1 Dock Street

Stamford, CT 06902
www.farostrading.com
www.twitter.com/FarosTradingLLC

FAROS TRADING | Faros Morning Report

08/04/2010

Good Morning
JPY the focus overnight as USD/JPY again made fresh lows
and it seemed like any rally in G10 currencies against the
USD was met with heavy selling in cross JPY. JGBs
continue to rip with yields falling below 1% for the first
time in 7yrs in the global yield race to zero. The Nikkei
suffered on the back of the strong JPY. The 85.32 area
was the low and we come back 85.42 level now and the
verbal intervention last night was notably absent. Flows
were heavily concentrated to Japanese locals on the sell
side which correlates the recent revision of JPY
assumptions in exporter forecasts.
AUD/USD benefited from Australia’s trade balance figures
which showed A$3.5Bn vs. 1.8Bn expected and AUD/USD
rallied back towards 0.9150 area before AUD/JPY sellers
capped the rally. We heard macro funds were the buyer
of AUD/USD.
A prominent technical analyst on the Street issued a piece
discussing the historical relationship of DXY to the 200 day
moving average and basically argued for a further
extension lower in the DXY now that the 200 day was
breached at 80.73. We still expect 80.00 in the short term
and then 79.748 the 61.8% fibo from the 88.773 / 74.17
range.
read as dovish with USD/IDR remaining under the 8950 level
after a brief spike.
EUR/USD saw some macro buyers early in Asia which ran into
EUR/JPY offers and EUR/USD drifted back through 1.3200
briefly but comes back 1.3228 now. Eurozone data was
supportive with inline services PMI and better retails sales at
0.4%yoy vs. 0.1% expected. Market continues to talk about
1.3200 and 1.3250 strikes coming due today at 10am.
GBP had a lot to chew on with UK retailer Next seeing ‘notable
cooling’ as they revise their H2 outlook, UK services PMI came
in worse at 53.1 vs. 54.5 expected while Halifax house prices
showed improvement and ex BoE officials warned of potential
higher than expected interest rate increases. The FTSE didn’t
like the retailer news and GBP/USD took a look through
1.5900 before coming back 1.5945 now.
TRY and PLN were the weaker currencies in the EM space
overnight as markets digest Poland’s Multi-year financial plan
and news that Polands 6Bn of notes due for auction today had
to be delayed to 2pm local time as a result of technical issues at
the Treasury. EUR/PLN rallied back to 4.0250 briefly but is now
testing 4.0000 again as the market talk is of strong demand for
the local auction.
EUR/TRY again trading above the 100 day at 1.9734 with
1.9850 area the high and we could see a test of 2.0000 in the
short term.

CNY met with more rumors of a high CPI print imminent
and we heard CICC is calling for 3.3% vs. 2.9% expected.
USD/CNY hit a new low fixing rate at 6.7715, which is the
lowest since the 2005 revaluation.
Indonesia left rates unchanged at 6.5% and the statement was
USD/CAD continues to re-test the 1.0270 area as it seems
determined to finally remain below 1.0300 and we note the
speculative community seems very willing to play the catch up
trade in CAD strength while M&A flows continue to weigh on
the CAD.
Good Luck

© Copyright 2010, Faros Trading, LLC. All rights reserved. This message is intended solely for the individual(s) named, and may contain confidential or privileged information of
Faros Trading, LLC. Any unauthorized review, dissemination, distribution or copying is strictly prohibited. If you have received this message in error, please notify the sender
immediately and permanently delete both the message and any attachments. We do not waive confidentiality by mistransmission. This communication is not investment advice,
an offer, or solicitation of any offer to buy or sell any security, investment or other product.