggests buying opportunities once the dust settles. The responsible way to ensure that growth is maintained at a reasonably high level for an extended period of time is to make sure such growth doesn’t push too far away from the sustainable trend, thus restraining incipient asset price bubbles. What is ultimately good for global growth, and thus risk assets, is that China continues to sustainably consume raw, intermediate and finished goods at elevated levels, rather than overconsumption followed by a crash in consumption. Commodity currencies should be weaker today on the China news, though global growth will be shown to have rebounded when the 2010 numbers are all accounted for, suggesting that short term liquidation of cyclical currencies creates buying opportunities after all has quieted down. One final note on China, while M2 money growth in the country has begun to sharply decline, the current estimate (January) suggests that this monetary aggregate is still over 25% higher than one year ago. The rate of increase in 2009 was staggering (see top graphic), and we shouldn’t be surprised that much more monetary tightening is in the pipeline from China.
• Yesterday’s $16bn auction of US 30-year bonds was rather disappointing and sent yields on the long bond to near one-month highs, though today’s environment has helped US yields tick down somewhat. Most relevant for the USD, indirect bidders (which includes central banks) bought only 28.5% of the offering, far lower than the 40.7% average of the past 10 auctions. However, there is little USD impact to be had as other factors are keeping the USD well bid; the dollar index has hit a new 7 month high. Next week’s TIC data release will be particularly interesting as it corresponds to December, the month in which the current USD rally began. We’ve seen a recent improvement in TIC data, and another large inflow into so called long-term assets will provide a sentiment boost to the USD. S.T.

Americas

USDCAD (1.0530) • Despite the fact that USDCAD is up 0.3%, CAD continues to outperform on the crosses as the USD gains across the board. The propensity of CAD to hold its value much better than most other majors during periods of risk aversion suggests that CAD may be viewed as holding less short-term potential versus other high beta currencies on a reversal of the USD’s fortunes. Still, broad based USD selling would be bearish for USDCAD and leave the pair back on its trajectory towards parity. We’d look to downtrend resistance off of the Tuesday North American session’s high near 1.0758 to hold the topside currently sitting just above 1.06. Canadian Motor vehicle sales for December will be released today. S.T.
Europe
EURUSD (1.3550) • EUR has dropped 1.1% since yesterday’s North American close. China’s reserve ratio increase accelerated the downward move that was already in place on the back of weaker than expected GDP and industrial production. Q4 GDP was expected to climb 0.3%, but instead only managed to increase 0.1%; while industrial production dropped 1.7% m/m. Accordingly, the recovery continues to be fragile and uneven and currency traders can find little reason to be long EUR. After yesterday’s brief announcement from the EU that confirmed that the “Euro area member states will take determined and coordinated action, if needed, to safeguard financial stability in the euro area”, CDS levels and bond yields came in. The rest of the market was already well into risk taking mode, with equities, commodities and non-USD and non-EUR currencies appreciating. However, the EUR was unable to rally, highlighting that traders remain unwilling to go long EUR - see middle chart on page 1. The good news from yesterday’s market moves is that it hints that developments in the EU are no longer driving risk aversion across markets and that traders are instead playing them out against the EUR specifically. The currency has now broken through the psychologically important 1.3600, the next level to watch for is 1.3500 followed by 1.3483, the 61.8% retracement of the February to December 2009 rally - see bottom chart on page 1. Pivots today suggest that buying pressure will emerge at 1.3458 and selling at 1.3727 - see table. C.S.
GBPUSD (1.5610) • Sterling is lower today, but still trading within Tuesday’s 1.5562 to 1.5748 range. The chart is bearish, with the 100 day moving average of 1.6229 now trading below the 200-day 1.6263; however for now the psychologically important 1.5500 is holding well. There were no economic releases today, but the market is expecting CPI to rise to 3.5% y/y on headline and 3.3% y/y on core next week. Even though the BoE has reiterated that it is anticipating inflation to rise above its 3.0% limit before falling back, any upside inflation surprise will cause a stir in markets. C.S.

Asia / Oceania

USDJPY (90.10) • USDJPY continues to hover on either side of 90.00 and its 100-day moving average of 90.13. Consumer confidence rose to 39.4. C.S AUDUSD (0.8800) • The commodity currencies are all losing ground against the USD on the back of tighter policy in China. AUD has yet to break out of yesterday’s range (0.8750 to 0.8921). C.S.
USDCNY (6.8333) • On the eve of the week long Lunar New Year holiday (which will decrease Asian flows next week), the PBoC has raised the reserve requirements on the deposit taking institutions by 50bpts. This is the second increase in the last month and provides further evidence that China is making small attempts to tighten policy in an attempt to reign in asset prices and avoid a bubble. The market has taken this negatively, however we would argue that in the medium term tighter policy in China will allow for a more sustainable recovery. • Over the last three sessions the yuan has depreciated 0.11% against the USD. The significant change is widely expected to have been caused by the buying of USD leading into the New Year celebrations; however at a time when there is ongoing international pressure for China to allow some appreciation of the yuan it seems at odds with where the managed currency should be moving. C.S.

Commodities

Oil (73.58) • Oil has fallen from yesterday’s close on the back of how tighter policy in China will impact global growth going forward. Accordingly, oil failed to break above its 100-day moving average of 75.81 and is now trading between there and its 200-day (71.21) again. The rolling 45-day correlation between CAD and oil remains high at 0.82. • Due to the snow in the northeastern US, oil inventories (usually released on Wednesday) will be released today at 11am EST. The market is expecting a 1,600k build in oil inventories and a drop of -1,550k in distillates. C.S.
CRB (269.70) • Like oil, the CRB index has climbed off its lows, but continues to trade between its 100 and 200-day moving average (273.33 and 262.33, respectively). Yesterday’s above expected release from Rio Tinto is favourable for commodity markets. The CEO, Tom Albanese, said that “in those businesses that are supporting the Chinese market, we’ve never seen stronger demand”. C.S.

Suggested Reading

When Deficits Become Dangerous, Michael Boskin, WSJ (February 12, 2010) Europe Vows to Save Greece, C. Forelle, M. Walker & A. Galloni, WSJ (February 12, 2010) China’s Surprise Monetary Tightening Shatters Calm, J. Chisholm, FT (February 12, 2010) New Dangers for the World Economy, The Economist (February 11, 2010) Not so Risk Free - Which Countries Have the Biggest Problems?, The Economist (February 11, 2010) Five Threats to the Common Currency, Stefan Schultz, Spiegel (February 12, 2010) Our Monthly FX Strategy Call is now available, please dial in at your convenience.
On this month’s 20 minute call we discuss:
1) Has the EUR stabilized - the key signals
2) USDCAD outlook into year-end 2010
To dial into the call (the replay is available for 30 days)
Dial: 416-695-5800
Passcode: 16272369#
For more information please go to:
http://www.scotiafx.com/conference/index.htm
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Please consider voting for us in Euromoney's FX Poll 2010 between January 14 and February 26. The link can be found at http://www.euromoney.com/stub.aspx?stubid=92.
___________________________________
Camilla Sutton, CFA, CMT Sacha Tihanyi
Currency Strategist Currency Strategist
Scotia Capital Scotia Capital
416-866-5470 416-862-3154
Camilla_sutton@scotiacapital.com Sacha_tihanyi@scotiacapital.com



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The Plaza Futures Group



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FOPLADE- La princesse saoudienne qui défend la cause des femmes
De notre envoyé spécial à Riyad, Pierre Prier
10/02/2010 | Mise à jour : 08:09 Réactions(42)

Crédits photo : ASSOCIATED PRESS


Rencontre exclusive avec la fille préférée du roi Abdallah, et son atout pour faire bouger la société.

Elle avait précisé : pas de photo. Pour sa première interview à un journal occidental, Son Altesse royale la princesse Adelah bint Abdallah sait jusqu'où elle peut s'aventurer. Si des présentatrices au visage découvert apparaissent quotidiennement sur les chaînes saoudiennes, la fille préférée du roi Abdallah ne peut se permettre de transgresser les «traditions familiales» même si elle n'y verrait personnellement aucun inconvénient. Elle a pourtant accepté, pour la première fois, de recevoir un journaliste en tête à tête, et chez elle. C'est déjà un grand pas, dans un pays où l'on peut condamner une femme au fouet pour s'être simplement trouvée en compagnie d'un homme étranger à sa famille.

La princesse accueille simplement le visiteur dans sa maison de Riyad, une vaste villa que l'on ne saurait qualifier de palais. Pas de protocole. Adelah bint Abdallah, une grande et jolie femme, tend la main en souriant au seuil d'un salon aux meubles modernes, métal et cuir. Elle porte une jupe longue en cuir noir, une veste courte en velours vert sur un chemisier de soie grège, un foulard en fine mousseline posé sur les cheveux. «Je le mets quand je suis en représentation officielle», explique-t-elle. On est loin du niqab, la tenue noire couvrant entièrement le visage, courante dans les rues saoudiennes.

En plein accord avec son père, Adelah bint Abdallah s'est créé une mission bien à elle dans la famille royale, faire avancer la cause des femmes dans un pays encore très traditionnel. L'establishment religieux ne voit pas cela d'un très bon œil. Mais avec la légitimité de son rang et l'appui personnel de son père, la princesse se sent libre d'exprimer des convictions qui pourront sans doute choquer plus d'un religieux, sans parler des islamistes locaux.

Le voile complet ? En Arabie saoudite comme en France, il devrait s'agir d'un choix personnel. La mixité, déjà en vigueur dans les hôpitaux, où des femmes médecins traitent des patients masculins, et vice-versa ? Elle devrait être étendue à toute la société. L'âge du mariage ? Il faut fixer un minimum, dit la princesse, qui prend spontanément la défense de la «fillette de Boureïda», une histoire qui divise les Saoudiens, celle d'une gamine de 12 ans qui a épousé un homme de 80 ans (lire encadré).

50 % des diplômés sont des filles

Diplômée d'anglais de l'Université du roi Saoud, mariée au ministre de l'Éducation, Adelah bint Abdallah, mère de cinq enfants, aurait pu se contenter de mener la vie dorée des membres de la famille royale. Mais des anecdotes familiales, racontées par son père, elle retient surtout les leçons de courage. Comme le jour où son grand-père le roi Abdelaziz, l'unificateur du royaume par l'épée et le Coran, partagea deux dattes avec ses compagnons d'armes, «en gardant les morceaux le plus longtemps dans la bouche».

Certes, Son Altesse royale ne dédaigne pas le style de vie des classes supérieures saoudiennes. Elle aime voyager, s'apprête à partir skier en famille dans les Alpes pour les vacances de février, qui commencent cette semaine, et confie son attrait pour les plats de «grenouilles», prononcé en français. Mais elle passe aussi beaucoup de temps dans le royaume, s'impliquant personnellement dans une série d'organisations dont la plupart ont pour but la promotion des femmes, comme l'association Khadija bint Khuwailid, destinée à aider les femmes d'affaires, et qui a emprunté son nom à la femme du Prophète, une commerçante. «Elle représente l'avenir et l'espoir des Saoudiens, hommes et femmes, dit un intellectuel proche de la famille royale. Elle comprend très bien la société saoudienne, et elle s'est fait une idée claire de la direction à prendre.» Adelah bint Abdallah envisage une Arabie saoudite où l'on ferait la différence entre les interdits issus de la tradition et les règles de la religion. Suivant l'exemple de son père, qui a admis les représentants de toutes les écoles juridiques de l'islam au grand conseil des oulémas, les savants religieux, la princesse estime que l'on devrait pouvoir choisir son école préférée ce qui, là encore, ne plaira pas aux religieux officiels partisans d'une vision rigoriste de l'islam, que ses adversaires désignent comme «wahhabite».

À travers sa fille, le roi Abdallah tente de faire bouger tout un pan de la société saoudienne, un enjeu crucial pour la famille au pouvoir. Un pays où désormais plus de 50 % des diplômés de l'université sont des filles ne peut continuer longtemps à ignorer la moitié de ses citoyens. Mais ces réformes ont leurs limites. L'expérience des élections municipales de 2005, partielles et réservées aux hommes, n'a pour l'instant pas été reconduite. La monarchie avait suggéré que la fois suivante, les femmes pourraient voter. Elles devront encore attendre.





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FOPLADE- Análisis Financiero.

HEADLINE RISK FOR EUR REMAINS HIGH
-EC President Barroso says accord has been reached, but provides no details.
-Snow storm in north-eastern US expected to play havoc with February economic data.
-Australian employment jump provides AUD a large boost.
-CNY sees its largest 2-day depreciation in some time.

FX Market Update

The Asian and European sessions allowed for an increase in risk taking. Accordingly, the USD is on weaker footing, while equities and commodities are stronger. AUD and NZD are benefiting from Australia’s surprisingly strong employment release. Headline risk is ongoing, with EC President Barroso saying that an accord has been reached and details will be provided later.
• A strategy for providing support to the weaker members of the EU is being waited on by markets. The Lisbon Treaty clearly lays out that there is to be no direct ECB guarantee or bailout, unless there are extraordinary circumstances; however there could be direct bilateral or multilateral support. Headline risk remains high and EUR is vulnerable.
• The Economist has combined three measures of risk: bond yields over growth rates, the debt-to-GDP ratio and the primary deficit/surplus to rank those countries most at risk. The top chart highlights the result - the lower the score the higher the risk associated with the country. The result isn’t surprising, but does point to several themes playing out in the market. 1) Greece is weak, but it is not alone. In many ways the market has given a window of opportunity to those countries at risk and should they fail to bring in fiscal responsibility their currencies could face a similar fate as the EUR - GBP and USD are good examples of this. 2) Canada and Australia are well positioned fiscally and we would expect their currencies to be rewarded for this in the year ahead. 3) Japan’s debt stats point to a grim picture, however most of it is internally held, which removes the risk of foreign investors. We continue to believe that sovereign issues will play a key part in currency valuation throughout 2010.
• Weather is creating some chaos for those in the north-eastern US. Trading volumes were lighter yesterday with many desks only partially staffed. In addition, worries are already circling as to the economic impact of the snow fall. The employment survey is currently being taken and accordingly could provide an odd reading, in addition there is speculation that productivity losses could be as high as $100m per day, which could play into many of the February data releases.
• Yesterday, Chairman Bernanke provided no indication of a change in timing of tighter policy, however he laid out how the Fed can bring in tighter policy. The key takeaway was that “Fed funds rate could for a time become a less reliable indicator than usual of conditions in short-term money markets”. There are several tools available to tighten policy including paying interest on bank holdings of reserves. This would put upward pressure on all short-term interest rates. In addition, at some point the discount rate will increase but this shouldn't be viewed as leading monetary tightening. C.S.

Americas

USDCAD (1.0588) • USDCAD on its way to testing its 100-day m.a. of 1.0554. A break and close below would be bearish. Regardless, for now USDCAD continues to be in range trading mode. We continue to believe that global developments to date (an ongoing global recovery, sovereign risk becoming a market focus and shifting sentiment away from the EUR) are all positives for CAD over the medium term, particularly on its non-USD crosses. We hold a year-end USDCAD target of 0.9700, EURCAD target of 1.3968 and GBPCAD target of 1.5908. The only data expected today is new housing price index, which is expected to increase 0.3% m/m. Any upside surprise will fuel speculation over the potential of a Canadian housing bubble. • For near-term traders, today’s pivot indicate that buying pressure will emerge at 1.0540 and selling pressure at 1.0675. C.S.

Europe

EURUSD (1.3716) • EURUSD had come under pressure heading into North American trading after hitting intraday resistance at 1.38. However, EUR found a bit of a bid as the European Commission President Jose Barroso has stated that an accord has been reached and that the EU presidency will announce it. Reaction has been fairly muted when compared to the impact that earlier speculation has had on EUR, but after so many false start announcements the market is likely waiting to see the details rather than reacting too proactively on only news of an imminent announcement. • The previously mentioned 1.38 level corresponds to the downtrend off of the January 14th intraday high and the beginning of the one month sharp selloff that EUR finds itself entrenched in. Trend support off of the February 5th low favours EURUSD and comes in just above 1.37. Combining this support with the 1.38 level, it appears that EURUSD is being squeezed by two opposing trendlines, with the short term perhaps likely to win out if the forthcoming announcement on Greece does enough to calm market fears. S.T.
GBPUSD (1.5617) • Cable continues to find bids in the 1.5550 to 1.5570 range which is helping it to avoid a retest of the 1.5536 low from Monday. The UK’s National Institute of Economic and Social Research’s rolling quarterly GDP estimate for the three months ended January came in at 0.4%, helping the NIESR growth estimates return once again back above their average since the beginning of 2004. Still, with Mervyn King’s comments yesterday warning that it is too early to take the QE option off the table, GBP remains stuck in a rut. Strong GBPUSD buying is helping to drive cable back to its intraday highs near 1.5660. S.T.

Asia / Oceania

USDJPY (89.63) • The yen has rapidly moved higher moving into the North American trading day after USDJPY ran into upside resistance at its 100-day moving average of 90.12. USDJPY is being squeezed between a short term uptrend off of the February 4th low and a downtrend off of the January 8th high. Today may not bring a test of these bounds with the downside bound near 89.43 and upside bound near 90.50, though USDJPY pressure as we go to print suggests that the downside is most vulnerable. S.T.
AUDUSD (0.8870) • AUD is a very large outperformer on the day up as much as 1.7% against the USD at one point. Though AUD has weakened off somewhat since peaking, it is still up a very impressive 1.4%. The catalyst for AUD’s move higher has been a much better than expected January employment result. Consensus estimates suggested a respectable 15K jobs would be added on the month when in fact a massive 52.7K print was registered. This was the largest employment increase in more than three years, though job gains (like last month) were still heavily weighted towards gains in part time employment (responsible for 70% of the increase). Interest rates in Australia jumped significantly providing upside impetus for AUD as markets reassess their RBA outlook. S.T.
USDCNY(6.8338) •The USDCNY exchange rate continues to move higher after yesterday’s surge and has pushed close to 6.8350, a level not threatened since October. Though only a marginal change over the past two days (a 0.1% yuan depreciation), on a relative basis it does appear rather significant. S.T.

Commodities

Oil ($75.33) • Crude continues to gain, helped by political tensions in the Persion Gulf related to Iran’s nuclear ambitions. Crude is also getting support from the IEA which raised its global oil demand forecast for 2010, now foreseeing 170K more barrels per day to bring total daily demand to 86.5mln barrels per day. Downtrend resistance off of the January high (just below $84) is sitting near 75.90. S.T.

Suggested Readings

Adding in the Deficit, Buttonwood, The Economist (February 4, 2010) EU Leaders to Back Greek Rescue Plan, Tony Barber, FT (February 11, 2010) Snow Throws Wet Blanket on Recovery Gauges, Kelly Evans, WSJ (February 11, 2010) A Greek Crisis is Coming to America, Niall Ferguson, FT (February 11, 2010)

Please consider voting for us in Euromoney's FX Poll 2010 between January 14 and February 26. The link can be found at http://www.euromoney.com/stub.aspx?stubid=92.
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Camilla Sutton, CFA, CMT Sacha Tihanyi
Currency Strategist Currency Strategist
Scotia Capital Scotia Capital
416-866-5470 416-862-3154
Camilla_sutton@scotiacapital.com Sacha_tihanyi@scotiacapital.com



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