Intraday Market Thoughts Archives

Stocks extend losses after touching 10K just like FTSE-100 extended losses few weeks ago when it hit 5K. Whether it is the break of the 76 level for the first time in 365 days or NZDUSD failure to breach the 76% retracement at 0.7450, traders must watch these failed parameters of risk appetite. $GBPUSD did fail to break the trend line resistance of $1.64, while high yielders extend selling. Look for shorts in NZD and AUD against GBP, USD, while offsetting w/ shorts in GBPUSD.

Oils close above the 200-week MA of 75.70 (highest since exactly 52-weeks) is the latest major development triggering fresh USD weakness after crude oil stocks unexpectedly fell by 1 million barrels, countering expectations of a build of 2.2 million barrels. A weekly oil close above 76.2838% retracement of the decline from 147.27 to $32.40, would likely pave the way for the next move towards 85.28 and 89.62the 50% retracement of the said move. Once again, the US Treasury report on FX found no country to be a manipulator of currencies, but did reiterate the Chinese yuan remained undervalued. Positive earnings from Google and IBM extended the stocks rally. GBPUSD breaks above the previous neckline support of $1.6255, now eyeing $1.6408 trend line resistance from the $1.7027 high. AUDUSD breaks above 0.9260 amid rising talk of parity as early as this year. Its 3-day rebound vs NZD, draws 1.2450 into focus. AUDUSD support stands at 0.9170, which could be followed by a fresh attempt to recall 0.9262.

Any brief pullback in USD is being exploited as a fresh selling opportunity. Stocks retreat after Goldman Sachs beat earnings but falls of short of last quarters record. The EIA data due in 20 mins could be considered as the last saving grace for the greenback for the day and could very well be the catalyst to call up $1.50 in the event of another unexpected draw in inventories (or smaller than expected build). The 200-week MA in US crude is at 75.55 but the high was at 75.93. While we did see an intraday break of this MA in August, there was no close above it. Will we see a close ABOVE the 200-week MA today? GBPUSD resistance now stands as the previous neckline support of 1.6340, a break of which calls up 1.6410.

USD DAMAGE accelerates against AUD and CAD after the FOMC minutes show the Feds puzzlement in the face of falling bond yields. Some members explained falling yields due to reduced concerns about inflation, while others saw it a result of excess reserve balances was putting downward pressures on yields. The Feds situation is growing extremely unsustainable: In order for it to contain the plunge in yields and the rapid fall in the dollar, all it can do is manage inflation expectations (translation: telling bond traders it wont be increasing liquidity for ever via stating the obvious we will raise rates when the time is right. EXPECT MORE HAWKISH LANGUAGE from the Fed in coming days such as referring to reverse repos (way to reduce liquidity) as USD Index nears 75.18-- the 76.4% retracement of the rise from the March 2008 lows to the March 2008 highs. EURCAD renews declines in line w/ latest HOTCHART.

FX markets are reluctant to add on the aggressive gains already posted by GBP, EUR and NZD against USD and EUR despite a blowout earnings by JPM, smaller than expected decrease in US retail sales and smaller than expected increase in UK jobless. Dow attempts to catch up with Nikkei at 10K, while SP500 maintains its 1080s footing above Gold's 1060s. Cable still faces interim resistance at 1.6050s, followed by 1.6120s. USDCAD remains supported at 1.0235-40 while oil awaits tomorrow's EIA data (delayed release).

The Intel-driven rally in world equities and risk currencies continues to damage the US currency, as EURUSD regains $1.49 and GBPUSD hits $1.60. JP Morgans earnings are due at about 11:00am GMT expected +$0.49 per share from previous +$0.11. Cable looks to break above the 4-week trend line resistance of $1.6125-30, but intraday stochastics are starting to show a bearish divergence. USDJPY attempts to hold above 89 on JPY strength after the BoJ upgraded its assessment and an MoF official said there would be no intervention when yen rise is a result of other currencies weakness rather than actual yen strength. EURJPY is capped at 133.60, AUDJPY has yet to break above 81.70 double top.

TECH/FINANCIALS DIVERGENCE: Rallying US Tech stocks after a blow out earnings from Intel are boosting technology shares, while banking stocks continue to struggle. Past trading patterns showed that rallying techs relative to financials have occurred during pullbacks in the main equity indices. Will Goldman Sachs do the usual and beat earnings expectations on Thursday? Or has the bar been set too high? But an potential earlier obstacle to appetite will be TOMORROWs RETAIL SALES, expected -2.1% from +2.7% and ex-autos seen +0.2% from +0.2%

Sterling rebounds off its 5-month low of $1.5710 after BoEs Bean talks about the need to withdraw liquidity at the right time to avoid inflation. There were no other fundamentals to the GBP rebound aside from renewed risk appetite along with surging oil prices. Interim resistance stands at 1.5950, followed by 4-week trend resistance at $1.60. Watch IBM and other tech earnings after the bell for the influence on risk appetite. AUDJPY STILL FAILING to regain the double top of 81.50s, now ready to take another fall below 81. Disappointing consumer confidence from Australia are weighing on AUD. Look for interim downside at 80.60.

Canadian dollar's jobs-driven surge is extended on the back of the 4th consecutive daily gain in oil prices, as US crude breaks above $74.00, calling into focus the major resistance of $75.41200 week moving average. USDCAD extends its losses to 21% year-to-date, hitting a 14-month low of 1.0270. Technically, there is little support before 1.0240 (the highs from Feb-Jul 08). FX markets should expect to hear interventionist remarks from the Bank of Canada, which did include the currency factor as a source of difficulty in its last policy announcement. EURUSD hit a 14-month high at $1.4875, a close at which would pave the way for 1.4880. The US earnings factor is added into the mix, with IBM due after the US closing bell.

CPI DAMAGE TO STERLING as consumer price index tumbles to 7-year low of 1.1% y/y in September from vs. expected 1.3%. Once again we alerted you in the previous IMT about the possibility of a weaker than expected CPI unleashing more damage to a currency whose central bank is considering further QE. GBPUSD hits 5-month lows, testing the key $1.5730 support--38% retracement of the move from the 1.3660 low to the 1.7013 high. Expect to see 1.5680 to act as interim support, but any sharp decline in stocks to call up 1.55 by mid week. EURGBP tests 0.94, a break of which clears way for 0.9450. Oil strength continues to empower CAD and overall USD weakness. which is providing some support for GBPUSD.

MORE UK DATA/EVENT FLOW We alerted you last night of the CEBR report hours before it unleashed its broad damage on GBP, which lost 150 pips from against USD. Due tomorrow (8:30 am GMT) is the Sep UK CPI, expected 1.3% y/y from 1.6% y/y, (exp +0.4% m/m from +0.2% m/m) with the core CPI seen at 1.7% y/y from 1.8%. Note that most G10 nations have shown slower inflation figures as of late, which highlights that disinflation is the immediate concern, thereby, prolonging expansive monetary policies. With the BoE expected to expand its QE by at least another 25 bln, any figure below at or below 1.5% would be neutral to negative for GBP, while 1.3% or lower would be especially bearish for GBPUSD, especially now that the pair has hit the key support of $1.573838% retracement of the Mar low to the July high,

Oil prices soar on escalating worries about the USD and reserve diversification from central banks scaling up EUR and JPY. The breakout above $73 faces the $75 as the sole resistance, which augurs well for prolonged CAD gains ahead. See our LATEST HOTCHART on EURCAD http://bit.ly/4DckdM GBPUSD rebound off its 1.5720 lows remains capped at $1.5860. Ashraf's BLOOMBERG TV INTERVIEW earlier today http://bit.ly/86c4G

Ashraf Laidi's FX FORECAST REGAINS #1 RANK in FX WEEK's POLL

http://bit.ly/hdE5D

Oil regains $73, so watch out for a close above that level, but USD Index at 76.22, well above the 75.80 low, due to deepening GBP losses.

STERLING DYNAMICS. The Centre for Economics and Business Research (CEBR) report due on Monday predicts the future setting of UK fiscal and monetary policies to drag GBPUSD to $1.40 and lift EURGBP above parity. With all the talk about painful cuts in spending and increases in taxes, CEBR also expects the Bank of England to increase its quantitative easing target by 75bn from the current 175bn. News that Barclays is planning to spin off 4bn of collateralised loan obligations (CLOs) from its balance of sheet in order to tackle its toxic asset load may give a short-term boost to the currency. GBPUSD has not been spared by the periodic source of negative news from BoE, economic data or investment banks. Rallies in GBP remain temporary and $1.5780, 0.9370 remain key short-term targets in GBPUSD and EURGBP. WATCH ASHRAF Monday on BLOOMBERG discussing US FX policy choices at 9:15 am GMT (10:15 BST)