Intraday Market Thoughts Archives

Risk aversion dominates again after stocks' brief moment in the sun, which occured dubiously despite worse than expected bank results and econ data. Yesterday's rise in the VIX above the 100-day MA remain validated, triggering broad gains in the JPY and Gold. With US markets shut on Monday and thin trading on Tuesday's pres inauguration, there's little motive for continuity in the upside. How long will . . . You must be a subscriber of Intraday Market Thoughts to read rest of content.

Dollar drops across the board as the combination of falling inflation (lowest annual core CPI since 1954) and deteriorating industrial production justify the Feds zero interest rate policy, which is a double negative for the US currency. A third reason weighing on USD is the improvement in risk appetite, fuelling gold back above $830 after proving it could hold above the 2-month TL support of $805. I remain sceptical with the strength of the equities rally and the pullback of the USD. $1.3380 and $1.5050 in cable remain key obstacles for the day.

Markets improved in late NY trade helping Asian equities on reports of a $20 bln in gov cash to Bank of America in order to help the buy out of Merrill Lynch. In the UK, the short-selling ban will be removed today, but markets will be busy dissecting the US figures on inflation, TICS, indus production, and consumer sentiment. EURUSD managed to hold above key trend line support vs USD and GBP. EURUSD eyes 1.3380.

Ashraf speaks on the ECB rate cut, falling inflation, struggling equities, rebounding VIX and the impact on the Canadian dollar. How to link it all together http://watch.bnn.ca/#clip129880 if the link does not work then search BNN.CA under Ashraf Laidi

The latest article argues for further risk aversion weighing on S&P, Dow and favoring the VIX until next week. But EURUSD 2-mth TL support at $1.3020 and EURGBP support at 0.8850 is seen holding up. Chapter 5 of my book is fully devoted to "Risk Appetite in the Markets" (sneak available at amazon.com) offers a practical and graphic illustrations of the relationships among high and low yielding FX, VIX, equities and credit spreads.

EURCHF has dropped 145 pips from 2 days ago when I issued a negative bias to CMC Clients based on increased concerns with Eurozone fiscal integrity, possibility for 75-bp ECB cut and unlikelihood of SNB rate cut soon. Techs suggest H&S formation could trigger prolonged losses towards 1.4650 and 1.4570 in case of renewed risk aversion. ECB seen widely cutting rates by 50-bps to 2.00%. which is likely to prevent EURUSD from breaching below $1.3050 TL support.

The 2.7% decline in US Dec retail sales defies the receding signs of stress in credit markets and expose the ongoing deterioration on the economic front.

The shocking report triggers sharp return to the risk-driven trades of H2 2008 boosting USD and JPY, but this also means that USDJPY could head towards towards my projected target of 86.40 (see lasty week's H&S analysis). Gold still holds above TL support of $815.

Gold's first 2-day gain in 2 weeks along with troughing stochastics suggest a possible extension towards $850 /oz. from yesterday's 4-week low of $817/oz. Interim resistance stands at $840, but renewed risk aversion could pose substantial obstacle. US retail sales to show 6th straight monthly decline, but figure unlikely to be as negative as Nov, in which case possible stability in stocks could ... You must be a subscriber of Intraday Market Thoughts to read rest of content.

USD gains on the 29% plunge in the US Nov trade deficit to a 5-year low of $40.4 bln, which was a clear manifestation of eroding global growth weighing on world trade. The record 12% decrease in US imports reflected a 36% drop in petroleum imports, highlighting the fact that falling US growth dominated the role of the stronger dollar. The 6% decline in US exports is another sign of slowing global growth in the face of weakening global currencies against the US dollar. But a record twin deficit of over 10% ...You must be a subscriber of Intraday Market Thoughts to read rest of content.

NZDJPY proved a major loser after S&Ps downgrade of NZs foreign currency outlook to negative, which added to the gloom triggered by multi-decade lows in NZs business confidence. NZDJPY shed 3 yen to 49.32, which is 2 yen away from last months 8 year lows. A breach below 47 is likely to call up the 45 yen low. Rising AUDNZD highlights NZD selloff from 1.18 to 1.209 in the past 10 hours, with 1.2370 ... You must be a subscriber of Intraday Market Thoughts to read rest of content.

The interpolated 86 yen target on USDJPY Head & Shoulder is on its way to take hold, consistent with the analysis sent to CMC Clients on Friday's post-payrolls note. Similarly, GBPUSD peaked out at my projected $1.55 and now eyes $1.45. We're witnessing a classic return to risk-driven trades, whereby the JPY and USD are the winners, but the JPY has the last word for now.

I reiterate that 950 in the S&P500, 92.20 in USDJPY and 35 in the VIX each continue to pose major obstacles for any marked improvement in risk appetite. S&P500 remains consolidated between the 950 and 830 levels as well as its failed attempts to garner more than 25% gains from the lows. VIX remains well supported at the 35, which is both the 200-day MA and 50-week MA, each key technical trend measures. USDJPY right shoulder at 92.20 and translates to a ST target at 86.