Intraday Market Thoughts

Euro Attempts to Extend Monti Bounce

by Adam Button
Nov 14, 2011 3:00

Mario Monti has been appointed to head Italys emergency government aimed at implementing a series of unpopular austerity measures. The next hurdle in Italy's debt drama is Mondays 5-year auction in Italian govt bonds due to raise EUR 3 bln.

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Fridays spike in risk appetite wiped out most of the mid-week moves after Italys Senate passed an austerity budget. AUD and EUR were the top performers while USD and CAD lagged. The CFTC Commitment of Traders report was delayed until Monday due to the Veterans Day holiday.

Risk appetite was positive in European trading on the Italian Senate news but it spiked early in the US session, driving 100+ pip moves. The moves cant be explained but a single headline but the factors included:

1) The UMich consumer sentiment survey for November at 64.2 vs 61.5 exp

2) A rumour the EFSF will peg maximum bond yields and defend them

3) A continuing rally in Italian 10-year notes, with the yield falling 48 bps to 6.50%

4) Larger than expected gains in US stocks at the open

5) Low liquidity due to the holiday

6) Cascading stop losses

Friday's afternoon spike was a symptom of the indecisive, confused trading we saw throughout the week as the market grappled with the politics in Greece and Italy. Monday's Italy's 5-yr auction will be the first measure of sentiment in the new temporary govt.

 
 

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