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Forex Flash: FX fair value models say NZD/JPY convexity makes sense - Societe Generale

Sebastien Galy, Senior FX Strategist at Societe Generale notes that FX fair value models say NZD/JPY convexity makes sense

He continues, adding “NZD/JPY is the most expensive making the view of some of being long convexity in this pair sensical. Otherwise SEK is expensive and GBP a bit cheap.” He notes that the medium term models tend to do a poor job in regime breaks and as such GBP can get a lot cheaper before he worries about that signal. Look at JPY though, he feels that it is starting to get as cheap on the LT and MT models suggesting this 90/100 range could well hold. He finishes by writing, “As usual the program, data is available on demand as is the full range of model output (8MB). The enhanced valuation engine is not yet operational, given the horror of dealing with EM data, but getting there.”

Forex Flash: Gilts break out of consolidated range – RBS

According to Dmytro Bondar, a Technical Markets Strategist at RBS, “From safe havens, Gilts look far less attractive, as a break of the recent ranges brought he market to the 114.58 retracement level (50% of 2012 extremes), while the former support of 116.00 has now turned into resistance. The overall bias is for a range of 114.60-116.60 with a possible recovery towards 117.80 if the latter is broken. However, this is unlikely to happen in the near-term. For the next week, we favor a range trade between 114.60 and 116.60. A break of 114.58 triggers a move to 114.00 and 113.14 – an upside break points to recovery towards 117.82.
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Gold hits fresh 6-month low

The yellow metal extended losses into a sixth consecutive day on Wednesday and broke decisively below $1600/oz, sliding toward its lowest in nearly 7 months before finding support while investors await the minutes of the latest FOMC meeting.
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