Rough Waters, Few Harbours, ESM Leverage News

The latest news over the weekend is chatter that Eurozone nations are reconsidering plans to leverage the ESM up to EUR 2.0 trillion. In the beauty contest of the forex market, they are all ugly ducklings. The volatile week ended with the yen as the top performer and the euro as the laggard. CFTC positioning showed a sharp pullback in euro longs. The latest on our Premium Insights is found below.

Finding reasons to sell currencies is far simpler than reasons to buy at the moment. Central banks are printing and Europe is bumbling the ESM. The resulting threats to growth could undermine the commodity bloc.

Those dynamics were captured on Friday and resulted in a volatile day. The euro rallied on indications Spain could be less than a week away from requesting ESM aid and then stumbled when officials said no application was coming.

The US dollar initially slumped when San Francisco Fed President Williams put QE4 on the table saying the Fed could buy Treasuries when Operation Twist runs out in December if the economy remains weak.

EUR/USD whipped back and forth before closing the day nearly unchanged at 1.2979. Gold shot to a six-month high at $1787 and then sank back to $1772.

CFTC Positions

It was the first look at positioning since the ECB and Fed meetings. Although euro shorts were trimmed 23%, the market retains a strongly negative bias, which points to the continued possibility of a short squeeze.

EUR -73K vs -94K prior

JPY +15K vs +33K prior

GBP +14K vs -4K prior

AUD +69K vs +68K prior

CAD +111K vs +102K prior

CHF -4K vs -9K prior

NZD +17K vs 10K prior

See the latest Premium Insights on EURUSD, EURJPY, AUDSD, GBPUSD, CADJPY, gold, silver and oil found here: http://ashraflaidi.com/products/sub01/access/?a=682 Non subscribers can click here: http://ashraflaidi.com/products/sub01/

-AB