Intraday Market Thoughts

إستراتيجية الإسترليني قبل قرار الخميس

Jan 28, 2020 13:20 | by Ashraf Laidi

لنكتشف أفضل استراتيجيات تداول الجنيه الإسترليني مع تصاعد احتمالات تخفيض الفائدة من قبل بنك إنجلترا و نلقي نظرة على نقاط الضغط في اليورو. الفيديو الكامل

إستراتيجية الإسترليني قبل قرار الخميس - Orbex Video Snapshot Jan 28 2020 (Chart 1)

Earnings Absorb Market Fears for now

Jan 28, 2020 12:19 | by Adam Button

Markets pare losses from Monday's global slide as traders divide their attention on US earnings and China's efforts to stem the spread of the Corona virus. The number of confirmed cases has now reached 106, up more than 100-fold since January 17. News of a planned 10% production hike by Apple has helped their suppliers and overall sentiment. USDJPY regains 109, US crude at 53.40s and US 10 yr yield at 1.62% from 1.57%. US durable goods orders and consumer confidence are due up next. The Premium Video below focuses on a 2-part trading strategy for Thursday's tight BoE decision as well as EURUSD.

China confirmed 4,515 cases of coronavirus on Wednesday, up from 2,744 a day earlier and just 41 on January 17. The pace of cases accelerated on the day but has been at just above 50% since the outset. That pace would surpass the SARS total by Friday and push it over 100,000 by next Wednesday.

What's especially worrisome is that it's not just Hubei province, the increase in other provinces is taking place at nearly the same pace. While it's certainly possible to believe that Hubei is too overwhelmed to get a correct count, that's less likely elsewhere.

Internationally, Thailand remains the place to watch for signs of an international outbreak with 8 cases there now confirmed. The baht was Asia's top performing currency last year but has fallen for four straight days as local stocks, especially those tourism-related take a fall.

The Fed meeting this week is suddenly more meaningful. US 2s/5s inverted on Monday and the spread between 3 month bills and 10-year notes is down to just 3 basis points. Judging by the Fed's recent playbook, there will be a dovish tilt in an effort to support stocks and calm volatility. All eyes will be on the surging debate about the Fed's repo injections.

Earnings Absorb Market Fears for now - Tweet Yield Curves Jan 28 2020 (Chart 2)

It's early but the Fed is right to worry. SARS cut 0.8-2.0 pp of GDP growth from China in 2003. The economy is completely paralyzed right now and many shutdowns through the week of Feb 10 have already been announced. China railway traffic and passenger flights were down 42% y/y on Saturday, the first day of lunar new year.

First , the Fed will get some final pieces of data on Tuesday with durable goods orders due out at 1330 GMT and the consumer confidence report at 1500 GMT. Apple earnings are due after the bell.

Act Exp Prev GMT
Core Durable Goods Orders (m/m)
0.4% -0.1% Jan 28 13:30
CB Consumer Confidence
128.2 126.5 Jan 28 15:00

Yields Lead Slump in Virus-Driven Market Selloff

Jan 27, 2020 12:25 | by Adam Button

Risk trades deepen their slump as market react to weekend news of the growing coronavirus outbreak, claiming at least 80 fatalities and sending the number of confirmed cases to 2744. Markets were especially hit in early Monday Asia by the revelation that the virus has an incubation of as long as 2 weeks, raising the possibility that people carrying the virus but not yet aware of the symptoms could infect others. Markets were also concerned with news reports of rocket attacks on the US embassy in Baghdad (see below). The US crude oil short opened at 59.65 on Jan 8th will be closed today. Here is the rationale for entering the trade even after a sharp drop in oil.

Click To Enlarge
Yields Lead Slump in Virus-Driven Market Selloff - Premium Snapshot Oil Us Crude Jan 8 2020 (Chart 1)

A second city of 7.5 million people 70km away from Wuhan was put on lockdown with 10 cities placing curbs on travel. One startling fact is that Chinese foreign tourism has risen 8-fold since SARS in 2003 and the lunar new year holiday is an extremely busy time of year for travel.

Aside from oil, one other striking development is the breakdown in the 4-month trendline support of the US 10-year yield to 1.62%, which could clear the way for 1.51%, followed by the record low of 1.42% (Sep 3). JPY leads in FX, while the Aussie and kiwi lagging in a classic risk-off mood.

US new home sales are due up later but economic data will take a backseat to virus news.

The Baghdad Story

One story that could push its way into the limelight was a rocket attack on the US embassy in Baghdad. Reports from AFP says the dining facility was directly hit and that helicopters were removing casualties. It's not clear if they are Americans but if they are it could mark the start of another escalation in the region.

That would put oil traders in a particularly tough spot as they weigh a Middle East flareup against the demand destruction of shutting down large parts of China. In early trade crude breke through the November low and sank to $52.15 even with an OPEC warning that it was watching closely.

The week ahead is filled with US earnings and a few economic data points including new home sales on Monday but it's tough to see how anything could steal the spotlight from the virus. Don't forget the Fed meeting/press conference on Wednesday and BoE decision on Thursday.

CFTC Commitments of Traders

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

EUR -47K vs -48K prior GBP +25K vs +31K prior JPY -45K vs -31K prior CHF +1.5K vs flat prior CAD +38K vs +33K prior AUD -19K vs -20K prior NZD +1.8K vs flat prior

The risk off mood related to the virus caught the market just as it was shifting away from risk trades and the safety of the US dollar. That means that more specs will be at risk of going underwater sooner if risk aversion persists.

Act Exp Prev GMT
New Home Sales
730K 719K Jan 27 15:00
FOMC's Williams Speaks
Jan 27 14:30

Corona Virus Weighs on Risk, Oil Dumped

Jan 23, 2020 8:12 | by Adam Button

The coronavirus is increasingly drawing the attention of the financial markets and escalating headlines about infections are putting traders on edge. Chinese officials halted travel from Wuhan, locking down the city of 11 million people as they confront halting the spread of a new SARS-like virus that's already killed 17 and infected nearly 600 people. More below on how this compares to SARS in 2003. Aussie is the highest gainer on reduced expectations for an RBA rate cut next month after an unexpected decline in the jobless rate. Global indices are down across the board, oil extends its tumble, CAD fell sharply after the BoC issued a dovish hin, while JPY and bonds resume their ascent.   The Premium trades in short oil and long cable are deepening in the green, while the EUR trades await the ECB's 500th ECB policy decision, due later today.

نستعد للإنطلاق الحقيقي (فيديو للمشتركين)

Corona Virus Now vs SARS in 2003

The outbreak of the Corona virus is especially scrutinized as it coincides with the upcoming Chinese Lunar New Year, which involves the largest human migration in the globe as train and air travel ascends in and out of China. Beijing is one of the most traffic-jammed cities in the world, but it's said that in 2003 during the height of the SARS outbreak, the only thing drivers had to worry about was getting a ticket. The city was on lockdown and virtually every face was covered by a mask.

The economic impacts were real, estimates vary but the curb to GDP growth was somewhere between 0.8 percentage points and 2.0 points. It also weighed on other countries, particularly in east Asia. SARS eventually infected more than 5000 people in China and the path of coronavirus appears to be similar. In that case, the WHO issued the first alert in mid-March and didn't declare that the world was nearly SARS-free until the end of June.

Ultimately, this virus will pass and growth will resume but we're at the point in the cycle where the numbers and the fears will continue to rise. One area that was hard hit in 2003 was commodities, which struggled during the height of the fears. However this will ultimately be a buying opportunity for risk assets, but not yet.

Housing Higher, Dollar Bets Shrink

Jan 21, 2020 11:38 | by Adam Button

Here we go again; central bank meetings and more earnings from the US. US housing starts jumped 16% on Friday in a positive sign for the US consumer and a sign that low interest rates might be working too well. Trading was light on Monday largely because of the MLK holiday in the US. Gold leads all currencies, holding partly to gains after US inde futures bounce from Asia lows. The CFTC positioning data showed US dollar longs cutting back again. As speculation mounts ahead of this week's BoE and ECB monetary policy decisions, Ashraf posted the chart below, which he says is foretelling a major move in 2020.

Click To Enlarge
Housing Higher, Dollar Bets Shrink - Mystery Chart Jan 21 2020 (Chart 1)

The jump in US housing starts to 1608K from 1380K was the biggest one-month gain since October 2016. One caveat to the rise was unseasonably warm weather, which may have artificially increased activity but in the bigger picture, starts have been strong since August.

From a global perspective, US housing is still relatively cheap in part due to the overhang from the crisis, but the scars are beginning to fade and low rates remain steroids for home buying. In addition, home builders have been scaling down to lower-priced homes to capture high demand in that segment. That trend could help to boost activity in 2020 while higher housing prices could spark a wealth effect.

The jump is a reminder that US risks are more two-sided than they were in 2020. If manufacturing and trade-related sectors get a bump from the phase-one trade deal or if business investment picks up, the Fed could be facing questions about inflation.

CFTC Commitments of Traders

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

EUR -48K vs -61K prior GBP +31K vs +17K prior JPY -31K vs -12K prior CHF flat vs -4K prior CAD +33K vs +26K prior AUD -20K vs -27K prior NZD flat vs -1K prior

The overall the US remains firmly in a net-long position but it's at the weakest since June 2018.