Intraday Market Thoughts

US Growth Picks Up, JPY Confounds

by Ashraf Laidi
Oct 29, 2012 0:23

US third quarter growth was stronger than expected on resilient consumers and government spending. On Friday, the yen was the top performer as it retraced a portion of the early-week losses. The weekly CFTC positioning data showed a market thats eager to buy USD/JPY. Both EURUSD from last weeks Premium Insights are filled and in progress and so are USDJPY, CADJPY and gold.

US GDP expanded 2.0% in the third quarter, topping the 1.8% consensus estimate. The upside surprise was credited to defense spending and iPhone sales hardly the stuff of a lasting recovery. Forward-looking components like business investment show caution.

USD/JPY slumped on Friday, posting a bearish outside day. Given that risk appetite was generally flat, it was a surprise to see such a large yen move but after gains in 9 of the prior 11 days, a pullback was overdue.

The yen-correlations have been breaking down recently and makes for challenging intermarket analysis conditions. Overall, pairs like EUR/JPY are higher than they normally would be, given the slump in stocks. However, Treasury yields remain high and that indicates USD/JPY may be fairly valued.

The Bank of Japan meeting is on Tuesday and that may bring some clarity. There is speculation the BOJ could unleash 20T in fresh QE, double what analysts were expecting last week.

CFTC Commitments of Traders

EUR -55K vs -53K prior

JPY switches to net short 18K from net long 10K

GDP +18K vs +20K

AUD +46K vs +38K

CAD +86K vs +94K

The reversal in yen positioning is the big story in the data, which is collected at the close every Tuesday. Its the first time in a net short position for the yen since May. The rule of thump with positioning data is to follow the market when it switches.

Both EURUSD from last weeks Premium Insights are filled, with USDJPY, 1 of 2 CADJPY also filled and AUDUSD hitting all targets. 1 of 2 EURGBP was stopped out. We added 4 charts on EURUSD and gold to dissect the technical complexities for gold (daily and weekly sochastics and MA confluence) as well as euros intermediate trendline and its shifting behavior relative disappointing IFO & PMIs. For direct access to these Premium trades, please click here: Non subscribers, can click on here to join:


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