Intraday Market Thoughts Archives

THE ONCE SOARING AUSSIE is now underperforming vs EUR & GBP, supporting my bias in favour of EURAUD and GBPAUD. The previous decline did not extend below the 1.43 and 1.70 support and upside remains intact. See HOTCHART in this website. Meanwhile, here's a look at the relationship between USDJPY and the YIELD SPREAD between US & JP 10 year yields SEE CHART http://chart.ly/bt4yzn

HEREs THAT S&P500 PATTERN AGAIN http://chart.ly/5srck6

Basically if S&P500 cash closes today (and the week) below 1115, it would represent a DOUBLE TREND FAILURE i.e inability to close above 200 AND 100 day MAs (blue and red lines in chart), which is a similar pattern as in June 22 (left circle). A definite failure to 1150, followed by a break below the important 1107 trendline support, would extend probability of a DOUBLE TOP target from the 1127-30 top to the interim 1060 and 1080.

The US JULY JOBS report (-131K NFP, private payrolls +71K from +31K, unemp rate unchanged at 9.5%) is sufficiently negative for the market to sell the USD across the board based on the rationale of additional easing measures from the Fed. I noted yesterday "negative US jobs report may not boost the USD on the rationale of risk aversion, with the explanation stating that Unlike in other cases when falling stocks have proven positive for USD, a disappointing July payrolls figure will justify the Feds downward forecasts and unusually uncertain view at the expense of prolonged downside in bond yields and USD. USD INDEX DEEPENS LOSSES BELOW 200-day MA of 80.70, leaving EURUSD as the ONLY MAJOR currency to yet rise above its won 200-day. We should see more USD selling in the event that stocks head back into positive territory intraday basis, but even a renewed retreat is UNLIKELY to prevent EURUSD from hitting $1.3330 next week,with a possible breach towards $1.34 nearing FOMC. YEN CROSSES will be as volatile as stocks are, but given the fact that global bond yields are around 16-nmonth lows, yen strength will likely prevail.

-9.3K after +93K. Canada shows its first net decline in employment of the year with -9.3K in July payrolls after the second highest monthly increase in July at +93K. The unemployment rate unexpectedly rose to 8% from 7.9%, but markets arent heavily selling CAD due to the fact that the loss is only a payback for the aggressive jobs gains of the past 3 months. US payrolls are expected to drop by 100K-130K, with the unemp rate seen up at 9.6% from 9.5%. PRIVATE PAYROLLS will be the key due to the continued firing of census workers. Private payrolls exp to increase by 70K-10oK, so lots of data items to watch out for before market direction is established. FUNDAMENTALS ASIDE, CADJPY testing 83.60 support, for a possible retreat to 83.20, while USDCAD probes 1.0230 for 1.0290. EURUSD support stands at 1.3110-15.

JOB REPORTS FROM CANADA & US due in today. Canada (11:00 GMT) July employment exp +10K from 93K, unemp rate exp unchanged at 7.9%. Considering that the 93K rise was the second highest on record, A rise of 10-20K would be positive for CAD especially if the unemployment rate remains at 7.9%. USDCAD eyes a recovery above 1.02, but any rebound subsequent rebound is seen capped at 1.0250 until the release of the US jobs report, which could alter the risk picture. The 1.01 support remains valid for now, unless both US and CAD reports surprise on the upside. CADJPY still capped at 85, with ample downside risks calling for 84.20, followed by 83.60.

S&P500s 4th CONSECUTIVE DAILY ATTEMPT to close above the 100-week MA of 1127 may not succeed today, but be ware of misleading signals. THIS http://chart.ly/bkx6z5 shows the close above 1121 (50% fib from 2007 high to 2009 low) remains a positive dynamic for the index. But the real question is whether the last 4 days spent above the 200-day MA are simply a recurrence of the same pattern June 15-21 prior to the 8% decline. Therefore, even if the S&P500 fails to close above 1126-27 this week, it is important for the bulls to maintain a close above the 200-day MA of 1114-15 to sustain chances of eventual break out above 1126-20, which would pave the way for 1140.

BEST OF BOTH WORLDS FOR KIWI SHORTS US equities sell-off as jobless claims rise +479K, highest since April, adding to NZD losses against USD and JPY. Being a high yielding FX currency, NZD is among the usual victims of risk aversion, especially after higher than expected rise in NZ unemployment. NZDJPY may probe the 62 figure, with any deterioration in US equities in the event of a disappointing July jobs report on Friday, will likely call up 61.40. Although Aussie is pulling back on falling US equities, it remains robust against NZD along with all other currencies. USDCAD found a bottom at 1.01 for now, but further direction will depend on Fridays Canadian jobs figures due 90 mins before the US figures. Bond yields remain continue on the decline amid more talk of deflation; further benefiting the yen. USDJPY drops back below 86 as last nights recovery failed to take out 87. Heres Ashrafs Cantos Charts Video on Nikkei

USDX 3-month LIBOR continues to deteriorate; todays fixing drops to 0.418% vs. 0.52% 2 weeks ago, while EUR-3 month LIBOR rises to 0.832% from 0.75 in mid July. This is leading to an ever widening spread in favour of the EUR reaching +41 bps. This weeks article on EURIBOR, Euro & USD Index featured the chart of the EUR-USD libor spreads http://bit.ly/b5Ek8n and its rising correlation with EURUSD. Any hints from JC Trichet today about normalizing monetary policy will likely further boost EURUSD towards the $1.3270 resistance. USDCAD eyes support at 1.01 after the sharp decline from 1.02, which was in line with yesterday's IMT warning here http://chart.ly/mec6b8 GBPUSD looking to regain $1.5940s. Watch out from Jobless Claims and Trichet conference at 12:30 GMT (13:30 BST).

KIWI SLUMPS across the board after NZ unemployment rate jumped to 6.8% in July from exp 6.4% (vs exp 6.6%). My followers on twitter were alerted 75 mins before the release of the report with the following tweet: $AUDNZD longs worth a look ahead of tonight's Kiwi job figures. Cross already broke the 4/4 trendline resistance eyeing 1.2570s. The worse than expected report fired up AUDNZD by +100 pips in less than hour, sending it to 1.2577. GBPNZD longs eye 2.198, NZDCAD shorts may see prolonged losses as oil prices soar on 1) EIA figures 2) Feds dovish talk and 3) emerging speculation of an Israel strike on Iran (according to intelligence reports). NZDJPY would also be a big loser in the event that risk appetite takes a turn to the worse. USDCAD extends further losses as per the chart in prior IMT http://chart.ly/mec6b8

The next time there's a volcano, buy wheat.

Ashraf explains why the much-touted Death Cross in the S&P500 of early July did not work, using the EURUSD as a better example in mid January in todays VIDEO MARKET ANALYSIS http://bit.ly/cwG0W5

USDCAD VIDEO & CHART ANALYSIS

USDCAD CHARTS (Daily & Weekly)

http://chart.ly/mec6b8

USDCAD VIDEO:

http://bit.ly/9Ss1tr

STOCKS EXTEND FRESH DOSAGE of pre-payrolls buying after US July ISM unexpectedly rises to 54.3 from 53.8; S&P500 will attempt to close above its 10-day MA of 1126 (not broken since May). AUSSIE & LOONIE SOAR against all currencies as wheat extends its 55% rally of the past 4 weeks amid worsening draught in Russia. Aussies leadership is also boosted by the prolonged strength in energy and metals as the Federal Reserve opens the door for the possibility of renewed asset purchases (quantitative easing). QE is becoming synonymous with rallying commodities as was the case in Q1-Q3 2009. Copper nears the key $7,570 resistance, which is the 76% retracement of the decline from the April high to the June low. US crude has the technical momentum required to break above $83.50 (right shoulder), especially if the skirmishes in the Middle East show no abating. And with the FOMC widely expected to confirm its bearishness at next weeks rate decision, AUDUSD eyes 0.9230-35 as the next barrier. Any dovishness from the RBA in Thursdays quarterly monetary policy statement may have a limited impact ahead of next weeks FOMC. AUDJPY is the more likely loser in the even of disappointing US payrolls. USDCAD resistance drops from 1,0320 to 1.0270s eyeing 1.0170s.

AUSSIE & LOONIE SOAR against all currencies as wheat extends its 55% rally of the past 4 weeks amid worsening draught in Russia. Aussies leadership is also boosted by the prolonged strength in energy and metals as the Federal Reserve opens the door for the possibility of renewed asset purchases (quantitative easing). QE is becoming synonymous with rallying commodities as was the case in Q1-Q3 2009. Copper nears the key $7,570 resistance, which is the 76% retracement of the decline from the April high to the June low. US crude has the technical momentum required to break above $83.50 (right shoulder), especially if the skirmishes in the Middle East show no abating. And with the FOMC widely expected to confirm its bearishness at next weeks rate decision, AUDUSD eyes 0.9230-35 as the next barrier. Any dovishness from the RBA in Thursdays quarterly monetary policy statement may have a limited impact ahead of next weeks FOMC. AUDJPY is the more likely loser in the even of disappointing US payrolls.

Ashraf's analzyes USDCAD on Cantos Video Charts

http://bit.ly/ccOLmo

Ashraf's interview on BNN discussing Europe, euro and Swiss franc

Parts 1 & 2: http://bit.ly/aq7yeX

Ashraf's Video Charts Analysis on Cantos making the case for GBP and EUR against the Aussie

http://bit.ly/ 9vmIay

Ashraf's Video Charts Analysis on Cantos making the case for GBP and EUR against the Aussie

http://bit.ly/9vmIay

YEN TAKES OVER as stocks retreat across the board and especially by the fact that markets are paying less attention to Japanese policy makers who indicate that theyre closely watching currency yen movements. FALLING BOND YIELDS are also helping to boost the yen as the US 2-year yield hit a new low of 0.526% and 10-year drops below 2.90%. USDJPY may not extend losses beyond 85.50 at this point as it awaits key data later in the week (ADP, ISM and Payrolls). Upside seen capped at 86.40s. EURUSD seen supported at $1.3140-45 before renewed run-up towards $1.3270, while GBPUSD has yet to regain $1.60, which may be in function of not only the construction PMI but also the earnings from Lloyds, Standard Chartered and Barclays later this week.

EURUSD EXTENDS rally across the board after closing above the important $1.3130 resistance yesterday. Despite a modest pullback in equities; risk currencies extend gains versus USD. EURUSD eyes 1.3270, previous support from mid March to early April. USDCAD struggling to recovery above 1.0270 but seems supported at 1.0190 for now. USDCAD shorts consider shorts in USDCAD as an alternative to shorting USDJPY, especially as 85 CADJPY and 1.03 USCAD prove tough resistance levels. SOARING WHEAT prices due to hot weather in Russia are also helping to support Aussie and Loonie, but yesterdays softer thane expected Aussie sales figures add to my bullish stance on the already rallying GBPAUD and EURAUD.

AUSSIE CROSSES AHEAD & AFTER RBA: The upcoming RBA decision (12:30 am EDT, 4:30 am GMT, 5:30 BST) is widely expected to keep rates unchanged, but the impact on the already rallying AUDUSD remains doubtful given the break above the all-important 0.9070 resistance. Although a rate hold is widely priced in the market, I see room for AUD downside against the rallying EUR and GBP, both of which have been boosted by robust figures on Monday. GBPAUD makes a CLEAR BREAK ABOVE the 1.4 trend line resistance (from Jul 6 high), which was first addressed in last weeks HOTCHART http://bit.ly/drvzV6. This is inline with a bullish call in EURAUD, which not only remained supported above 1.43 double bottom, but is now propped to recpature1.4550s, especially if the RBA addresses softening inflation in its policy statement.

GBP NET SHORTS against USD fell to 17,940 contracts, the lowest level since August of last year. The chart http://chart.ly/7fxh7s shows GBPUSD is closely correlated with futures speculators interest in GBPUSD. This months BoE inflation report maybe the only viable barrier to further GBP gains in the event that it reiterates inflation to return below 2% at the end of the 2-year horizon. Until then, GBPUSD will seek to recapture $1.5940 after last weeks important break above the 200-day MA for the first time since January. As long as UK services and construction PMIs this week are w/in or better than expectations, the $1.6 can be seen this week, but more GBP gains are viable against EUR. EURUSD eyes 1.3270.

NEGATIVE USD COMBO: The combination of weak US figures, dovish Fed rhetoric and improving Euorozone figures (PMIs) is proving increasingly detrimental for the US dollar. USDX is at risk of breaking below the 81.40s, marking the 50% retracement of the rally from the Nov 2009 low to the June 2010 high, coinciding with the 100-week MA. The bulk of the decline in 6-currency USD index is occurring against GBP and CAD components, which occupy less than 10% each in the index. Interestingly, EUR, which has the largest share of the USD index at 57%, is showing the LEAST GAINS versus the USD. Therefore, as long as EURUSD is unable to break above the key resistance of 1.3125-30, USDX losses may remain relatively stable. But this does not mean traders can ignore the sharp gains in AUD, CAD and GBP. EURGBP breaks key 0.83 support, eyeing prelim support t 0.8220 before key target stands at 0.8140.