Intraday Market Thoughts Archives

THE COMBINATION OF BERNANKE calling for Further Action, US retail sales showing a robust 0.6% and the NY Fed manuf index shooting to 15.7 from is likely to extend USD selling. The data is good enough to maintain risk appetite on an upward trend (especially due to stellar earnings from Google--GOOG seen opening near $600 after rocketing from $540s). FX traders may have a fresh excuse to push USD lower upon the latest round of the Feds PERMANENT OPEN MARKET OPERATIONS (POMOs) due at 11 am EDT (15:00 GMT) involving the purchase of about $3 bln in treasuries. Friday POMOs have usually proven negative for USD. And when we recall that USDX always ended aggressively lower in each of the last FOMC meetings, there is not much ground for USD rebound. AUDUSD briefly regained parity. Going back to that Sep 10 trend line support in EURUSD, the pair NEEDS TO CLOSE THE WEEK ABOVE $1.40 to avoid a near-term selloff and extend to the next target at $1.4210. CAD gained some ground after strong machinery data. GBPCAD still eyes 1.6180 & 1.6250 while USDCAD seen capped at 1.0125, followed by 1.0180s. Renewed drop below parity remains in the works--0.9970

Ashraf's SPANISH INTERVIEWS; with CNN Entrevista en Espanol sobre el Mercado de Divisas, Matieras Primas y las Bancas Centrales :

*** CNN http://bit.ly/blU94y

*** BolsaMania - Web Financial http://bit.ly/9aXD5b

GBPCAD Daily chart extending http://chart.ly/t2d6d85 rebound after the validation of BULLISH HAMMER and positive stochastics, calling for a prelim target of 1.62 & 1.6300. Whike I continue to remain medium term bearish in USDCAD, this long GBPCAD allows for USDCAD rebound towards 1.0150s but NOT beyond 1.02. And so, with USDCAD around 1.0150-70s & cable near 1.6050s, you can capitalize on this cross. You will recall that my previous HotChart of last month called for GBPCAD breaking below 1.59. Once we hit 1.5840s yesterday, I called for turning bullish at 1.5980s. Now looking for 1.62 & 1.6280s.

THE OTHER IMPORTANT EVENT TODAY Aside from the Bernanke speech, which will come out 15 minutes before the US retail sales & CPI reports, the US Treasury may publish its SEMI-ANNUAL CURRENCY REPORT, possibly labelling China as a currency manipulator. The reports official release dates are April 15 and October 15, but it is almost always delayed by 1-2 months. The Treasury has been pressured and criticised by Congress for never naming China as a currency manipulator. In the UNLIKELY event that it does, this would effectively declare a currency war on China. RUMOURS OF A DEAL involving the US delaying the report or not naming China as manipulator IN EXCHANGE for China either revaluing the yuan or allowing it to appreciate faster. As part of any deal, CHINA WOULD NEED THE FED TO ISSUE LESS QE (purchase less treasuries) in order to alleviate the downward spiral of the USD. These talks are a strong reason to the consolidation seen in Thursday FX markets involving USD bounce and yen declines. The quick long call FAVOURING GBPCAD IN THE LAST IMT at 1.5980s followed a 110-pip gain, now reaching the 1.6110 trend line resistance. But the bulish hammer and positive stochasticks are likely to extend further gains ahead to as high as 1.6180.

USD INDEX flirts with 76. Readers of AshrafLaidi.com & my followers on Twitter were alerted of this level on Sep 29 (see chart) alerting you of this important target support. http://chart.ly/6t8tn9a ***** WATCH EURSEK Daily testing 9.22, with a close below 9.21 allows for 9.15 & 9.1. Hawkish comments from Riskbank's officials signalling more rate hikes to come, especially as rates remain at a mere 0.75%. ***** With GBPCAD having hit 1.5830s, time to ride a quick ascent back to 1.6130

There's room

USD EXTENDS LOSSES with the help of further accumulation in Chinese FX reserves, robust US earnings and continued gains in global equities. Singapores decision to widen its FX trading band is a form of policy tightening aimed at containing rising inflation. USDSGD trades at 1.2950, nearly 9% down on the year, while GBPSGD trades at 2.0680, which is well above the May low of 1.9902, which means there could be more SGD upside against GBP than against USD. USDJPY flirts with 81 amid the deafening silence of the BoJ. I havent changed my take on 80.80 and 79.70 targets in USDJPY communicated on these IMTs 4 weeks ago. CAD already hit parity vs USD, while AUDUSD is 20 pips away. At this point, there is little in the way of support to USD even as these headline-grabbing levels are broken. GOLD HITS A NEW RECORD but keep an eye on OIL, which has more upside, targeting 84.70. Bernankes speak tomorrow about Monetary Policy in a Low Inflation Environment will hit the press 15 minutes before the release of the Sep CPI and retail sales figures. USD selling will likely at least continue until the market is finally knows the initial starting quantity that will head off QE2. SEK WATCHERS await speeches Riksbanks Deputy Governors Ekholm (14:00 GMT) and Nyberg (15:50 GMT), while EUR watchers await will digest some speeches from ECB members at the Aspen Institute. Im in Madrid for Seminars & Conferences so updates are less frrequent than usual. Please tune in to my quick/brief markety insights on TWITTER http://twitter.com/alaidi

REVISITING CNY/JPY. Take a look at this WEEKLY chart of CNY vs JPY http://chart.ly/rvwndk9 , which fell nearly 25% over the last 2 years. Japan has all the right to be upset with the yuans weakness, but we all know that yen strengthening has broadened against all major currencies over the same period. Only an outright yuan revaluation (unlikely) will help stabilize CNY/JPY, which would occur via rising global appetite and a falling yen. Any further TIGHTENING of CHNESE MONETARY POLICY would only extend CNY/JPY further down, likely calling up 11.0 yen by Q1. This leaves us with powerful and effective BoJ easing/intervention as the only way to reverse this currency pair, which today, remains unlikely with the conservative 5 trillion yen in allocated asset purchases.

DJIA-30 EXTENDS BREAK ABOVE its 200-week MA of 10987, now at 11090 we have seen this in the week of April 22, Aug 7 when the Dow did have an INTRAWEEK-break of its 200-week MA only to fall back below later in each of those 2 weeks. Meanwhile, S&P500 never broke above its own 200-week MA during those occasions (April & Aug). S&P500 currently trades at 1177, which is 1.8% below the 200-week MA of 1197. Incorporating further equity gains with USD weakness has been sided on by my CAD-positive calls, repeatedly calling for parity on USDCAD, based on improving technical formations in crude oil (see current article on DIAMOND UPSIDE BREAK-OUT & DIAMOND DOWNSIDE breakout in USDCAD). Thus, I still call for 0.9970, 0.9920 in USDCAD, with prev trendline resistance of 1.0180 now sliding to 1.0140. GBPCAD FINALLY FALLING BELOW 1.6 as BoE's Miles talked down GBP. Im in Madrid for Seminars & Conferences so updates are less frrequent than usual. Please tune in to my quick/brief markety insights on TWITTER http://twitter.com/alaidi

FOMC MINUTES from the Sep meeting will likely highlight the dissent as well as uncertainty among FOMC members regarding i) the need to purchase additional bonds (beyond maintaining the balance sheet intact) and; ii) the visibility towards the November 2-3 meeting. The FX impact of QE2 will primarily be in function of the quantity as well as the extent to which it keeps the door open for further purchases, Thus, an initial announcement of say, $150 bln may disappoint USD-bears who had been anticipating higher amounts, but not if the FOMC announces a monthly purchase program that is subject to revision. Once US QE2 becomes the new normal, selling pressure on the USD could well ease as traders begin anticipating the days of similar moves by the Bank of England (70% chance of occurring before January) and the ECB, the risk of China hitting the brakes too hard could well increase in its role of weighing on equities, commodities and risk currencies.

EURUSD BREAKS BELOW 4-WEEK TRENDLINE SUPPORT of $1.3850, a NY close below which would extend losses to $1.37. The stochastics validation for further decline is in place. Now that the 200-week MA and 61.8% retracements at $1.3920 were both attained, this may be the time to take profits and extend losses towards possibly $1.36. Do not forget that EURUSD had 4 consecutive weekly gains (longest winning streak since Jul/August) and a correction is overdue. UK Sep CPI held at 3.1% y/y while the core slipped to 2.7% from 2.8%/ Sterling being hit by escalating demands for additional QE from the business community. GBPUSD continues to look like a double top from the Aug high of $1.5997 high and $1.57 appears a decent prelim target (trendline from Sep 9). GBPCAD eyes 1.6020.

THREE YEARS AGO THIS WEEK, the S&P500, Dow-30 and FTSE-100 hit their all time highs. Oct 5 showing http://chart.ly/ljlsiyj Today, all 3 indices are at their 6-7 month highs, with the 200-week MA testing by the Dow-30, broken by the FTSE-100 but not yet attained by the S&P500, which is about 2.3% below its average. US indices could well extend another 5% with the help of decent US earnings and anticipation of further QE from the Fed. EURUSD uptrend remains robust as long as Sept 10 trendline holds at $1.3850s i.e. NO NEW CLOSE below $1.3840. I will be travelling again this week so updates will be LESS FREQUENT than usual. FOLLOW ME ON TWITTER for quick/brief updates/analysis http://twitter.com/alaidi

IMF/G7 COMES and GOES, USD continues to fall amid the lack of any agreement on currencies. More and more players realize that US pressure on China is unlikely to succeed into a yuan revaluation and that ongoing pressure is equivalent to de-facto USD-devaluation. Each time a nation resorts to pressuring others to revalue their currencies, markets will easily sell its currency. But FX markets must be warned of complacent USD selling as EURUSD hovers around the important $1.40 and European officials begin to show signs of concern. Although ECBs Smaghi said the ECB has no FX target, some started to indirectly talk down euro (USD does not reflect fundamentals of US). As talk of DOUBLE-DIP fades, the DOLLAR DOUBLE DIP is back in play as the USD INDEX knifes through its 200-week MA, nearing the Dec low of 74, with the all time low of 71.20 a possibility for next year. Happy 10/10/10

WATCH PRESENTATIONS by Ashraf Laidi, Charles Gave (Gavekal) and Karolina Ekholm (Chief economist & voting member of the Riksbank-Swedens central bank). Ashraf argued against Germanys exit of the Eurozone, Charles Gave spoke about government debt structures and his view of the US dollar at the Nov FOMC, Ekholm (in Swedish) spoke about the Riksbank outlook of the Swedish economy, whose currency is the best performer against the US dollar over the past 3 months. http://bit.ly/cPz3ju