Intraday Market Thoughts Archives

Intermarket dynamics working like a symphony. The old/Oil ratio has further recovered as discussed in Thursday's article. Oil dropped to as low as sub-$57 (signaled in Thursday's IMT) and gold pushed to its highest since Mar 23 at $934. Forex markets saw further USD stabilization, prolonged yen strength and broad losses in NZD, each of which were called for on the website and our twitter updates throughout the week. Last but not least, equities continue to respect the 8-week cycle. All of these dynamics fully dissected in the just-released Workbook.

Ashraf's interview on Bloomberg TV earlier today. http://tinyurl.com/ol6bd5

US April industrial production -0.5% as expected from -1.7%, capacity utlization hits record low of 69.1. These figures may be neutral to negative for risk appetite but consdiering the Canadian figures, expected fresh gains USDCAD. The 1.1660 support held up, while target stands at 1.18. Cable's recovery eyes 1.5300.

Dollar and yen weakening after NY Fed Empire State survey -4.6 from -14.7, which is good news for risk appetite, while CPI was unchanged as exp while year on year -0.7%. CAD may not rise on these positive news due to dismal manufacturing sales from Canada, which fell 2.7% from February's 2.2% increase. Canadain factory order were also negative. USDCAD at session highs 1.1760 and could easily push higher in event of worse than exp US indus production in 40 mins from now.

Catch Ashraf on Bloomberg TV 11:45 am London (6:45 am EST) discussing oil, gold and the euro. NZD was the broad loser overnight following worse than expected retail sales, and once again its losses against JPY are greater than against the USD. JPY strength continues to emerge on a combination of comments about the internationalization of the yen and limited risk appetite. USDJPY breaches below 95, eyeing 94.60.

To capitalize on falling oil and gas prices, consider the ultra bearish ETF, which moves opposite oil and gas Symbol: DUG. http://www.proshares.com/funds/dug.html No margin or leverage are used. For non-US equivalent, check with I-Shares. http://twitter.com/alaidi for more trading updates, links and news.

About those Japanese comments boosting the yen: Japanese policy maker Masaharu Nakagawa (from DPJ Opposition party) said Japan should boost international use of yen; should mull asking us to issue yen bond, important to

diversify Japan FX reserves; shouldn't buy USD debt; Japan should talk to china about FX cooperation. Those comments were reported by the BBC this week. But when Mktnews Int'l asked Nakaawa about the comments, he only said those were made a month ago...rather than denying them.

Equity rally starting with a whimper and ending with another whimper but FX risk trades get the best out of the dollar and the yen...for now. If Asian is unimpressed with today's US session, then we may see modest pullback in GBP and CAD until US data sets the tone. Volumes are very low.

Dollar and yen losing their previous gains as stocks gradually accelerate their gains. Cable seeks to test the $1.5220 resistance while USDCAD seen supported at 1.1660. Swiss National bank reiterating its calls to stem franc strength, which briefly supported EURCH. The jump in jobless claims failed to dampen market sentiment as it was argued to be mostly Auto-sector related. Today's combination of rising jobless claims & rising PPI was well received, but let us see how tomorrow's CPI-Industrial Production plays out. Gold hardly moves at 920-925, whikle oil drifgts around $57.50 and $57.90. NZDUSD resistance capped at 0.5980s, USDJPY capped at 96.40.

Dollar strength joining yen strength in drawing risk aversion trades as GBPUSD breaks below $1.5070. CAD is well past its moment in the sun and is set for further damage, with USDCAD targeting goal at 1.1850, followed by 1.1910, which is the 200-day MA. The sell-oil story remains a fundamental driver as technicals show gradual signs of a breakdown, eyeing $54.66 as the next key target. Yen retains strength across the board and a break of 95 in USDJPY is viable, especially in the event of a considerable rebound in US jobless claims (12:30 GMT/13:30 London time) above 601K.

Catch Ashraf on CNBC Europe Thursday at 9:50 am London time. Metals gain as told in last week's article on Gold and the FX-Equity relationship. But silver continues to get the upper hand relative to gold. Oil shows 2 declines out of last 3 day. RSI comes off the 70% level, while stochastics transition from flattening to declining. Potential break of $56 seen by end of week. Latest Hot-Chart updated.

The Hot-Charts for the rallying FAZ and SKF Exchange-Traded Funds are now out. We have been favoring these over the past week. The oscillators are gradually moving into positive territory.

Ultra bearish Financials ETFs FAZ and SKF are +12% and 4% respectively as risk aversion accelerates to the full benefit of the yen. Many are asking whether the 2-month cycle I mentioned on March 13 article is over. Indeed, stocks showed another CLASSIC 8-WEEK RALLY from the March 6th low to the May 8th high just as was the case at each 2 month intervals since March 2008. Tomorrow's US weekly jobless claims could intensify the selling if claims rebound off their 601K lows. NZDJPY hits 56.50 target while NZDUSD hit 0.5890 from the 0.61 high. It is a textbook case of FX responding to risk aversion. More in my just released Forex & Intermarket Dynamics" workbook.

Sterling bounces from session lows vs USD despite stocks prolonged sell-off, but remains weighed vs JPY. Oil drops off its $59.80 session high despite unexpected cuts in inventories. Yen strength still prevails. A negative close today would make 3-consecutive daily losses, the first of pattern since end of March. Reiterating the call for bearish financial ETFs such as FAZ and SKF. W-formation in Daily NZDJPY continues to form, targeting 56.50,followed by 55.80. Upside capped at 58.50.

Will be on CNBC Arabia in 15 minutes, discussing FX, my 2-month cycle and metals. USDCAD nearing 1.1710, yen strength remains the name of the game. More twitter updates http://twitter.com/alaidi

YEN SHOOTS IN , GREEN SHOOTS OUT: Decline in US retail sales worse than expected so was the march revision, prompting renewed gains in the Japanese currency. Also expect GBPUSD to call up $1.5030 (very ugly looking Daily candle) targetting $1.5030. Stick with yen longs vs NZD, CAD and EUR. USDCAD targets 1.1705. Dow futures -128 pts from -70 pts before the report.

BoE's inflation report knocks off GBP across the board by confirming negativegrowth into rest of year and sub 1.5% inflation till Q1 '09. Yesterday we pointed out GBP was only major currency to not have regained above 200-day MA vs the dollar. Support seen stabilzing at $1.5070. But the play remains in favor of JPY on the dips, reiterating our calls against NZDJPY and EURJPY. GBPJPY vulnerable to 140 in event of renewed equity pullbacks. US April retail sales due at 12:30 GMT.

Broad dollar weakness is increasingly turning path of least resistance. Global equities do not necessarily have to rally aggressively in order for the dollar to sell off. This supports our previous calls favouring long AUDUSD for the long run. Although Asia failed to push up EURUSD and GBPUSD beyond the key $1.3740 and $1.5380 resistance, the trend remains clearly high. Absent any drastic events adverse to risk appetite, traders will continue weighing on the dollar. All of this is accompanied by broad strength on gold and silver. Also note how yen weakness has not been as pronounced as that in the dollar.

Risky currencies made a late session bounce as stocks pared earlier losses but ended up mixed, with Dow edging higher negligibly, and S&P500 and NASDAQ -off less than 1.0%. Financial stocks (XLF) fell for the second straight day after failing to break above their 200-day MA last week. Markets turn to tomorrow's US April retail sales report on whether the rate of decline has indeed become smaller. Any improved optimism may give EURUSD fresh chance to retest the elusive $1.3740 and AUSUSD above $0.7710. Cable not yet out of the woods but today's close above $1.5230 signals a possible attempt to regain $1.5380.

All 3 major equity indices in the red but Dow only -0.48% compared to -1.8% in NASDAQ with S&P500 -1.3%. Sterling continues to fail in breaching its 200-day MA while EURUSD unable to regain its the key $1.3740. Modest risk aversion playing in the favour of the JPY as NZDJPY breaks below 58 (see V-formation on daily chart) eyeing 57.20. USDCAD eyes channel resistance at 1.1770. As warned yesterday, the last hour of equity trading could trigger sharper selling in AUD, NZD and CAD in the event that indices add to their losses from current levels.

$1.3740 remains an elusive target for the EURUSD as it marks 38% retracement of the decline from the $1.6030 record high to the $1.2380 low. Euro needs extra help from equities to target that level, after which comes in the $1.3855. Cables upward bias may strengthen as traders viewed todays UK data as a possible motive to drive GBPUSD towards its 200-day MA, currently $1.56. Stronger than expected Canadian trade figures dragged USDCAD towards 1.1540 but the impact of falling stocks on CAD prevails. Interim support holds at 1.1570, paving way for initial target at 1.1670 and 1.1720.

Sterling is the only major currency not to have broken above its 200-day moving average against the dollar. EUR, CAD, CHF, AUD and NZD have all broken above their 200-day mov avgs against USD, while the dollar index has done so (below its 200p-day MA) last week. Cable will set sight on $1.5380, followed by the $1.56, which is both the 200-day MA and the trend line resistance. Watch Ashraf on Al-Arabiya Channel at 11:35 am GMT.

Although gold and silver continue to move in tandem, silvers gains still outstrip gold in percentage terms as its up over 50-% from the Nov lows compared to 33% for gold. Silver hovers around $13.9, and is set to call up the $14.60 trend line resistance from the March low. This almost coincides with the 50% retracement of the decline from the Mar high. And the fact that silver is 33% below its all time high--compared to 13% for gold, further supports the case for silver on the heels of a quantitative easing and uncertain outlook for US banks

Note that since the March low, the pullbacks in equity indices always limited to no more than 2-consecutive daily losses. Wed have to see at least 3-consecutive daily losses in the S&P500 and the Dow for the bears to feel less stress and the gains in USD to be more concerted. A classic case of risk aversion trades in FX is underway as US equities drop 1.3%, lifting USD and JPY off their Friday lows. EURJPY hits 132.25 and is set to call up 131.80, while GBPUSD battles at the 1.5080 support. USDJPY accelerating losses to 2-week lows and targeting 96.90. Equities may sell-off by as much as 4% today but this may not yet herald the end of the 9week winning run.

JPY bounces across the board as US equity futures are in the red following broad selling in Europe and lacklustre rally in Tokyo. USDJPY breaks below 98 to 97.60, while NZDJPY breaks below 59 after a short-lived break above 60. Expect prolonged paring of Fridays trades, with USDCAD eyeing 1.16 and cable eying 1.5030. EURJPY losses accelerated below 133.00, targeting 132.20. Dow futures -76 pts.

The short AUDNZD trade from the Hot-CHart is deepening in the money as the the triple top at 1.2950 proved another failure. This is heading into a prelim target of 1.2550. See the Hot-Chart for more detail on the rationale of the trade. http://twitter.com/alaidi for more frequent updates.