Intraday Market Thoughts Archives

As gold is set to close below its 100-WMA for the first time since Nov 2008, we add weekly and monthly charts as well as 5 new trades to our latest trades. All 4 USDJPY and EURJPY are in progress from the latest Premium Insights.

JPY accelerates weakness as the G20 agrees to leave off Japan from the official communiqué. Dont expect the Moscow G20 to be like the G7 Plaza Accord of 1985. At the end of the day, no four or five sentences issued by the G7 or G20 will undo the sea change in Japan's monetary policy, which was brought about by electing LDP back to power.  Also recognize that the G7 tacitly favours a weak yen as it is part and parcel of stabilizing the global economy via Japanese institutional investors' chasing yield abroad (in both G7 & G20 markets)

JPY Weakness is here to Stay

The last time the G7 proved to be a game-changer in currencies was at the G7 meeting in Dubai in September 2003 when both Japan & China were targeted for artificially capping their currencies. After the meeting in Sep 22 2003, the yen soared, driving down USDJPY by 13% from Sep 2003 to Dec 2004. That happened because USDJPY was originally as high as 120 (25% weaker than today). 

Yesterday's Premium Insights on USDJPY and EURJY are all in progress. Gold, oil and silver will be updated shortly.

Valentine's Day brought a dose of love for the yen as it retraced a portion of its recent losses. The euro was the worst performer on the day. The New Zealand dollar climbed above 85.00 in the early part of trading after an upbeat retail sales report. The latest trades ahead of this weekend's G20 meeting have been issued. New trades on gold will be added on Friday, while the existing silver and oil trades remain in progress until new trades are added on Friday. See today's Premium Insights below.

The US dollar was broadly stronger on Thursday after initial jobless claims fell to 341K compared to 360K expected. It was among the strongest readings since the crisis and shows that the US economy is headed in the right direction.

The Fed's Bullard forecast US growth near 3% this year and said he would taper QE operations if he could. He also suggested lowering the monthly QE tally by $15 billion for every 0.1% drop in unemployment.

On exception to the dollar strength was JPY, which was the best performer on the day. EUR/JPY is in danger of breaking last week's low of 123.43 and that could mark the start of a deeper retracement phase.

A draft copy of the G20 statement leaked on Thursday and although it didn't mention the yen specifically, it caused a quick 20 pip fall in USD/JPY. Yen traders have been exceptionally jittery in the past week to any yen-positive headlines.

In early Asia-Pacific trading, the kiwi continues to be the darling of the FX market after January retail sales climbed 2.1% compared to 1.4% expected. The upbeat number follows an extremely strong PMI a day earlier and propelled NZD/USD from a daily low to a daily high of 0.8515 in moments.

The rally marks a fresh high since mid-2011 and breaks through a tough area of resistance.

Other items on the calendar include revisions to Japanese December industrial production at 2330 GMT and the BOJ monthly report at 0000 GMT. Neither item is likely to move markets.

Friday's G20 summit in Moscow will produce its share volatility in JPY pairs. USDJPY is the “pair of the moment” as we head into the summit. Part of the reason that G7 officials may have no opposition to Japan's weakening currency is that they themselves are carrying out similar monetary policies. Another reason is that a weakening yen is less problematic to G7 partners than it is to Japan's emerging market trading partners, who are members of the G20. The latest Premium Insights ahead of this weekend's G20 meeting are issued. New trades on gold will be added on Friday, while the existing silver and oil trades remain in progress until new trades are added on Friday.

Japan prelim Q4 GDP contracted 0.1%, posting the nation's 3rd consecutive quarterly decline. A US retail sales report that was in line with expectations left the market searching for direction. The pound continued to weaken after the BOE report while the Australian dollar was the top performer. The BOJ decision follows later in the Asian session. A new edition of the Premium Insights will be released durint the Thursday US session. 

Japan's economy again unexpectedly shrank -0.1%, vs forecast of +0.1%. But markets are taking the news in stride following the recent advances in the Nikkei-225 and the positive impact of the falling yen on the economy. US trading was relatively mundane after retail sales rose 0.1% in January, which was dead on the consensus. Core sales were also very close to expectations. That left markets without any firm direction.

As the day wore on, risk trades were slightly stronger while the euro drifted 30 pips lower to 1.3450.

Early in Asia-Pacific trading, the New Zealand dollar jumped 60 pips to 0.8460 after the January manufacturing PMI jumped to 55.2 compared to 50.4 expected. A day ago, Finance Minister English was lamenting the effect of the strong NZD on manufacturing but this number showed an economy in full flight.

We may get an immediate response. At around 0300 GMT (there is no set time) the Bank of Japan delivers its latest interest rate decision. No significant changes are expected but the BOJ could hint at more in the pipeline.

OPEC lifted its 2013 oil demand growth forecast to 840,000 barrels per day, up 80,000 barrels a day from its previous estimates. Colder weather, broader global economic ecovery and strengthening Chinese consumption were cited as reasons for the increased revisions. For more charts & analysis, click here .

A comedy of mixed messages from the G7 led to a choppy day of trading in the yen crosses. Ultimately, the yen was the top performer on the day while the pound lagged. Australian consumer confidence data is a highlight of the upcoming session.The latest from our Premium trades has EURGBP, AUDJPY and US Crude oil hitting all of their final targets at 0.8630, 96.60 and 97.70 respectively. USDCAD long missed its final 1.0098 target by 11 pips, while CADJPY long remained unfilled after missing the entry by pips. Both EURUSD remain in progress, so does the silver short and the other long US crude. The gold long was stopped out by 1 point at 1640. For those remaining trades, please see latest Premium Insights.

The G7 statement devolved into a circus with traders caught in the middle on Tuesday. The original statement made no mention of Japan as a problem and that was interpreted as a signal that concerns weren't at a high level.

An unnamed G7 official then released a separate statement saying markets misinterpreted the official comment. That sent USD/JPY crashing a full cent and eventually as low as 92.95.

Later, an unnamed UK official seemed to counter that, saying the original statement wasn't about any particular currency or country. Afterwards, USD/JPY rebounded above 93.50.

At the same time, the euro was climbing after comments from Draghi. The ECB leader didn't make any particular pronouncements about monetary policy but indicated the economy is improving. The euro climbed as high as 1.3475.

At 1830 ET, Westpac releases Feb consumer confidence for Australia. With markets so unsure about the next RBA move every data point is important. The market is pricing in a 56% chance of a rate cut on March 5.

Twenty minutes later, Japan releases the corporate goods price index for January. Expectations are for a 0.3% year-over-year decline but the report is unlikely to move the markets. At the same time, the Dec tertiary industry index is expected up 0.7%.

EURUSD regains its 100-WMA after last week's negligible close below the MA. A close above 1.3370 his week would be the 3rd close above the 100-WMA in 15 months. We called Friday's Premium Insights edition "Temproary Change in JPY bias", but the price move did not emerge until today following the G7 about-turn regarding the phraseology of its statement on FX movements (see previous IMT). The latest from our Premium trades has EURGBP, AUDJPY and US Crude oil hitting all of their final targets at 0.8630, 96.60 and 97.70 respectively. USDCAD long missed its final 1.0098 target by 11 pips, while CADJPY long remained unfilled after missing the entry by pips. Both EURUSD remain in progress, so does the silver short and the other long US crude. The gold long was stopped out by 1 point at 1640. For those remaining trades, please see latest Premium Insights.

G7 Yen Retraction won't Matter: Three hours after the G7 statement added fuel to the “yen carry trade” fire by tacitly approving Tokyo's currency policy disguised as a reflationary monetary policy, G7 officials re-emerged to state that they will issue a modified communique on currencies at the G-20 meeting with added emphasis on the yen. NPNE OF THIS is likely to matter in the medum term as we expect the anti-JPY dynamics to prevail. For more on JPY & FTSE/GBP Patterns, click here

A hint that the US has no problem with the Japanese policies that have weakened the yen. The euro was the top performer on the day while the yen lagged. Japanese consumer confidence and machine tool orders are the highlights as Japan returns from holiday.  The trades from the Feb 8 Premium Insights were updated, with an addition in gold, silver and oil. 2 EURUSD trades remain in progress, so do USDCAD, EURGBP and oil.

US Treasury undersecretary Brainard told reporters on Monday that his country supports Japan's efforts to reinvigorate growth and end deflation.

The comment was slow to circulate but it appears to be a signal that the US has no intention of forcing a showdown with Japan on FX. If that's the case, the rest of the G20 will likely fall in line at meetings beginning in Moscow.

USD/JPY was at 93.40 before the comment and hit a fresh cycle high at 94.40 after the comment. Yen crosses were similarly strong.

Earlier in the day, it was the ECB's Weidmann who jolted markets. The euro jumped a half-cent when he told reporters the currency isn't seriously overvalued and pledged to defend market-based rates. The rally stalled ahead of Friday's high of 1.3430 and has drifted back to 1.3390.

Today's calendar features Australian Jan NAB business confidence at 19:30 GMT. The prior reading was minus-4.

Later, the focus is on Japan with Jan consumer confidence at 0000 GMT; the prior reading was 39.2. An hour later, preliminary Jan machine tool orders will be released and will look to rebound from a 27.5% y/y fall in December.

China is on holiday all week.

The FTSE rose as much as 7% this year to hit its highest since May 2008.  After lagging most of its global counterparts in H2 2012, the FTSE made up ground and is now among the highest performers year-to-date. How does the index look ahead of Wednesday's BoE inflation report & testimony on UK growth?  Click here for charts & analysis.

The Chinese New Year and the blizzard in the North East of the US is dampening FX volumes. Euro watchers await the final confirmation on the aid package for Cyprus, and the rising value of the euro when they meet in Brussels today, while Greece may return to the news Eurozone discuss the progress of Greek reforms at their monthly meeting on Monday, which will determine the release of the next bailout tranche of € 2.8 billion. Yet, risk appetite continues to be shown more in equities than in FX as the S&P500 hits the highest since Dec 2007. Today, we updated the Premium Insights in gold, silver and oil. 1 GBPUSD hit all targets while both USDJPY were stopped out. All other EUR, JPY, GBP, CAD and AUD trades made on Feb  remain in effect.