OECD’s better life index

I kinda guessed who was gonna be numero uno.

‘Germany has reportedly drawn up a six-point plan to rescue Greece and the eurozone’s other failed economies’

Yer, good luck with that one…..

Lucinda Creighton Ireland’s Minister for Europe

• Catalonia calls for govt financing help
• Spain injects 19 billion euros into Bankia
• S&P downgrades Bankia, Banco Popular to junk
• Spain not considering EU help for banks
• BOE’s Weale: Weak GDP strengthens QE case
• Dutch PM: We will never allow eurobonds
• U Mich final consumer sentiment 79.3 vs 77.8 exp
• Greek tourism revenues down 15.1% in Q1
• Van Rompuy: Confident Greek people will make the right choice
• Poll: Syriza 28.5$, ND 26%
• EUR shorts hit record
• USD leads, CAD lags

Small closing changes across the board but there was some movement. Particularly in EUR/USD, which dropped as low as 1.2495, chomping through $1 billion in bids on the. The move was short-lived and inspired short covering to 1.2547. After Europe closed it was a slow bleed lower to 1.2511.

USD/JPY slowly moved to 79.63 from 79.53. Yawn.

Cable trading had some flavor as EUR/GBP orders and barriers spilled over. A quick early move to 1.5690 from 1.5655 was quickly reversed down to a session low of 1.5629 on the Spanish regional problems. Choppy up-move to 1.5650 afterwards.

The commodity currencies are falling late in the day and threaten to close at the lows. USD/CAD broke 1.0300 on two occasions late in the day, breaking a touted barrier at that level. NZD was an outperformer for most of the day but faded to 0.7527 from 0.7583 at the highs.

Gold +$13 to $1572; oil flat at $90.76.

The EU has published a letter European Council President Van Rompuy regarding the G20 meeting in June. It says Greece should stay in the euro and respect its commitments.

He should have addressed it to the Greek voters.

In the Commitments of Traders report:

• EUR short 195K vs 174K last week
• JPY short 18K vs 34K prior
• AUD shorts to short 17K from long 5K
• CHF short 35K vs 27K
• CAD long 39K vs 51K
• GBP long 11K vs 25K
• NZD shifts to short 1.5K from long 2.5K

First AUD net short since Jan 2011. Overall a broad move to USD and JPY, as you would expect.

The S&P 500 has fallen to a session low, down 6 points to 1314. Risk assets are following it lower.

The best trade this week, in percentage terms, was short EUR/USD, falling slightly more than 2% or 259 pips.

To me, only one line on the weekly EUR/USD chart matters — 1.2623. That was the 2012 low. It all likelihood, this pair will be closing below 1.26 and that puts it clearly in sell territory with a target at the 2010 lows.

Selling bounces is the preferred trade. I can envision a bounce to 1.2600 or 1.2623 but not higher.

Momentum indicators aren’t yet oversold on the weekly view, so I don’t see a reason for a bigger bounce but the fundamentals always bear close watching.

One chart that gives me a bit of pause is NZD/JPY against EUR/USD.

The kiwi carry trade has been taken to the woodshed in May, falling 8% month-to-date but the declines have stalled this week. Interestingly, NZD/JPY led the fall in the euro by 4/5 sessions. If that lag holds up next week, EUR/USD might be in for a move sideways.

Jamie has gone fishing, along with the rest of the market. It’s a long weekend in the US, so Monday will be quiet aside from the tape bombs out of the periphery.

Gold has found some life, climbing to $1572. The resistance main level to watch is $1600/04 but yesterday’s high of $1577 is also significant.

The USDJPY is trading between the Goal Posts as defined by the 100 and 200 hour MA (blue and green line). The price extended above the 200 hour MA earlier and below the 100 hour in the London morning session.  The price just tested the 200 hour MA and found sellers.

So the market is coiling between the support and resistance.  On the next break (either up or down), I would expect the price to have momentum in the direction of the break.  On the upside, the 79.78 followed by the 79.92 will be the next targets (61.8 and topside trendline). On the downside, the 79.35 followed by the 70.20 would be the next targets.

The touted barriers that were protecting 1.03 in USD/CAD gave way as liquidity thins out.

Worries about the Canadian house price market ebbed on today’s data from CREA that showed a 0.8% rise but the details show Vancouver could be in for a rough ride. I would argue that the Bank of Canada is less likely to hike with house prices falling there.

Corporate offers up to 1.0360 lurk but the hourly trendline I showed yesterday continues to provide support.

Banco Popular among the victims, not so popular now is it? Bankia cut to junk. Bankinter, Banca Civica and Banco Financiero y de Aborros the other victims

Banco Santander affirmed, BBVA affirmed but on review with a negative outlook, Caixabank on watch negative.

Classic S&P, they cut Bankia to junk after the government takes over 90% of the bank. Minor blip down in EUR/USD but the affirmations of the bigger banks help to balance out the downgrades.

Strange days in EUR/CHF with rumor central yesterday and then some large purchases from a UK clearer overnight. Pulses are thumping a bit faster with the pair down to a low of 1.2006.

I find it hard to believe that someone with an inside tip about SNB action on the weekend would be so foolhardy as to buy billions of dollars at once, moving the market when patient buys would get better fills.

The chart shows downward momentum but it puts the market back where it was early on Thursday so nothing has really changed.

If you think there is a spec of truth in the rumors, it’s better to be long.But here is why I wouldn’t be: if the SNB did have plans for weekend action, they would be shelving them right now because of the the perception they were leaked. After the Mrs. Hildebrand fiasco, they can’t have any more questions.

Shorts still don’t make sense to me in the near term. The peg is hugely popular in Switzerland and they don’t seem to care about the cost. In the longer-term shorts may start to make sense in a euro-breakup panic… but there will be lots of way to make money with that scenario.

S&P says Spain is entering a double-dip recession, according to DJ.

The consensus growth estimate for 2012 is -1.50% so the ratings agency is not breaking any new ground here, as usual.

From VPRC:

• Syriza 28.5%
• ND 26%
• Pasok 12.5%
• Independent Greeks 7%
• Democratic Left 7%
• Golden Dawn 5.5%
• KKE 5%

The Democratic Left will align with Syriza and with the bonus for first place, that puts them awfully close to majority territory.

h/t @YanniKouts

• In return for a 90% stake

Trying to shore up systemic confidence in Spanish banks with the big injection, apparently.

Not a surprise…

I’m sure they are just for medical isotopes…

• IAEA says uranium enriched to higher level than earlier reported

Oil consolidating around $91…

–Congressional Budget Office: Fiscal Cliff Could Lead To ’13 Recession
–CBO: Renewing Current Policies Would Impose ‘Substantial’ Econ Costs
–Senate Majority Leader Reid Says Sequestration Fix Must Include Revs
–Senate GOP Hammers Dems Over Defense Cuts; Pelosi Floats Tax Cut Plan

By John Shaw

WASHINGTON (MNI) – Congress received another grim warning this week
about the consequences of the U.S. plunging over the so-called fiscal
cliff at the end of the year, while Senate Democrats and Republicans
continued to squabble about the coming sequestration process.

The Congressional Budget Office said this week that the combined
effects of the expiration of the Bush era tax cuts at the end of 2012
and the scheduled imposition of across-the-board spending cuts in
January of 2013 could shove the U.S. into a mild recession in the first
half of next year.

The CBO said allowing the tax cuts to expire and spending cuts to
take hold would reduce the federal budget deficit by $607 billion, or 4%
of gross domestic product, between fiscal years 2012 and 2013.

This immediate fiscal consolidation, the CBO argued, would slow the
economy.

“The economic outcomes that CBO expects, under current law, for the
first half of 2013 strongly resembles mild recessions that occurred in
the past,” the CBO said.

The CBO said under current policies (tax cuts expire and spending
cuts go forward), real GDP would increase by 0.5% in 2013. But in the
first half of the year the American economy would contract by 1.3%.

The CBO outlined the “difficult trade-offs” for policymakers as
they consider future fiscal policy. On the one hand, CBO noted that
postponing indefinitely or cancelling the scheduled fiscal tightening
would “lead to a greater accumulation of government debt and might raise
doubts about whether longer-term deficit would ultimately take effect.”

But the CBO observed that allowing deep tax increases and spending
cuts to go forward immediately would “represent an added drag on the
weak economic expansion.”

While the CBO does not offer policy recommendations, its review of
the options confronting lawmakers suggests a substantial and specific
deficit reduction package that is phased-in gradually is the most
reasonable approach.

“Although there are trade-offs in choosing when policy changes to
reduce future deficits should take effect, there are important benefits
and few apparent costs from deciding quickly what those changes will
be,” the CBO paper said.

The Committee for a Responsible Federal Budget, a budget watchdog
group, responded to the CBO report by urging policymakers to divert from
the fiscal cliff by enacting a comprehensive deficit reduction plan.

“Instead of going over the fiscal cliff or allowing an ever growing
mountain of debt, we should rise to the challenge and enact a
comprehensive plan with more targeted and thoughtfully crafted
measures,” said Maya MacGuineas, president of the budget group.

“A smart debt reduction plan put in place this year would reassure
businesses, markets and individuals that the country can indeed control
its rising debt — a move that would surely be a boon to confidence. But
we must act now, even if it is an election year,” she said.

Senate Budget Committee Chairman Kent Conrad told MNI this week
that while Congress remains deadlocked on major fiscal issues, there is
“very active, very intense behind-the-scenes bipartisan work” occurring
to assemble a major deficit reduction package based on the
Simpson-Bowles deficit reduction plan.

“Things are pretty quiet on the surface up here (in Congress), but
beneath the surface there is a lot of careful, detailed and intense
working occurring on a deficit reduction package, involving people from
both parties,” Conrad said.

Conrad said meetings to assemble, draft, and score a major deficit
reduction package are underway, adding that he would like to move
forward with the package “as soon as possible.

But he added that it’s not very likely that such a package could
move in Congress before the election.

“I think we all know the kind of plan we need to pass and pass very
soon. But I can’t tell you that there is sufficient support up here to
pass it now. The mood must change. But things do change. Events happen.
The situation in Europe worsens. We want to be ready if there is an
opportunity,” Conrad said.

Conrad said he is working with lawmakers both within the Senate
Budget Committee and in informal groups such as the “Gang of Six” to
develop a deficit reduction package.

“This is incredibly detailed, difficult work. It takes months and
months of careful preparation to be ready with a plan. Some of us are
determined to be ready pretty soon with a plan. We hope the political
moment comes that allows us to move the package,” he said.

“Both parties must move together on this. That’s the only way it
can happen,” he said.

The Simpson-Bowles plan calls for more than $4 trillion in deficit
reduction over a decade, with spending cuts and tax increases. It would
reduce spending to about 22% of GDP by 2022 and bring revenues up to
about 21% of GDP in 2022.

While private budget talks go forward, Democratic and Republican
congressional leaders continue to spar publicly.

Senate Majority Leader Harry Reid repeated this week that he would
be willing to alter the across-the-board spending cuts that are
scheduled to begin in January of 2013 with a “balanced approach to
fiscal policy that combines smart spending cuts with revenue measures
that ask millionaires and big corporations to pay their fair share.”

In a letter to Senate Republicans, Reid said election-year politics
will make it very unlikely for Congress to “reach this sort of balanced
agreement before the election.”

A number of Senate Republicans said this week that the scheduled
spending cuts would hit defense very deeply and endanger national
security.

More than two dozen Senate Republicans introduced legislation this
week that would require the Obama administration to tell Congress how it
would implement the automatic cuts to government agencies, including the
Pentagon.

Finally, House Minority Leader Nancy Pelosi sent a letter to House
Speaker John Boehner this week calling for an immediate House vote to
extend the Bush-era tax cuts on those with incomes of less than $1
million.

Pelosi’s $1 million threshold for extending the Bush tax cuts
differs from President Obama’s call to extend them for those making less
than $250,000.

** MNI Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

The 1.2500 barrier option that Jamie pointed out was broken and the subsequent corrective move higher took the price above the 38.2% -50% of the trend move down (see chart above).  That move above the 50% took some steam out the trend move and although the price has since rotated back down, the 1.2514 area (low from yesterday) may give cause for pause.

What the move back down does do for the longer term bears is it keeps them happy and comfortable.  It may not be a trend type day down (one of the pre holiday steam rolling variety) but there is no need to panic either.  The London/Europe last hour of trading is taking place and this can lead to squaring up swings.  Then we can likely expect real quiet trading conditions for the rest of the trading day.

Looks like some fix-related selling in cable to wrap up the week in London as the pound falls below the 61.8% retracement of the 1.5236/1.6310 range seen so far in 2014.

1.5646 is the 61.8% retracement of that range, so a close below that level tonight would add to the bearish backdrop.

Bids are seen on dips to the 1.5600/20 area, some said to protect 1.5600 barriers.