Intraday Market Thoughts

China PMI Misses, AUD Longs in Peril

May 2, 2016 1:20 | by Adam Button

The yen ripped right to the finish line on Friday and is slightly higher to begin the week. China's manufacturing PMI was released on the weekend and edged lower. Holidays could complicate trading to start the week. On Friday, the Premium trades took a 335-pip gain in AUDJPY, while 6 of the 9 existing Premium trades are at in the gain with +100 pip each. The Video below is open for subscribers and non-subscribers alike, containing Ashraf's take on how/why stops were hit 2 weeks ago and how matters change last week.

On Thursday we warned that the pain could be far from complete in yen crosses and that was the case as USD/CAD cracked the April lows, pushed through 107.00 and sank to 106.30. The pair is down 560 pips since the BOJ decision.

Holidays make this a tricky week of trading. China, the UK and parts of Europe are out on Monday. Japan returns from a three-day weekend but only for a day before another three-day holiday begins.

Seasonally, April was a weak month for the US dollar and that proved to be true as it lagged all G10 FX except the Aussie. The situation reverses in May, which is an excellent month for the dollar bulls.

Weekend news was led by the China manufacturing PMI. It slipped to 50.1 from 50.2 and missed the 50.3 consensus. The non-manufacturing PMI also declined to 53.5 from 53.8. The misses aren't likely big enough to spark much of market reaction but the numbers underscore the muddling global economy.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -40K vs -47K prior JPY +66K vs +72K prior GBP -49K vs -55K prior CHF +9K vs +9K prior AUD +59K vs +44K prior CAD +12K vs +7K prior NZD +7K vs +5K prior

These numbers show the setup ahead of the BOJ and Fed, not afterwards. Specs sniffed out how the BOJ would be sidelined and real money piled in. The position that's in peril this week is AUD. It was the worst-performer in April and Stevens may not be friendly on Tuesday.

Act Exp Prev GMT
Markit Manufacturing PMI (APR)
50.8 May 02 13:45
ISM Manufacturing PMI (APR)
51.8 May 02 14:00
Markit PMI Manufacturing (APR)
51 May 02 8:30
Nikkei PMI Manufacturing (APR)
48 May 02 2:00
Eurozone Markit PMI Manufacturing (APR)
51.5 May 02 8:00

The Lessons From the Carnage

Apr 29, 2016 0:27 | by Adam Button

The BOJ and RBNZ yesterday were a shining example of just how much dovishness the market demands from central bankers. The yen rocketed higher after the BOJ and the kiwi was the next best performer while the US dollar lagged. We take a look through the wreckage of the yen pairs. There are 2 JPY Premium trades, one taken today after the BoJ, the other 24 hours prior to the BoJ on expectations the BoJ would nothing.

Click To Enlarge
The Lessons From the Carnage - Nikkei Apr 28 2016 (Chart 1)

The Bank of Japan decision to leave policy unchanged was merely a postponement of more action but the market crushed yen shorts in 200-400 pips moves. It's a lesson in the fallibility of CFTC futures positioning data. Those numbers show a crowded yen long trade but they don't reflect the build-up of structural and real-money bets on the yen to fall. Those trades were running for the exits Thursday.

The tell was the comment from Abe advisor Honda who correctly predicted the BOJ wouldn't act this time around and correctly forecast the surprise cut in January.

Ashraf also correctly predicted the BOJ and was quick to sell AUD/JPY after soft Australian CPI.

What's striking is how aggressively currencies are rallying when central banks don't act. The RBNZ tried to replace action with a dovish bias and jawboning but it wasn't nearly enough. Stevens has used the same playbook for years but the market has grown immune to it. If he doesn't deliver action then Australian dollar will surge but the good news for AUD bears is that he will now surely recognize what's at stake.

The stakes have surely been raised in yen trading after Thursday's moves. The spot to watch in the day ahead is USD/JPY as it flirts with the April low of 107.60. It has 55 pips of breathing room at the moment but the lack of a sustained bounce in US hours isn't comforting for the bulls. Real money tends to chase big breaks so the pain could be far from complete.

Data to watch in the hours ahead includes the 0130 GMT Australian PPI report. The prior year-over-year reading was 1.9%. A soft number would add even more weight to the CPI miss. The other data point at the same time is private sector credit, which is expected up 0.5%.

Most important will be a speech from the RBA's Debelle at 0345 GMT. Watch for clues about the May 3 RBA decision, they could be a major AUD mover.

Act Exp Prev GMT
Producer Price Index (Q1) (q/q)
0.3% Apr 29 1:30
Producer Price Index (Q1) (y/y)
1.9% Apr 29 1:30
Private Sector Credit (MAR) (m/m)
0.6% Apr 29 0:30
Private Sector Credit (MAR) (y/y)
6.6% Apr 29 0:30
RBA Assist Gov Debelle Speech
Apr 29 3:45

أفضل سيناريوهات للذهب

Apr 28, 2016 18:45 | by Ashraf Laidi

  6 سيناريوهات مثالية للذهب

Fed and RBNZ Dovish, BOJ Next

Apr 28, 2016 1:02 | by Adam Button

The dominant dovish theme in global central banks reasserted itself once again after the Fed steered completely clear of anything like a hawkish bias. The New Zealand dollar higher in early Asia-Pacific trading despite an effort to remain dovish without a hike. The Bank of Japan is the next central bank on the agenda.  

The Fed continues to make a mockery of its dot plot. The forecast collectively calls for two rates hikes this year but the FOMC statement made it clear there are no plans to hike.

The market was caught wrong-footed on the release because headlines highlighted the removal of the line referring to global events posing risks. But that was essentially stating the obvious. The more important lines referred to a continued 'accommodative' stance and slower growth.

After jumping a half-cent the US dollar retraced. Choppiness and indecision followed but the dollar finished close to pre-FOMC levels.

The RBNZ decision was released in early Asia-Pacific trading. The market was leaning toward a decision not to cut rates but there was enough belief that it was possible that the kiwi popped 75 pips on the announcement. That was despite waves of dovish rhetoric and anti-NZD jawboning in the statement. It just goes to show how anything but a sprint to the bottom is cause for a currency rally.

That theme is likely to be underscored by today's Bank of Japan decision. The BOJ has been highly unpredictable over the past year so no one is comfortable. The belief is that they will unleash another round of easing or save it for a few months from now.

The last-minute thinking is that the dovish Fed will prompt the BOJ to act.  As Abe advisor Honda outlined earlier in the week, the argument for waiting is that the government could unveil a package along with the BOJ. It's a close call.

The final decision may also sway by CPI data to be released at 2330 GMT. The national reading is expected flat year-over-year. Excluding food and energy, the forecast is for a 0.8% rise.

A new Premium trade was opened shortly after last night's Aussie CPI, taking the number of existing trades to 7. All eyes are on the BoJ due around 2:15 GMT, 3:15 London.

Durables Add Doubt, Aussie CPI Next

Apr 26, 2016 23:08 | by Adam Button

Another soft US durable goods orders report may leave the Fed with second thoughts about a hawkish bias. The pound was the top performer while the dollar was generally softer and the Japanese yen lagged. The Australian CPI report and another round of US primaries are due later. There are currently 6 Premium trades in progress, 3 of which are in profit (one includes AUD), 2 in a loss and 1 at breakeven. Today's Premium video focusing on FX trades & charts pre-central banks is posted below.

Durables Add Doubt, Aussie CPI Next - Videosnapshot Apr 26 (Chart 1)

US durable goods orders have struggled for two years and the March report once-again raised doubts about the economy. Overall orders were up 0.8% compared to 1.8% expected and the core measure was flat compared to +0.6% expected. The misses were compounded by small downward revisions to the February data.

The US dollar came under immediate pressure after the release. EUR/USD eventually hit 1.1339 from 1.1275 before the release. Later in the day the pair retraced all the gains, likely on Fed speculation.

There is major indecision about what the Fed could signal Wednesday. Fed funds futures are pricing in just a 19.6% chance of a hike. One reason they could wait is uncertainty about the Brexit vote, which is a week after the June 15 FOMC.

The 'leave' side got a boost Tuesday with a new poll showing them with a slight lead. The market sensitivity to the numbers is growing and cable immediately fell 35 pips on the headlines.

Other US economic data was mixed. The Richmond Fed was at 14 vs 12 expected. Consumer confidence improved to 94.2 but not as much as the 95.8 consensus. The Markit services PMI was at 51.1 vs 52.0 expected.

The Fed gets the advance trade balance report but it's unlikely to make a difference in deliberations. The data in Q1 has been weak but worries about global financial conditions have certainly ebbed. Resource prices will boost inflation as well.

The Fed wants the opportunity to hike in June and a less-dovish statement tomorrow is a pre-requisite. However, there is a chance they punt on the decision for another six weeks because of worries about unsettling stock markets.

Other central banks are struggling with similar dilemmas. The RBA will be closely watching Q1 CPI data due at 0130 GMT. The consensus is for a 1.7% y/y rise and a 2.0% y/y climb in the trimmed mean. Look for a significant AUD reaction to any miss.

At 0430 GMT, the BOJ will be watching the Feb all industry activity index. Their decision is due about 11 hours after the Fed and may depend on the signals Yellen sends.

The final set of events to watch are Republican primaries in Connecticut, Delaware, Maryland, Pennsylvania and Rhode Island. The announcement of mild cooperation by Kasich and Cruz this week to deny Trump the nomination could get uglier before it gets better.

Act Exp Prev GMT
Durable Goods -ex transportation (MAR)
-0.2% 0.5% -1.3% Apr 26 12:30
Durable Orders (MAR)
0.8% 1.7% -3.1% Apr 26 12:30
Consumer Price Index (Q1) (q/q)
0.4% Apr 27 1:30
RBA trimmed mean CPI (Q1) (q/q)
0.6% Apr 27 1:30
Consumer Price Index (Q1) (y/y)
1.7% Apr 27 1:30
RBA trimmed mean CPI (Q1) (y/y)
2.1% Apr 27 1:30
Goods Trade Balance (MAR)
$-63B Apr 27 12:30
All Industry Activity Index (FEB) (m/m)
-0.9% Apr 27 4:30
CB Consumer Confidence (APR)
94.2 96.7 96.1 Apr 26 14:00

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