>> Commodity Bloc to Underperform While Major Currencies Consolidate

-Euro still locked in choppy consolidation

-G-20, IMF and World Bank meetings kick off

-Looking for underperformance in commodity and EM FX

-German IFO and UK retail sales come in above consensus

-Taking a closer look at risk management and effective trading technique

We have reached the final session for the week and after all is said and done, there have really been no significant price action developments in the major currencies. The Euro remains locked in a tight consolidation and will still need to break and close back above 1.3215 or below 1.2995 for clearer directional bias. Thursday’s successful Spanish bond auction has managed to prop the single currency for the time being, but any upside has been capped to this point.

Relative performance versus the USD Friday (as of 10:35GMT)

CHF +0.40%

EUR +0.35%

GBP +0.31%

CAD +0.30%

AUD +0.07%

NZD -0.01%

JPY -0.18%

Global equity markets still seem to be overvalued in our opinion and the technical picture warns of a more substantial decline over the near-term. As such, we would expect to see a continued underperformance in risk correlated currencies going forward, and perhaps it is best to be net short a basket of the commodity bloc and emerging market FX against the major currencies.

With this strategy, we would eliminate direct exposure to the US Dollar, whose fate seems to be less certain given the recent consolidation. By extension, we would also be long of some of the other major currencies like the Euro and Pound (against commodity and EM FX), and this seems to be the right trade on Friday, with both the Euro and Pound responding well to the much better than expected economic data in the form of German IFO and UK retail sales.

Looking ahead, markets may remain locked in a holding pattern in light of the G-20, IMF and World Bank meetings which are all underway. However, as per the usual, we do not expect any developments from these meeting to have any major influence on the direction in markets. The underlying market drivers over the coming weeks will continue to be driven off the Eurozone crisis, Fed monetary policy outlook, and Chinese economic performance.

Moving on, the other day I received an email from a client asking for some tips on risk management. The client was distressed with his performance and inability to successfully trade the markets and was looking for some feedback. I put together a response and thought it might be helpful to share my thoughts on the matter. The following is my response:

What you speak of is one of the most challenging things about being a successful trader....it is not easy and comes down to maintaining a very firm discipline.....the best I can explain is that intuitively, a trader will look to be fearful in a winning position and hopeful in a losing position...this is why most unsuccessful traders will get poor results....they are hopeful when they are losing and hold onto the position and yet the second they see any profit they are fearful and quick to take it off....this obviously skews risk/reward and makes for a bad strategy.....a lot of this stems from a lack of confidence....

What you need to do is to flip that around and be fearful in losing positions and hopeful in winning positions...this is really the secret....the best way to do this is to make sure you take only trades you love.....then determine where you would like to see the trade go..and let the trade play out..while also being very firm with your stop-loss...do not take profit ahead of what you decided (provided you still love the trade), and also try and not watch the market every second of the day.....another way to effectively implement this strategy is to make sure that your position size is not too big...one way to do this is to take the "Pillow Test”, a rule I came up with years ago which says that if you can't sleep at night then your position is too big and you won't be able to think clearly.....so reduce the size until you can sleep soundly on your pillow :)...

ECONOMIC CALENDAR

 TECHNICAL OUTLOOK

 EUR/USD: The latest round of setbacks have stalled ahead of some key multi-week support by 1.3000 and from here we still can not rule out risks for additional consolidation above 1.3000, before considering bearish resumption. Ultimately, any rallies towards 1.3300 should be well capped, while a break and daily close back under 1.3000 would accelerate declines to the early 2012 lows at 1.2660.

 USD/JPY: The latest pullback from the 2012, 84.20 highs was viewed as corrective and it looks as though the market has finally found some solid support ahead of 80.00. The setbacks have stalled by the top of the daily and weekly Ichimoku clouds and we look for the formation of a fresh medium-term higher low somewhere around 80.00 ahead of the next major upside extension back towards and eventually through 84.20. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate.

 GBP/USD: The recent break back above 1.6000 now opens the door for fresh upside towards the October 2011 peak at 1.6150. However, any additional gains beyond 1.6150 should prove hard to come by, and we once again see risks for a bearish reversal in favor of renewed weakness back down towards key support by 1.5800. A break and close below 1.5800 will then accelerate declines. Ultimately, only a weekly close above 1.6150 would negate underlying bearish bias.

 USD/CHF: Our core constructive outlook remains well intact, with the latest setbacks very well supported by psychological barriers at 0.9000. It now seems as though the market could be looking to carve a fresh higher low, and we will be watching for additional upside back towards the recent range highs at 0.9335 over the coming sessions. Above 0.9335 should accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9000 delays and gives reason for pause.

> Aussie leads after data of the work while the Japanese Yen and the US Dollar fight

Fundamental headlines

-Decrease in deposits at its lowest since 2007 U.S. foreclosure - Bloomberg

-Yellen said jobs Outlook accommodating political mandates - Bloomberg

-Silent guns in the hours after the truce of Syria - Reuters

-Italian short term results - WSJ

-Will be the Inflation Kill there hopes? -WSJ

Summary of European Session

In recent weeks, the sense of global investors has eroded for two main reasons: the eurozone sovereign debt crisis. and the slowdown in China's growth. The currency which has been influenced the most by these events has easily been the Australian Dollar. Since March 1, the Australian Dollar was the main currency of less powerful, loser 3.10% to the US Dollar; This performance looks particularly brutal from the relatively strong performance by Canadians and the NZ $ in the same image, when they have only lost 0.98% and 1.31% against the US Dollar, respectively.

That these concerns, the Australian Dollar in circulation have accumulated, expectations of lower rates have soared in recent weeks, with the credit Switzerland Overnight Index Swaps suggests (as recent as yesterday) a chance to 97.0% a rate at the next meeting of the Australia Reserve Bank. Primarily, policymakers expressed concerns in a housing market deflate, price pressures, cooling and the labour market recently struggling.

The release of labour market last night has certainly facilitated some of the concerns of the decision-makers of the RBA. Not only data rash printing - 44.0 k actual versus 6.5 k scheduled - but partial picked up immensely, usually a sign that firms seek to expand their work forces (it is usually a precursor to employment full time).

For today, with decision makers to be a little less concerned about the economy - also marked less than 5.2% unemployment rate - rate cut expectations have decreased considerably, with the credit Switzerland ISB now showing a 82.0 percent chance of a rate of 25 points, 0-base cut at the next meeting of the RBA. The Australian Dollar has responded accordingly, surging against the lower yield currencies, the Japanese Yen and the US Dollar, levels tests key technical against him that would justify a change in medium-term exchange rate forecasts.

Take a look at credit, the market players continue to push the debt of periphery of the Euro zone after the comment by Benoit Couere who suggested that the ECB could resume to buy Spanish debt, Member of the Board of the Central Bank European. The periphery debt responded positively, the yields of 10 Italian years and falling Spanish 5.390 and 5.781%, respectively.

AUDJPY 5 min chart: 12 April 2012

Graphing with Marketscope - prepared by Christopher Vecchio

Overall, the Australian Dollar was the best performance of the major currencies, gaining 0.85% against the US Dollar. Products and European currencies were strong overall, with Canadians and the NZ $ 0.38% and 0.48% respectively, while the Euro firmed by 0.23% against the Dollar but two sessions Thursday. The Japanese Yen has been the worst performer, down 0.06%.

24-Hour price Action

Key levels: 13: 55 GMT

So far, on Thursday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is low, trade at 9938.80 at the time when this report was written, after opening at 9968.85. The index traded only lower, with the high in the 9968.92 and the 9922.03 low.

TradeTheNews.com European Market Update: ECB 3-year LTRO allotment in line with expectations while number of bidders surged to 800

Wednesday, February 29, 2012 5:49:24 AM

 TradeTheNews.com European Market Update: ECB 3-year LTRO allotment in line with expectations while number of bidders surged to 800

***Economic Data***
- (EU) ECB: €4.9B borrowed in overnight loan facility v €1.1B prior; €481.1B parked in deposit facility vs. €475.2B prior
- (IN) India Quarterly GDP Y/Y: 6.3%e v 6.9% prior
- (ZA) South Africa Jan Private Sector Credit Y/Y: 7.3% v 7.1%e; M3 Money Supply Y/Y: 6.6 v 8.6%e >- (DE) Germany Jan Import Price Index M/M: 1.3% v 0.7%e; Y/Y: 3.7% v 3.0%e
- (DE) Germany Jan ILO Employment: 41.37M v 41.28M prior; Unemployment Rate: 5.8% v 5.7% prior
- (FI) Finland Dec Final Trade Balance: -€533M v -€475M prelim
- (TH) Thailand Jan Business Sentiment Index: 50.8 v 48.5 prior
- (FR) France Jan Consumer Spending M/M: -0.4% v +0.2%e; Y/Y: -2.2% v -2.0%e
- (DK) Denmark Q4 Preliminary GDP Q/Q: 0.2% v 0.6%e; Y/Y: 0.6% v 0.2%e
- (ES) Spain Feb Preliminary Consumer Price Index Y/Y: 2.0% v 1.9%e; CPI EU Harmonized Y/Y: 1.9% v 1.9%e >- (CH) Swiss Feb KOF Swiss Leading Indicator: -0.12 v -0.10e
- (TR) Turkey Jan Trade Balance: -$7.0B v -$6.4Be
- (TW) Taiwan Jan Leading Index M/M: 1.0% v 1.0% prior; Coincident Index M/M: 0.2 v 0.0% prior
- (HK) Hong Kong Jan M2 Money Supply Y/Y: 5.6% v 4.6% prior; M3 Money Supply Y/Y: 5.5% v 4.6% prior; M1 Money Supply Y/Y: 1.3% v 8.8% prior
- (SE) Sweden Q4 GDP Q/Q: -1.1% v -0.7%e; Y/Y: 1.1% v 2.6%e
- (SE) Sweden Dec Non-Manual Worker Wages: 2.7 v 2.6% prior
- (DE) Germany Feb Unemployment Change: 0K (flat) v -5Ke; Unemployment Rate: 6.8% v 6.7%e
- (AT) Austria Jan Consumer Price Index M/M: -0.3% v +0.2% prior; Y/Y: 3.0% v 3.2% prior
- (CZ) Czech Jan Money Supply Y/Y: 6.0% v 5.3% prior
- (IC) Iceland Jan Final Trade Balance (ISK): 10.1B v 12.0B prior
- (NO) Norway Jan Credit Indicator Growth Y/Y: 6.9% v 6.7%e
- (NO) Norway Q4 Manufacturing Wage Index Q/Q: 1.4% v 2.1% prior
- (UK) Jan Net Consumer Credit: £0.1B v £0.2Be; Net Lending: £1.6B v £0.8Be >- (UK) Jan Mortgage Approvals: 58.7K v 54.0Ke (highest reading since Dec 2009)
- (UK) Jan M4 Money Supply M/M: +1.6% v -1.4% prior (fastest growth since Oct 2009); Y/Y: -1.8% v -2.5% prior; M4 Ex IOFCs 3M Annualized: no est v -0.8% prior
- (EU) Euro Zone Jan CPI M/M: -0.8% v -0.8%e; Y/Y: 2.6% v 2.7%e; CPI Core Y/Y: 1.5% v 1.7%e
- (CH) Swiss Jan CPI EU Harmonized M/M: -0.7% v -0.3%e; Y/Y: -0.9% v -0.7%e
- (GR) Greece Dec Retail Sales Value Y/Y: -11.0% v -6.4% prior; Retail Sales Volume: 12.7% v -8.9% prior
- (ES) Spain Dec Current Account: -€3.6B v -€4.1B prior
- (IE) Ireland Feb Live Register Monthly Change: -1.8K v -3.2K prior; Unemployment Rate: 14.2% v 14.2% prior; Live Registry Level: 438.3 v 440.1 prior

Fixed Income:
- (EU) ECB allots $3.5B in 7-Day USD Liquidity Tender at fixed 0.61% vs. $3.6B prior
- (EU) ECB allots $14.5B in 3-Month USD Liquidity Tender at fixed 0.62% vs. $9.4B prior
- (SE) Sweden sells total SEK10B vs. SEK10B indicated in 3-month and 7-month Bills
- (EU) ECB allots €6.5B in 3-Month Tender (MRO) vs. €19.6B prior >- (EU) ECB allotted €529.5B in 3-Year Lending Tender (LTRO) vs. €500Be; Bidders at 800 vs. 523 prior
- (DE) Germany sold €3.258B in 2.0% Jan 2022 Bund; Avg Yield 1.83% v 1.82% prior; Bid-to-cover: 1.4x v 1.4x prior

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Dow Jones Industrial closes above the 13,000 level for the first time since 2008
- Fed member Pianalto: Will take five years to get back to 6% unemployment
- Japan fund managers raise global equity weighting in Feb
- German Unemployment change slightly weaker than expected but unchanged MoM
- ECB 3-year allotment in line with expectations at €529.5B but had 800 banks participate vs. 523 prior

Equities: >FTSE 100 flat at 5928, DAX +0.40% at 6916, CAC-40 +0.30% at 3460, IBEX-35 +0.24% at 8548, FTSE MIB +0.75% at 16,466, SMI +0.20% at 6135

- Markets traded up ahead of ECB's LTRO which boosted optimism that the second long-term refinancing operation would ease the tension in the banking sector. Data showed that the 3-year tender, which was slightly higher than expected, attracted 800 bidders from 523 prior. Markets are still digesting the news and are moving erratically but remain in positive territory. Banks rallied during the session.
- Standard Chartered [STAN.UK] was up approx. 2% after releasing better than expected earnings and increasing its dividend. Bank also expected to see double digit EPS growth in medium term. ITV [ITV.UK] also rose after exceeding expectations. Swiss cement-maker, Holcim [HOLN.CH] was higher after reporting a narrower than expected loss and higher revenues. Company expects higher demand across its geographic segments. Hochtief [HOT.DE] reported a loss for its full year and expected that its 2012 pretax profit to be lower than 2010 level. Company also announced that it would not pay a dividend in 2011. Shares were lower.

Speakers: >- EU Leader Summit draft document noted that the region was taking all required measures to facilitate economic growth and pledge June agreement on pilot phase of project bonds. The summit to pledge differentiated fiscal consolidation. The EU saw need to aid banks without excessive deleverage and sought more precise commitments on reforms and targets
- BOE members King, Bean, Tucker and Posen all testified on inflation in Parliament.
- BOE Gov King commented that unwinding QE was relatively straight forward operation with the process is a lot easier compared to stimulating the economy. The BoE would take whatever action it thought was appropriate on QE and no hard and fast expectation that BoE was going to do a lot more QE. Main reason for QE was to bring growth in broad money back to normality
- BOE member Posen stated that second round of QE wouldl be as successful as the first round and that the QE2 now was different than 2009 because market was not in panic mode. Lastly he noted that Japan needed to react quickly on its monetary policy.
- BOE member Bean stated that he saw a gradual strengthening of UK economy and that inflation would fall back to target in the near term. He did caution some uncertainty over further inflation moderation down the road and noted headwinds from fiscal consolidation and de-leveraging
- BoE Tucker noted that the outlook was highly uncertain and needed to keep policy under review
- BoJ Gov Shirakawa commented to parliament that the central bank would pursue strong monetary easing policy. The Gov reiterated his view that the central bank would maintain Zero Rate Policy until the 1.0% price target was in sight.
- Japan Fin Min Azumi also noted in Parliament that the BoJ effectively adopted inflation goals with a clear target of price increases
- Italy Dep Fin Min Grilli commented that the risk of debt crisis contagion had yet to be overcome
- Poland Finance Ministry said to have forecasted its Q4 GDP at 4.3%
- Ireland Central Bank dep gov Gerlach: The central banks must do more to assess risks
- Sweden Central Bank (Riksbank) released its February Minutes which note that sluggish Euro Area growth impacted Swedish exports more than expected and concluded that inflationary pressures were low in the years ahead. Various members echoed the same theme in their commentary. Gov Ingves noted that he saw big differences between Northern and Southern Europe in terms of growth while there were bright spots in US economy. Member Jansson expressed concerned over slow pace of Euro Area improvement but recent agreement on EU Fiscal Compact was encouraging. Member Jochnick noted that economic developments in Europe weakened since December but Europe was on the right path and member Wickman-Parak added that the European economic slowdown had a pronounced effect on Sweden's exports with sSome improvement recently in both domestic and international data. She added that she could not see any reason to stop the current rate cuts
- German gov't spokesperson commented that the German cabinet supported solar-subsidy draft legislation

Currencies:
- The FX markets were steady heading into the ECB 3-year lending operation but overall dealer sentiment was stacked against the greenback due to the LTRO operation in Europe and the semi-annual testimony from Fed Chairman Bernanke. - The price action was initially choppy following the results of the 3-year LTRO but the number of banks participating added some concern. The EUR/USD drifted lower into the NY open around the 1.3440 level. There was some chatter of a large 1.3500 option barrier in the pair circulating (but unconfirmed).

Political/ In the Papers:
- Morgan Stanley had expected banks in Italy and Spain to increase their holdings of government debt by up to €120B in sovereign debt. Recent data from the ECB showed that Spanish and Italian banks increased holdings of their country's sovereign debt by record amounts in Jan.
- Out of Germany, the Frankfurt court banned airport strike action, adding that impact caused by air traffic controllers announced by the GdF union would be 'disproportionate' to the support it would provide for the demands by the ground workers. The GdF union stated that it would appeal against the court decision.
- The Telegraph's Ambrose Evans-Pritchard looked at the possible implications from Ireland's planned referendum on the EU fiscal pact. The move by Irish officials could lead to clashes with German officials. Although Ireland's top political parties support the treaty, some analysts believe there is a high risk that the measure could be rejected by their voters. Note that Ireland voted "No" to both the Nice and Lisbon treaties before being made to vote again. If Ireland rejects the fiscal agreement, it would make it harder for the company to receive a second EU bailout, if needed.

***Looking Ahead***
- 6:00 (EU) EU to propose competition and capital rules for Trade Settlement
- 6:00 (NL) Netherlands Parliament votes on second Greek bailout package
- 6:30 (CL) Chile Central Bank Meeting Minutes
- 7:00 (FI) Finland Parliament votes on second Greek bailout package
- 7:00 (UK) PM question time in House of Commons
- 7:00 (CL) Chile Jan Industrial Production Y/Y: 2.4%e v 0.5% prior; Industrial Sales Y/Y: No est v 0.4% prior
- 7:00 (CL) Chile Jan Total Copper Production: no est v 509.4K tons prior
- 7:00 (CL) Chile Jan Retail Sales Y/Y: 8.8%e v 10.1% prior
- 7:00 (US) MBA Mortgage Applications w/e Feb 24th: No est v -4.5% prior
- 7:00 (ZA) South Africa Jan Budget (ZAR): No est v 20.9B prior
- 8:00 (EU) EU's Barnier speaks at Event in Brussels
- 8:00 (EU) EU's Barroso
- 8:00 (PL) Poland Central Bank (NBP) Feb Inflation Expectations Survey: No est v 5.2% prior
- 8:30 (US) Q4 Final GDP Q/Q Annualized: 2.8%e v 2.8% prelim; Personal Consumption: 2.0%e v 2.0% prelim >- 8:30 (UD) Q4 Final GDP Price Index: 0.4%e v 0.4% prelim; Core PCE Q/Q: 1.1%e v 1.1% prelim
- 8:30 (BR) Brazil Jan Nominal Budget Balance (BRL): No est v -18.6B prior; Primary Budget Balance: No est v +1.9B prior; Net Debt to GDP ratio: No est v 36.5% prior
- 9:00 (CA) Canada Dec Teranet/National Bank House price Index M/M: No est v -0.2% prior; Y/Y: No est v 7.1% prior; HPI Index: No est v 149.11 prior
- 9:30 (US) Fed's Fisher speaks on economy in Mexico City
- 9:30 (UK) Treasury Minister Hoban testifies on Euro-Area Crisis
- 9:45 (US) Feb Chicago Purchasing Manager: 61.0e v 60.2 prior
- 9:45 (UK) BOE to buy £1.5B in 2019-2025 Gilts in reverse auction
- 10:00 (US) Fed Chairman Fed's Bernanke delivers semi-annual Monetary Policy Report
- 10:00 (US) Feb NAPM-Milwaukee: 58.8e v 58.4 prior
- 10:30 (US) Weekly DOE Energy Inventories
- 10:30 (BR) Brazil Central Bank weekly currency flows
- 11:00 (CO) Colombia Jan Urban Unemployment Rate: 10.8%e v 10.4% prior
- 11:00 (EU) EU Juncker before EU Parliament
- 11:00 (IT) Italy PM Monti with Portugal PM Coelho
- 12:00 (GR) Expected ISDA ruling if Greek sovereign credit event occurred
- 12:00 (DE) German Chancellor Merkel hosts Town Hall on Germany's Future in Erfurt
- 13:00 (US) Fed's Plosser speaks on economy in New York
- 14:00 (US) Fed Releases Beige Book Economic Survey
- 14:00 (EU) Denmark PM Thorning-Schmidt speaks at Brussels Think Tank
- 14:00 (AR) Argentina Jan Construction Activity M/M: No est v 1.2% prior; Y/Y: No est v 2.6% prior
- 20:00 (CN) China Feb Manufacturing PMI: 50.8e v 50.5 prior
- 21:30 (CN) China Feb HSBC Manufacturing PMI: No est v 48.8 prior

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