Intraday Market Thoughts Archives

THE NEW STERLING REALITY; as GBP drops on deteriorating Eurozone news - the latest of which is Moody's multinotch downgrade of Ireland (not Greece as I mstated earlier). I mentioned on Wednesday GBP was already the worst performing currency of the day and the week due to UK banks exposure to Ireland/Portugal/Spain (Barclays at GBP 94 bln). Adding to this is the BoEs report expressing more concern with the economy and financial system than in May and Nationwides consumer confidence index falling to 45 in November from 52, lowest since March 2009. GBPUSD HITS $1.5520 WEDNESDAY CHART TARGET http://chart.ly/yn4xak3 , a break of which to call up prelim $1.5420. Key target stands at $1.5275. This daily bearishness is also supported by the slow stochastics. EURGBP breaks above 200-day MA of 0.8520 but will need to CLOSE THE WEEK above this level to fuel further gains next week. MORE DETAILS ON MY JAN 23 FULL DAY COURSE Click here: http://www.ashraflaidi.com/products/workshop01/

WHEN ALL IS SAID & DONE, EURUSD' s November candle is the BIGGEST bearish monthly REVERSAL since the creation of the currency. There were only 3 of such major monthly reversals since Jan '99. Read carefully, I said bearish REVERSALS, i.e. an opposite move occuring at the TOP of the uptrend. And we all know what significant reversals mean (both bearish & bullish reversals).

US-GERMAN 10 YR YIELD SPREAD (US minus German) breaks further above its 200-day MA) for the 1st time in 5 months (see chart http://chart.ly/2hkhsyi ) The daily chart shows the spread has formed a possible Head & Shoulder formation, with the right shoulder around 45-50 bps, which means that a CLOSE ABOVE 50 bps would be necessary to invalidate this potentially bearish formation. Some may say a close only needs to be above 0.43-0.44 bps for the shoulder to be broken. So while the media emphasis is on soaring US bond yields, we must focus on the US-GE spread, whose daily correlation with EURUSD stands at -0.80. My bearishness on EURUSD remains intact since Nov 23 as all of the technical conditions have held up (55-WMA and Nov trendline). I first mentioned $1.27 in this video (after 4:00 mins) http://bit.ly/ePEvbf and highlighted the importance of bond yields on this Dec 1st CNBC interview http://bit.ly/hjjlZB

AUDUSD needed to close above parity to invalidate H&S pattern but failed to do so (despite touching parity) before quickly losing 150 pips on Wednesday. Hours ago, Aussie inflation expectations were reported to have slowed to 2.8% in Dec from 3.1% in Nov, positing their second consecutive monthly slowdown. Not exactly bulllish for AUDUSD. Eyeing preliminary 0.9750 for now. NZDUSD ALSO showing a case of H&S, whose falling neckline suggests prelim 0.7290. My $1;27 objective for EURUSD has not changed since Nov 23. See my IBEX35 chart on here http://tinyurl.com/3anw43g

*****I WILL BE OFFICIALLY STARTING my vacation on Thursday. Therefore, my updates on the site and twitter will be less frequent than usual.

USD MAY BE RALLYING BUT CAD IS FLYING after oil prices hit $88.60 following the biggest weekly draw in EIA crude stocks of 9.85 mln, the biggest drop in 9 years. Despite Euros 130pip slide and cables 200-pip damage, USDCAD slides to parity. FITCH UPGRADE of Canadian Imperial Bank of Commerce (CIBC) outlook to stable from negative on improved profitability and capitalization. EURCAD hits 10-day low at 1.3286 with possible extension to 1.3170s (in line with the current HotChart). USDJPY regains 84.20s after holding well above 55-day of 82.50s (seen in yesterdays videos). EURUSD seen testing $1.3190 before weeks end while GBPUSD SEEN TARGETTING $1.5520 and $1.5280 as seen in this chart http://chart.ly/yn4xak3

STERLING SANGRIA HANGOVER; GBP worst performing currency of the day and the week; Barclays exposure to Ireland/Portugal/Spain standing at 94 bln by end of Q3, and the PIIGS banking sector under more scrutiny, GBP could well become a substitute for EUR vis--vis safer haven currencies such as USD and JPY. Todays UK jobless data showed a 1.2K decline in Nov, less than the expected 3K, while the ILO measure of unemployment rose to a 7-month high of 7.9%. Cable downtrend remains intact after failing to regain i) the Nov trendline resistance ii) 55-day MA of $1.5890s. Interim support stands at $1.5520s, a break of which to call up $1.5275. This daily bearishness is also supported by the slow stochastics. EURGBP breaks above 200-day MA of 0.8520, so thorough close above 0.85 could pave the way to 0.8570. Keeping my long term bearishness intact as seen via the Jan trendline resistance.

EUROs LATEST DECLINE makes the transition from falling on rising US yields to falling on the latest credit rating warning, this time by Moodys (1h ago) placing Spain under review for a possible downgrade due to rising funding needs. Yesterdays announcement by S&P to place Belgium under review due to political indecision since June. US 10 Yr yields hit 3.50% in Tokyo, highest since May. 3.65% now stands as the 200-week MA, a technical measure last seen in October 2007. EURUSD ONCE AGAIN proves its inability to follow up on its gains as long as it fails to close above $1.3400. Tuesdays gravestone doji candle suggests 1.3170 is a possibility, especially if US Indus production data come show another upside surprise. EURGBP 2hr and 4hr charts showing suggesting a looming retest of 0.8420, with key support seen at 0.8360.

USD STABILIZES AS SOARING US 10 YR YIELDS yields hit a fresh 6-month high at 3.47%, blatantly ignoring the QE2 and increasingly leaning towards the fiscal-GDP construct that is driving bonds. The broadly positive Nov retail sales report was accompanied by upward revisions in Sept & Oct. *** US-German 10-year yield spread **** (US minus German 10 yr yields) hits 43 bps, the highest since August and breaking above its 200-day MA for the 1st time since July. EURUSD has yet to confirm Mondays rebound as it must maintain a close above $1.34 for a convincing break above the 55-week MA ($1.3380). This is a case of technical failure justifying faltering fundamentals (lack of definite Irish agreement, prolonged dissent regarding Eurobond issue among EU and Fitch talk of a downgrade of Belgiums AA+ rating in light of political uncertainty). EURUSD remains vulnerable to retesting $1.3250, followed by $1.30.

**** ASHRAF's VIDEO MARKET HIGHLIGHTS **** on #sterling, $EURUSD, Tankan, Pre FOMC, Norges, Riksbank http://bit.ly/gJ3aBj

Ashraf's interview earlier today on a CNBC panel today talking UK inflation, BoE & sterling : http://bit.ly/gFQw0P

As EURGBP extended rebound i called for GBPUSD short as a hedge to the short EURGBP. 1.5770 target hit but this could gradually extend to 1.5680 asd USD strength unfolds as result of strong retail sales.

ANOTHER CASE OF USD STRENGTH resulting from strong US retail sales. If EURUSD closes below $1.34, then EUR bears would grow in confidence that the break above $1.3460 was not Unsustainable.

*** ASHRAF Video Charts Analysis for Reuters Thomson **** on SEK, NOK and, USDNOK ahead of TOMORROW's NORGES & & RIKSBANK rate decisions. The Riksbank is expected to raise rates by 25-bps to 1.25% while the Norges seen unchanged at 2.00%. But NOK is seen as the preferred currency : http://link.reuters.com/cex99q

EURUSD MAKES A CLEAR BREAK above its Nov trendline resistance and its 55-week MA as it hits $1.3470s on a combination of broad EUR buying and deepening USD weakness. Yesterday's warning by Moodys about revising US AAA rating following the latest tax stimulus acted as a catalyst to broad USD selling. Todays FOMC announcement may be quite uneventful in that it will confirm the Feds $600 bln purchase program but may be sufficiently eventful in adding to USD weakness. US NOV RETAIL SALES could weel add to USD weakness if they come in lower than 0.7%. Watch Sales ex-food ex gasoline for the more durable market impact. UK inflation rose to a 6-month high of 3.3% but unable to stage any decent gains even against the deteriorating USD. GBPUSD edging over its 55-day MA of $1.5875, coinciding with the 50% retracement of its $1.6296-$1.5490 decline at $1.5895. EURGBP seen capped at 0.85. WATCH Ashraf today on CNBC-Europe at 11:05 GMT

CHF is the BEST PERFORMER OF THE DAY, closely followed by NOK and EUR as the data vacuum paves the way for extended equity gains to the favour of all commodity currencies. AUDUSD testing the right shoulder resistance near 0.9950-60s. Using the left shoulder high of 0.9980-90, it would be inaccurate to call the Head&Shoulder formation invalidated without a close above parity. EURUSD testing the 1.3380 trendline resistance extending from the Nov 4 high and thru Nov 5. 1.3385-90 also coincides with the 55-week MA. Therefore the euros 7 week downtrend would only reconsidered if we see a close ABOVE $1.34. Ashraf's ARABIC Interview with CNBC ARABIA http://bit.ly/gnpH2I

A SPECIAL EDITION of the Video Markets Analysis, covering equities, indices, FX, commodities and yields into 2011: http://bit.ly/gVKYv0

A CHARTS LOOK AT THAT EUR-SPX divergence http://chart.ly/3qujons The euros decline despite rising S&P500 is growing similar to the divergence prevailing in Jan-April (see 1st red circle) when EURUSD fell 15% and S&P500, Dow-30 and FTSE-100 rose 16%-19%. Could we expect further EUR declines to be followed by a catch-down in the S&P500?