Intraday Market Thoughts Archives

Since, June 30, USDCAD's CORRELATION w/ S&P500 soared to -0.83, which is (in absolute terms) higher than any daily correlation b/ween major forex pairs and equities (even higher than Aussie and Kiwi pairs). Loonies oil-fuelled bounce shrugs the mostly flat levels in equities as crude regains $63, attempting to regain 64.0938% retracement from 73.5 high. USDCAD chart http://twitpic.com/anori shows a consolidation at the 1.1150s, which is the 61.8% retracement of the 6-week rally from the June low. The fact that 1.1150 held up over the last 3 days suggests relevant stabilization, but further testing is awaited next week as equity bulls attempt to maintain their above the key 8,600 and 930 levels.

Yen weakness broadens (even vs USD) while USD weakens against non-USD as all major US bank earnings beat expectations while US housing starts printed building permits rose beyond forecasts (starts +3.6% to 582K, permits +8.7% to 563K. The econ data encourages the notion of stabilizing housing market. Multi family housing, however, did not share the strength seen in single family units. Bond yields push higher (10 yr above 3.60%) as stocks push lower, but the strength in oil (62.60s) suggests prolonged robustness in risk appetite, hence renewed selloff in USD. USDCAD supported at the 1.1140 fibonacci, but facing resistance at 1.1230,

European bourses once again attempt in replicating Wall Streets Thursday rally after the Nikkei-225 delivered a more reserved 0.5% gain. The late Wall St rally was attributed to remarks by NYU Prof. Roubini saying the worst in the US economy was over only for Roubini to issue a statement indicating he was taken out of context and he still didnt see growth before end of 2009. The hotel bombings in Jakarta have prompted USD off its lows, further dragging EUR and GBP from their highs after the failure of $1.42 and $1.65 respectively. CIT continues to weigh on the markets. USDJPY resistance at 94.40 still stands. Earnings from Ciitigroup, BoA and GE all due today.

Ashraf's video charts presentation on S&P500, USDJPY and EURUSD. http://bit.ly/X3n8w, carried out on Wednesday prior to the US opening bell. On USDJPY and EURUSD http://bit.ly/X3n8w

Equity futures extend gains after US jobless claims show greater than exp decline to 522K from 569K, while 4-week mov avg is slashed to 584K, showing first sub-600K reading since Feb. But such positive economic news is pushing up S&P500 futures to only 929 and Dow futs. are only +12 pts, while bond yields are in fact down to 3.55% from yesterdays high of 3.63%. EURUSD did break above 1.4120 to 1.4165, now eyeing $1.4198 high-- 76% retracement of the $1.4338-$1.3744 decline. While the data are negative for both USD and JPY, USDJPY remains below 93.80s from earlier session high of 94.44. JOBLESS CLAIMS CHART http://twitpic.com/aixn7

Markets turning to cautious mode as the CIT news dampens confidence and markets retreat on the defensive ahead of the JPMs Q2 earnings (10:30 GMT, 6:30 EST) seen at 5 cents/share, but higher end leaning as high as 9 cents/share. US jobless claims (12:30 GMT) seen at 553K from previous 565K, which could further elevate risk appetite at expense of USD and JPY. But EURUSD still failing to regain the $1.4120 trend line resistance as is AUDUSD failing to regain the $0.8090s http://twitpic.com/ah25r.

CIT, the struggling lender to thousands of small businesses announces that all discussions with govt agencies have ceased, further escalating chances of its bankruptcy. The news is dragging stock futures from their explosive Wednesday session, which saw the testing of key resistance levels in the S&P and Dow at 930 and 8,600. The CIT news is supporting USD and JPY off their lows vs all other main currencies, but such a retracement may be limited ahead of Thursdays earnings from Google and JPM and the al-important figures from BoA and Citigroup on Friday. US jobless will also be seen whether they remained below 600K after their sharp 52K decline, which was largely attributed to July 4th holiday. SEE CHARTS ON AUDUSD & EM http://twitpic.com/ah25r AND http://twitpic.com/ah3e6

Gold and bond yields extend their positive correlation as they both exploit the dollars latest damage. Better than exp US data boosted bond yields while improved run-up in appetite lifted gold as well as rest of high yielding currencies. The 3.26% low in yields is higher than our predicted 3.15%. A breach above the 3.55% resistance in yields boosts chances of a protracted climb towards 3.64%. More likelihood in gold extending its gains towards 960s in the event of a close above 945.

Neutral US CPI (w/in expectations) & better than exp Empire & IndusProd figures provide the best of both worlds for risk trades against USD and JPY. EUR continues to display less volatility vs. USD than other risk currencies such as AUD, NZD and CAD but has yet to breack above interim target of $1.4120. AUD & NZD showing stellar performacne vs USD and JPY. Trade updates on http://twitter.com/alaidi

European equities rallying despite the late session retreat in the Nikkei in the aftermath of stronger than exp earnings from Intel. FX positioned towards risk at the expense of USD and JPY with USDJPY looking to test the 93.90 trend line resistance extending from the 97 high. NZDJPY and AUDJPY favoured to eke out additional gains towards 60.50s and 75.20s. CAUTION must be exercised ahead of the days US economic releases especially if US CPI regains the 1.8% y/y or higher, in which case could weigh on overall appetite. An ideal scenario for risk appetite would be a softer CPI (12:30 GMT) and stronger than expected Empire manufacturing survey (12:30 GMT) (exp -5 from -9) as well as better than exp industrial production (13:15) (exp -0.6% from -1.1%). S&P HotCharts updated.

S&P Hotchart updated. As AUDNZD gradually retreats back towards the 1.24, look into exploiting strengthening NZD by applying fresh shorts in NZDUSD as stocks struggle to regain pre-Goldman Sachs earnings gains. Intels Q2 earnings after the bell (exp 8 cts/share) may impact the market, but any additional gains in NZDUSD towards 0.6370s are seen capped at 0.6400s. Same goes for Aussie being an attractive short near 0.7920 trend line resistance for interim target at 0.7850, followed by 0.7780s.

How high is the right shoulder on the S&P500? Better than expected Q2 earnings from Goldman Sachs at failed to sustain equity futures at their highs as higher than expected PPI was accompanied by a rise in retail saes that was largely driven by sales of autos and gasoline. S&P500 did hold above the neckline of 877 (never closed below it) as well as held above the declining 200-day MA (878). Bulls attempt to make their case by eyeing the 55-day MA, currently at 908. June 11 trend line resistance stands at 916, while the right shoulder (resistance) is held at 928. Recall the recent failure of USDJPY at the 97 right shoulder.

Markets await Goldman's Q2 earnings (12:30 GMT) exp at $3.48/share from $4.58/share a year ago. High end of expectations stands around $4.58 /share, but Meredith Whitneys bullish forecast is at $4.65. Also due 12:30 GMT, US June retail sales and June PPI , with sales exp +0.4% and ex autos exp +0.5%). PPI seen +0.9% from +0.2%, with core seen +0.1% from -0.1%. JPY sold off across the board as financials lead sentiment. USDJPY capped at 93.60s, USDCAD breaks below 6-week trend line support of 1.1460, coming up to 55-day MA of 1.1444.

Tuesday's release of US retail sales, UK CPI and Germanys ZEW should add some macrodata to the earnings calendar, as emphasis turns to the consumer. Last week's disappointing consumer confidence from the Univ of Michigan followed an equally dismal survey from the Conference Board. As disinflation returns to the fore, so will the topic of quantitative easing and whether the Fed and BoE will replenish their asset purchases beyond their existing program, due to end this month. UK CPI expected at 1.8% from 2.2%, which would provoke further deflationary talk as well as GBP pressure. Aussie NAB Business Confidence survey for June due at 1:30 am GMT

FX traders require more of a convincing upturn in risk appetite to allow any substantial rebound in yen pairs (USDJPY above 92.90s, EURJPY above 131.50 and GBPJPY above 151.00). Similarly, keep an eye on US 10-year yields (3.20% support) and oil prices ($57.35). The weeks array of US banking earnings could will unveil the usual 3-way juggling involving earnings, expectations and guidance. Oil volatility continues to influence equities, with any fresh declines succeeding in dragging stocks lower. $57.90 per barrel is the 38% retracement of the 33.05 -73.25 rally.

Ashraf's interview on CNBC's World Wide Exchange earlier this morning discussing, FX, US earnings, oil and bonds. http://www.cnbc.com/id/15840232?video=1180716571&play=1

Another case of aggressive sell-off in Asia despite flat US sessions, which further highlights the dubious late session gains in US markets. Yen shrugs the dissolution of Japans lower House of Representatives and call for general elections on Aug. 30. Japan is no stranger to political disappointments and neither is the Japanese currency. US earnings season as well as US industrial production and retail sales will test the fragile consolidation of US equity indices. We have yet to see a convincing close below 877 in the S&P & 8,940 in the Dow. Watch Ashraf guest hosting CNBC's World Wide Exchange at 9 am GMT (10 am BST)