Intraday Market Thoughts

Risk Rebound: Noise or Substance?

by Ashraf Laidi
Jun 14, 2011 18:54

The broad rebound in risk appetite (equities, risk currencies & commodities at the expense of USD) is unleashing all sorts of fundamental explanations by pundits as if something significant has changed. China's latest data was deemed either too cool to threaten the global economy nor too hot to threaten the need for aggressive tightening. Just as the Fed easing has lost its efficacy, so did Chinese tightening (unless of course it is accompanied by actual rate hikes). Neither the consistently poor array of US economic data has abated, nor Germanys insistence on private investors sharing in the burden of Eurozone debt has diminished. Adding to the fray, (on the USD side) is the beginning of negotiations between US VP Biden and Republicans over the debt ceiling deadline on Aug 2. We have said time and again that the US raising its debt ceiling every year is akin to getting a bailout from Asia. Add to it the fact that the Fed will be obliged to maintain liquidity despite the official end of QE2 later this month and you get a convincing selling of USD bounces. EUR shows more action when being sold against CHF and JPY than against USD. Fridays EURUSD close below the 55 dma was...

Fridays EURUSD close below the 55 dma was important, but quickly ensued into a rebound the following Monday. More significantly, Friday's close remained ABOVE the lows of May 31-June 2 & above the highs of May 13, 19 & 20, translating into a bullish translation of previous resistance becoming key support. As for the US CRUDE chart, THUSRDAY's PREMIUM OIL CHARTS REMAIN VALID as shown here: 626nona with the key support continuing to hold.

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Ashraf Laidi


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