Intraday Market Thoughts Archives

MARKETS SLUMP after Citi misses earnings and the July Univ of Michigan consumer sentiment survey plunged 9.5 pts to a 16-month low of 66.5. GBPJPY extends its plunge to 160 pips from yesterdays levels, eyeing 131.70. CAD is the WORST PERFORMER and JPY is the BEST PERFORMER as oil makes another prominent failed attempt to regain the 200-day MA. Crude eyes 74.70, with risk of calling up 73.00. USDCAD eyes 1.0590, while CADJPY (the days biggest mover) may fins some stabilization at 81.60s. EURJPY is on track w/ latest HOTCHART as it fails 113.40, but a sub 111 break is needed for the downside to be established. EURUSD seen supported at $1.2867-70.

ASHRAF's WEBINAR THIS SUNDAY will go over the evolving relationships between equities and currencies, medium term putlook for USD, EUR, JPY and GBP, the lag between CAD & oil and the rationale for these recent IMTs. REGISTER HERE http://bit.ly/bup7tZ SUNDAY 19:00 EDT (23:00 GMT; Midnight BST).

Ashraf

EURUSD BREAKS above $1.29, regaining the 100-day MA for the first time since December mainly on a weakening US dollar and good news on the earnings front. Euros momentum shows the elements of an extenstion towards $1.3120. US equities made a late session rally on news that Goldman Sachs would settle its lawsuit with the SEC, but news of Googles earning miss was not ignored by Asian markets. Nikkei-225 fell 2.9% on what is said to be fears of prolonged yen strength. Were maintaining negatve stance on GBPJPY despite emerging rallies in GBPUSD and GBPCAD.

Ashraf's VIDEO MARKET ANALYSIS is back http://bit.ly/dc27JF Why choosing GBPJPY and why is GBPCAD fading? US 10-yr yield have finally declined below 3.00%.

US 10 YIELD YIELDS DROP BACK BELOW 3.00% for the 1st time since Jul 9th, dragging yen crosses across the board, in line with the deepening selloff in bourses. Selecting which currencies to short against the yen stands between CAD and AUD, but GBP maybe considered as a currency which has more downside room, considering its current gains. Thus, rather than opting for currencies which have already sold off against USD, opt for those with more modest losses against USD but with potential downside room against the JPY. GBPJPY eyes 133.80. GBPCAD longs heading for the exit after the +300 pip gains of the last 36 hrs.

MIXED US DATA as US June PPI falls 0.5% vs. exp 0.1% decline, Empire State index WORSENS to 5 from 19.6 with broad declines in New Orders and Employment Index. The good news is the 21K decrease in jobless claims to 429K. WATCH US JUNE INDUSTRIAL PRODUCTION (13:15 GMT) which could show the first monthly decline in 12 months after a 1.3% rise in May. July Philly Fed (14:00 GMT) is expected at 10.0 from 8.0 and 21.4 in June and May respectively. Watch the employment and prices paid indices for an indication of the internals and impact on overall sentiment. EURUSD extends run-up above $1.28, eyeing $1.2880 as EUR overtakes GBP visa rising EURGBP. 0.84 remains a key support, while GBPUSD is likely to probe $1.5380 a breach of which to make $1.5450 the next focal point. USDJPY awaits Indus production for a retreat to 87.20.

JPY IS STRONGEST OF THE DAY FOLLOWED BY GBP in early Thursday European trade as Chinas Q2 GDP growth slows to 10.3% from 11.9% in Q1. 13 hours after the Federal Reserve downgraded its 2010 and 2011 forecasts for US growth and inflation, Beijing publishes evidence of slowing growth and inflation. JPY is boosted by the sell-off in Nikkei-225 and Shanghai Composite Index. GBP edges up in line with yesterdays positive bullish against USD, CAD and EUR as the BoE is the only major central bank dealing with above-target CPI. GBPCAD gains 90 pips from yesterdayss lows, now looking for prelim target of 1.5955-60, while EURGBP is set to retest 0.8260 and 0.8210. EURUSD eyes 1.2670. ASHRAF WILL EXPLORE the latest turning points in the OIL-BALTIC DRY INDEX RELATION & various FX setups in this Sunday's webinar. REGISTER http://bit.ly/bup7tZ

FOMC MINUTES INDICATE A FED DOWNGRADE of the the US econ outlook for 2010 and 2011, weighing on yields and stocks, while keeping USD mixed. FOMC revised down its 2010 and 2011 projections for GDP growth and inflation while pushing up its unemployment outlook from the April forecasts; GDP down to 3.0%-3.5% from 3.2%-3.7%, unemployment to 9.2%-9.5% from 9.1%-9.5% and Core PCE price index to 1.0%-1.1% from 1.2%-1.5%. GBP continues to outperform CAD due to robust UK employment figures and negative impact on CAD from FOMC revisions. GBPCAD eyes 1.5850 and 1.5910. JPY PAIRS may drift further in event of deteriorating US equities. Keep an eye on Chinese Q2 GDP tonight, expected around 10.5% from 11.9% in Q1. Chinese are unlikely to show a figure that is too strong in order to avoid the ire of the West about raising yuan flexibility.

*** REGISTER FOR ASHRAF'S SUNDAY WEBINAR on FX, Commodities and Yield Relationships http://bit.ly/bup7tZ

OIL UNABLE TO BREACH ITS 200-day MA of 77.40,which coincides with the trend line resistance extending from the Mar 5 high thru the June 28 high. This also helps explain USDCADs support at the 1.0270 floor and subsequent recovery to 1.0370. Sticking with prior IMTs bearish call on EURGBP eyeing prelim target at 0.8260 and 0.8210 as 0.84 appears harder to break. GBPUSD failed to breach 1.53, showing a negative picture on the 4-hour, but only a break below $1.5160-70 would be required to delay calls for renewed run-up to 1.53. Watch the close of the London bell for a potential attempt in GBPUSD back to 1.5330. 1.FOMC MINUTES (due at 18:00 GMT) could trigger renewed USD selling as they confirm ratres will remain low for a period of time wth diminshing risks of inflation.

US JUNE RETAIL SALES -0.5% (vs exp -0.2% and prev -1.1%), ex autos -0.1% from prev -1.2%. Better but not good enough is one way to sum up these figures. Youd have to remove autos, gas and building material to obtain a positive retail sales figure. The 1.3% DECLINE IN JUNE IMPORT PRICES was the biggest decrease since Jan 2009. This is a vocal message of disinflationary conditions, which will further dampen any inflationary fears from the hawkish members of the FOMC. Watch the US 10-year yield retreating towards 3.0% especially after what we believe to be another dovish set of minutes from the FOMC. EURGBP is vulnerable to 0.8260 and 0.8210 in medium term.

TUNE IN FOR ASHRAF's WEBINAR THIS SUNDAY http://bit.ly/bup7tZ

UK UNEMPLOYMENT fell by 20.8K in June after a 31K decline in May with the unemployment rate dropping to 4.5%--lowest since March 2009. The robust figures may not dispel doubts over the impact of upcoming decline in falling public sector jobs. The weaker than expected 2.7% increase in average earnings is in line with the softening in June headline CPI, which may provide food for thought for GBP bears. With Cable slipping towards $1.5230s, we may see a renewed attempt to retest $1.5320 but beware of late session turnarounds in the pair as profit-taking sets in. US markets await June retail sales and FOMC minutes today. Strong Intel earnings last night helped Asia but are failing to provide the follow-through in Europe. EURJPY HOTCHART sees 113.00 being tested but 113.40s remain top heavy. See calendar http://www.ashraflaidi.com/economic-calendar/

BoA/Merrill Lynch Fund Survey finds the biggest deterioration in sentiment among portfolio managers since 2005 according to MNI. A net 14% of global fund managers expect the real economy to weaken over the next 12 months, compared to +24% expecting it to strengthen in last months survey. That is the largest 1-month fall in expectations since mid-2005. In April, when U.S. equities posted new 2010 highs, a net 61% of those polled looked for the real economy to strengthen in the coming 12 months. Portfolio managers reduced their equity allocation to 11% overweight from +24% in June, 30% in May and a +52% in April.

OIL TESTS 200-DAY MOVING AVERAGE (77.33) for the 1st time this month, probing the 1.0286 support (61.8% retracement of the 0.9928-1.0866 rally), a breach of which is apt to call up 1.0220s. The fact that CAD has outperformed crude oil over the past 2 months intensifies CADs prospects during advancing energy prices. USDX loosk to test 83.15--38% retracement of the 74.17-88.80 rally. 83.15 also coincides with the 100-day MA. A close below 83 this week would be highly rewarding to CAD & CHF.

USD EXTENDS LOSSES on intensifying risk bounce as GBP, CHF and CAD outperform major currencies. GBP EXTENDS GAINS above $1.51 as the focus on the 3.1% reading in CORE CPI overshadowed the retreat in the headline CPI to 3.2% y/y. $1.5140s appear vulnerable to a $1.5220 in the event that Intel earnings deliver another break above expectations (EXP $0.43 from -$0.07). EUR rallies against USD and JPY but struggling vs CHF, eyeing 1.32550, which is seen as a hedge against EURUSD longs. USDCAD eyes 1.0270s, ARABIC SPEAKERS WATCH Ashraf on CNBC-Arabia at 16:15 GMT (19:15 Dubai Time)

MOODYS DOWNGRADED PORTUGAL by 2 notches to A1 with a stable outlook, prompting broad downside pressure on EUR, but the run-up in equities is boosting EUR back towards $1.2570s from its 1.2520s session lows. GBPUSD rallies by full cent despite retreat in June CPI to 3.2% from 3.7%. Cable eyes 1.5135-40 trendline resistance, while USDCAD vulnerable to 1.0280 from current 1.0330.

STERLING DROPS by S&P's remarks that it is maintaining its negative outlook on the UK and that further rise in UK public debt burden would bge incompatible with AAA rating.

*** EURJPY HOT CHART IS NOW READY ***

http://bit.ly/9wr4nf

EURJPY HOT CHART IS NOW READY

http://www.ashraflaidi.com/hot-chart/?a=1711

$80.00 OIL has not been seen since May. The frequently cited Death Cross in equities and commodities is emerging in US crude oil, as the 55-DAY MA drops below BOTH the 100 and 200-day Mas for the 1st time since October 2008. as Ive cited back in Jan 19 article http://bit.ly/8EZTO8 , death crosses are particulalrly appealing when the both the 55 AND 100 MAs are ABOVE the 200-day MA, in which case would indicate more downside potential. While the more obvious resistance stands at the 200-day MA of $77.30, the more resilient barrier is found at $78.40, represening the 61.8% retracement of the decline from the $87.21 high to the $64.21 low. Daily chart still shows a H&S pattern with interim downside target at $71.50.

THIS WEEK's US Q2 EARNINGS EXPECTATIONS:

MONDAY: Alcoa $0.14 from -$0.26, CSX $0.95 from $0.72

TUESDAY: Intel $0.43 from -$0.07

THURSDAY: AMD $0.07 from -$0.49, Google $6.55 from $5.36, JPM Q2 $0/73 from $0.28

FRIDAY: BoA $0.21 from $0.33, Citigroup $0.05 from $0.49, GE $0.27 from $0.26.

***AUDCAD risks extending decliens towards 0.89 not necessarily due to struggling equities but particularly improving sentiment in CAD following Friday's stellar job report ***

SPAIN WINS THE WORLD CUP in a 1-0 victory over Holland in extra time. Dutch players fulfilled their promise of using unpretty football to try to overcome the Spaniards, but the outcome was 9 yellow and 1 red card for the Dutch, whose dirty play was the only way to slow the tempo of Spain's passing machine. A flash of genius from Schneijder offered Robben a golden pass but the Dutch winger inexplicably missed the chance of a lifetime, with the help of Casillas foot. Fabregas wasted the same type of opportunity but later redeemed himself with the most valuable assist of his international career, feeding Iniesta with the only goal of the match. English media desperately trying to elevate referee Howard Webb into star-status, but he once again made his share of mistakes --not awarding 2 penalties to Spain, overlooking a clear foul on Robben and mysteriously ruling a Schneijder shot as goal kick when it clearly shouldve been a corner-- This last action led to a crescendo of Spanish passing that eventually found Iniestas winning goal. But it couldve been much worse for Webb and the game had he not kept his cool and composure. Although the World Cup final was far from entertaining, it produced a greater share of thrilling moments than did the 2006 final in Berlin (passes, misses, shorts action and not penalties). Spain, the European champions, deservedly proved to the world why they were favourites. Iniesta-Xavi pair has been promoted from impeccable to unstoppable. Hard luck to Holland who loses its 3rd WCup final and Congrats to Spain and its beautifully effective game. The Fabregas pass to Iniesta is a preview why Spains Ligua will undoubtedly the most difficult, spectacular and talented football league in the World (assuming Fabregas will go to Barca). Spains Barca boys, Ronaldo, Ramos, Mourinho, and Forlan may be the only way Spains league could save Spains deteriorating sovereign debt situation.