1. The market was really, really short of Cable…
2. The Fed will stay easy for months to come while phasing out its special lending programs
3. The Swiss have begun to follow the ECB and Fed in withdrawing some of its support measures, specifically forex intervention to maintain a weak franc
4. The market is discounting a serious trade dispute between the US and China. Otherwise they wouldn’t be plowing headlong into AUD and CAD as elevated levels.
5. Greece will be a back-burner issue until it becomes a front-burner issue again as they resume rolling over their debt at 300+ basis points over European benchmarks.

China and the US are bickering. The French are snipping at the Germans…Greece is waiting for a package that seems to have been lost in the mail…

Along with these tensions, we have concerns that all the AAA sovereign credits will need to begin getting their fiscal houses in order or risk their top ratings.

Sounds like a good day to pull the covers over your head and go back to sleep…Expect a fair degree of risk aversion today.

• AUD and CAD positioning moved to overweight from neutral after a week of heavy buying. AUD long positions increased by 25%.
• EUR shorts increased by 10%, to a new record level
• GBP open positions were reduced by about 6% but the market remains significantly short
• JPY long positions were trimmed by almost 20%

Generally speaking, the market is neutrally positioned on the USD and CHF. It is long AUD, CAD and JPY and is short EUR, GBP and NZD.

I’m hearing that there are quite a few Sovereign offers building between 1.3825/50. The same names were heavy buyers between 1.3450/1.3550 so the offers could be similarly heavy (but I’m speculating on the size).

• USD/JPY: corporate sellers 91.00/20
• GBP/USD: light stops above 1.5105
• AUD/USD: option-related and corporate buyers .9100-10; trailing stops expected below .9090 and .9060
• EUR/USD: Sovereign offers 1.3800-25, bids still firm 1.3530-50

Overall the order books, particularly in the JPY crosses, are surprisingly light.

I’m hearing that there is some solid selling interest close by in the cable, around 1.5070/75, and there are quite heavy stops just above 1.5080/85. That should keep the GBP dealers busy.

Why are we not moving? Usually when a market like EUR/USD stops falling, it turns around and rallies, leaving a trail of tears in its wake. Not so this time. Why not?

My guess is the market got it self good and long options. If you’re not sure which way the market is going to move, you can buy both puts and calls, essentially betting that the market will move and soon. If the market moves higher, you get longer the underlying. If it goes lower, you get shorter the underlying…What do traders do with those positions? They hedge them.

This keeps markets range-bound unless some greater force comes to knock us out of the range. No such luck so far this week.

It’s college basketball tournament season, so lots of senior dealers are down at Madison Square Garden rather than manning their desks. It’s so quiet, even the black boxes are watching hoops.

My alma mater leads Syracuse by 5, with 8 minutes to go, by the way…

There are bids at .9100 and just below. There are lots of stops below that again and particularly below .9060. I think the market may try again to get at these stops, now that we are back close to the .9115 session lows.

Corporate bids are reported at .9100 and just below. Stop-loss sell orders are now building below .9080 and again below .9060. These may come into play fairly quickly if the market can get through the ‘figure’ bids.

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