Archived IMT (2011.04.20)

EUR, AUD, CAD, CHF, gold and silver jumped to fresh cycle highs as USD slumped on growing risk appetite following strong earnings. The final day of the holiday-shortened Australian week features the producer price index; otherwise, flows will dominate Asia-Pacific trading.

U.S. economic data was light with existing home sales climbing to 3.7% in March (exp: +2.5%) after a 9.6% decline in February. US EARNINGS REMAINED THE BIG STORY, with yesterdays strong Intel earnings setting up the best day on the Nasdaq since Oct. 5. After the close, Apple earned $6.40 per share, crushing the $5.36 consensus. AAPL, we warn, is seen as a phenomenon rather than a bellwether for the broader market.

EUR/USD hit 1.4548 in European trading but leveled off afterwards. There were rumours of a Greek default this weekend and also talk of creative bank-led bailouts. The rumours are 99% likely to be untrue. What appears to be true is that new options are being put on the table and that the confusion and uncertainty will weigh on euro crosses in the coming weeks.

USD/CAD fell to a fresh three-year low of 0.9497 but was unable to hold below the key psychological 0.95 level.

Cable bulls are sweating after 1.6427 held for the third time today following the BOE minutes. GBP/USD closed above 1.6400 and the triple-top will eventually give way but we question whether the market wants to go higher ahead of the long weekend.

Gold hit a record $1506 and silver hit the highest since the $49.45 Hunt Brothers high. Commodity wise man Jim Rogers said yesterday that If silver continues to go up like it has been over the past 2 or 3 weeks then, yes, it would get to triple digits this year. He also warned that holding dollars is growing riskier. The $5 rally in silver since last Tuesday is not a sustainable short-term pace. Gold poses fewer short-term downside risks.

ASIA PACIFIC PREVIEW

Australian hawks grew excited yesterday after a surprise 1.4% rise in Q1 import prices (exp: 0.6%). The data point alone wont faze the RBA but if the 0130 GMT release of the Q1 producer price index paints a similar picture, we may start to see a shift in rhetoric. The economist consensus is for a 1.0% q/q rise but given yesterdays high figures, the market consensus has likely shifted closer to 1.2%. If we see a consensus 1.0% reading, the Australian dollar may tick lower. Ultimately, next Wednesdays CPI data will dictate what the RBA does next.

AUD was the best performer Wednesday and AUD/USD is trading at a record high, just a smidge below $1.07. Australian and New Zealand markets are closed on Friday so expect to see some profit taking on AUD longs ahead of the long weekend. NZD may also be sensitive to a pre-weekend slide with NZD/USD stumbling at 80.00 today for the second time.