Intraday Market Thoughts Archives

Risk rally sees no follow-through; AUD weakens; German PPI flat; Eurozone current and trade surpluses rise; Periphery yields. Attention turns to Canadian CPI and University of Michigan consumer confidence. 1 EURUSD, AUDJPY and oil hit all their targets. See more on rest of Premium Insights below.

Yesterday's risk rally that was attributed to Merkel's comments backing the ECB stalled and the greenback was able to recover a portion of its losses against most majors. The common currency continues to trade near session highs around 1.2360 and USDJPY pushed higher to 79.49. European equities are gaining about 0.3% and the relative strength winner is USD while AUD and NZD lag.

AUDUSD trades weaker around 1.0440, mainly on the back of sharp losses that the Aussie is experiencing on the crosses, especially against EUR and CAD.

On the data front we learned that German PPI was flat in July from previous -0.4% m/m (0.9% from 1.6% y/y) and that Eurozone current account surplus rose to EUR 12.7 bln in June from 10.3 bln in May. Trade surplus increased to EUR 14.9 bln from 7.1 bln.

Spanish and Italian yields moved slightly lower and are trading around 6.44% and 5.78% respectively.

The NY session begins at 8:30 am ET with Canadian CPI that is expected to rise 0.2% from -0.4% m/m and keep steady at 1.5% y/y. Core CPI is projected to also rise 0.2% from -0.4% m/m and to remain at 2.0% y/y.

US reports are limited to the University of Michigan consumer confidence at 9:55 am that is expected to increase marginally in August to 72.5 from previous 72.3 and to leading indicators at 10:00 am that are seen at 0.2% in July from previous 0.3% decline.

1 of 2 EURUSD Premium longs hit their final and so did oil and AUDJPY, while USDJPY. 1 GBPUSD, EURUSD, both gold and CADJPY are all in progress, while the other GBPUSD was stopped out Direct Access to these Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=675 Non subscribers can click here: http://ashraflaidi.com/products/sub01

More signs that Europe is readying a plan to stabilize Spain led to a rally in risk assets. The euro was the best performer while the yen lagged. The Asia-Pacific weeks winds down with a quiet data-day. 1 EURUSD, AUDJPY and oil hit all their targets. See rest of Premium Insights below.

The euro climbed nearly a cent in US trading to 1.2373 on speculation that the ECB will unleash a substantial bond buying program as part of a package to be delivered when Spain calls on the EFSF for aid.

The gains came after Merkel indicated Germany is willing to do whatever it takes to preserve the euro and is on board with ECB conditions designed to encourage Spanish reforms. Hopes for ECB bond buying were reflected in a one-month low in Spanish 10-year yields and a 5.6% rally in Spanish stocks.

At the same time, the US dollar weakened on QE speculation after soft readings on the Philly Fed and jobless claims. The regional manufacturing indicator was at -7.1 compared to -5.0 expected and claims were fractionally higher than expected at 366K.

Data on housing was mixed with starts down 1.1% vs -0.5% but building permits at a 4-year high.

Oil was in focus as it rose to the highest since May, at $97.70/barrel. The White House leaked a story saying it was dusting off a plan to release strategic reserves but the market quickly judged such a move unlikely with the election looming.

The lone item of note in the Asia-Pacific session is a speech from the Feds Kocherlakota. He will deliver the same speech as yesterday but it taking questions. In his comments yesterday he did not reveal any tendency toward or away from QE3. In all likelihood, it will be more of the same today but there is always the chance he could offer a hint.

1 of 2 EURUSD Premium longs hit their final and so did oil and AUDJPY, while USDJPY. 1 GBPUSD, EURUSD, both gold and CADJPY are all in progress, while the other GBPUSD was stopped out Direct Access to these Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=675 Non subscribers can clikc here: http://ashraflaidi.com/products/sub01

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UK retail sales rose; Gold demand declined; Eurozone CPI steady; Swiss ZEW improved. US housing starts fell and jobless claims edged up. Philly Fed index is next. Latest Premium Insights saw EURUSD, USDJPY and US crude oil nearing targets, while AUDJPY and 1 cable all in progress.

GBP pushed higher after UK retail sales bested expectations. Annual sales remained at 3.3% in July vs. expectation of a fall to 2%. Core sales rose 2.8% from previous 1.6%. Monthly figures showed a decline but it was smaller than expected plus previous results were revised sharply higher. However, the positive data over the past two days is unlikely to change the view that the BOE could ease further. GBPUSD pushed from 1.5640s to 1.5707. It currently trades around 1.5690.

The World Gold Council reported today that global demand in Q2 fell 7% compared to Q2 2011. Imports to India dropped over 50% while imports to China declined 7%. The ongoing Eurozone crises led to 15% increase in demand from retail investors while the official sector demand more than doubled and reached a record high of 157.5 tonne.

Other reports showed that Eurozone CPI remained steady for the third month in a row in July at 2.4% but core CPI rose to 1.7% from previous 1.6% on annual basis and that Swiss ZEW economic expectations index improved in August to -33.3 from previous -42.5.

USDJPY extending gains, EURUSD, USDJPY, AUDJPY and 1 GBPUSD in progress. Crude oil is 5 cents away from its final target while the other cable play is stopped out. Direct Access to these Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=675 Non subscribers can clikc here: http://ashraflaidi.com/products/sub01

Last week's short EURUSD bias in the Premium Insights went into effect immediately after it was issued but the long leg has yet to hit the final target. Recognizing the ongoing tug-of-war between the bulls and bears in this pair, we will stick with the current positioning and issue a new trading idea. Those who have not taken the long trade may consider a short near 1.2380s, with stop above 1.2410. There are 4 new Premium trades, 1 in progress and 2 cancelled. Direct Access to these Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=675 Non subscribers can clikc here: http://ashraflaidi.com/products/sub01

The dollar continued to march higher despite surprisingly low inflation and a soft regional manufacturing index. The Canadian dollar was the top performer for the second day and the euro once again lagged. Comments from the RBAs Debelle and the Feds Kocherlakota will be highlights of the Asia-Pacific session. Latest Premium Insights will be updated tonight.

The Treasury market is backing away from QE3, at least in the near term, as 10-year yields climbed above 1.80%. Bill Gross talked down bonds yesterday and Goldman Sachs said QE3 is now unlikely before year-end.

Anti-QE sentiment helped push USD/JPY above 79.00 for the first time in a month. The gains were scaled back to 78.60 after a round of soft economic data but the climb later resumed.

The data included the CPI at 1.4% y/y compared to 1.6% expected. The Empire Fed also hit an 11-month low at -5.85, falling well short of the +7 consensus. Industrial production was slightly above expectations but downward revisions wiped out the gain.

The Australian dollar lifted back above 1.05 after Chinese state radio carried comments attributed to Premier Wen. He said falling consumer inflation gives the government more room to intervene. The comments also helped USD/CAD to a three-month low.

Overall, markets remain quiet and the WSJ reported that average stock market trading volumes in August are the lowest in more than 5 years. The S&P 500 closed nearly unchanged for the sixth straight day.

Comments from the Feds Kocherlakota at 2200 GMT may get more attention than usual due to the lack of Fedspeak before the Jackson Hall symposium at the end of the month. Pianalto and Lockhart have joined Willliams and Rosengren in the dovish camp. Hint that Kocherlakota would support QE3 bring September back into play.

New Zealand job advertisements will also be released at 2200 GMT. At 0100 GMT, Australia consumer inflation expectations will be released.

The session wraps up with comments from the RBAs Debelle at 0545 GMT.

Latest Premium Insight focuses on the relationship between USD and JPY and EURJPY. Direct access is found here: http://ashraflaidi.com/products/sub01/access/?a=674 To Subscribe, please click here: http://ashraflaidi.com/products/sub01/

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USD/JPY rose to the highest in nearly a month after July US retail sales data beat estimates. On the day, the Canadian dollar was the best performer while the yen lagged. Australian reports on consumer confidence and wages are the highlight of Asia-Pacific trading. Latest Premium Insight focuses on the relationship between USD and JPY and EURJPY.

US retail sales climbed 0.8% in July compared to the +0.3% reading expected. The gains were broad based unaffected by volatile auto and gas figures. The impact was slightly negated by a downward revision to June figures to -0.7% from -0.5% but markets were encouraged.

The US dollar jumped to 78.94 against the yen the highest since mid-July. The Canadian dollar also benefitted from its proximity to the US.

In Europe, rumors circulated that Spain would ask for a bank bailout tranche this week but that seems unlikely with a holiday on Wednesday. The EUs Rehn also said Spain had not asked for EFSF funds but that the funding-strained country was keeping an open mind.

Second-tier data painted a less-optimistic picture. IBD/TIPP US optimism fell to the lowest since December and weekly retail sales data from Redbook and ICSC declined.

Broad US dollar strength was the theme of the session as the euro, Australian dollar and gold all declined. Stocks closed slightly higher.

The focus in Asia shifts to Australian consumer confidence from Westpac at 0030 GMT. The July survey climbed 3.7% to 99.1. An hour late, Australian releases the wage cost index for the second quarter. A 3.5% y/y rise is expected.

Latest Premium Insight focuses on the relationship between USD and JPY and EURJPY. Direct access is found here: http://ashraflaidi.com/products/sub01/access/?a=674 To Subscribe, please click here: http://ashraflaidi.com/products/sub01/

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Many of you have figured out by now that both USD and JPY underperform other currencies during improved risk appetite (rising equities) while outperform during risk aversion. Yet, one aspect remaining of relative mystery to traders has been the USDJPY relationship. Since both USD and JPY behave similarly vs. others, how do they behave against one another? Find out in our latest Premium Insights http://ashraflaidi.com/products/sub01/access/?a=674 To Subscriver, please click here: http://ashraflaidi.com/products/sub01/

German GDP slows and ZEW declines; Eurozone GDP contracts but ZEW improves; Eurozone industrial production drops; UK CPI higher. The market awaits retails sales, PPI and business inventories. For the latest on the Premium Insights, please see below.

The greenback has been trading within a narrow range in the ongoing session. European equity indices are gaining around 0.5%.

German Q2 GDP came in above expectations but still slowed to 0.3% from 0.5% q/q and to 0.5% from 1.7% y/y. German ZEW economic sentiment declined further to -25.5 in August from July's -19.6 which is the lowest level since December 2011. EURUSD started to move lower but a report that the German constitutional court confirmed that the ESM decision is still planned for September 12th despite the claim that was brought forward at the European court in Luxemburg helped to prevent additional losses.

Despite German growth, Eurozone data mainly disappointed as Q2 quarterly GDP declined 0.2% from a flat reading in Q1 which translates to an annual

decline of 0.4%. Industrial production dropped 0.6% in June after upwardly revised May's 0.9% so the silver lining was the ZEW economic sentiment index that improved slightly in August to -21.2 from July's -22.3. EURUSD trades around 1.2360.

UK CPI unexpectedly rose 2.6% in July from 2.4% while the core figure rose 2.3% from 2.1%. Prices were driven by transportation cost, clothing and footwear. This is the first increase after three months of declines but it is unlikely to change the downtrend in inflation. GBPUSD continues to struggle at the 1.57 handle.

In other news; Swiss PPI fell 0.3% in July, the same pace of a decline seen in June and LCH Clearnet announced that it has raised margin for some Spanish and Italian bonds.

The US session begins at 8:30 am ET with retail sales that are expected to rise 0.3% in July after falling 0.5% in June (core sales are seen at 0.4% from previous -0.4%). July PPI that is also due at 8:30 am is anticipated to slow to 0.5% from 0.7% while core PPI should ease to 2.3% from 2.6% on annual basis.

Business inventories at 10:00 am are seen at 0.2% in June from 0.3% in May.

1 EURUSD long in progress while the four gold and oil trades remain in progress. For direct access click here: http://ashraflaidi.com/products/sub01/access/?a=673 To subscribe, pls click here: http://ashraflaidi.com/products/sub01/

A fresh legal challenge threatens to further delay ratification of Europes permanent bailout facility. The euro stumbled in US trading but was still the top performer on the day while AUD lagged. The Asia-Pacific session is somewhat busy with the BOJ minutes and New Zealand retail sales. See Ashrafs latest OIL TECHNICALS on Daily, Weekly & Monthly below.

The German constitutional court is set to deliver a draft ruling on an ESM lawsuit on September 12 but that timeline may be stretched. The new claim says the court cannot make a decision until a similar case is settled in Luxembourg.

The euro climbed as high as 1.2375 in early US trading but faded back to 1.2325 on the lawsuit, which makes Europe vulnerable to a funding crunch before the funds come online. A margin hike on Spanish and Italian debt also weighed.

Overall, it was a quiet session with the main moves coming in EUR/AUD, which broke a 12-week downtrend and posted its largest one-day gain since May.

ECB data showed that the central bank did not buy any bonds for the 22nd consecutive week. Noyer, last week, said they could take action very soon but weekend comments from the ECBs Coene said the governing council is still at odds about when to re-activate the program.

Ashrafs LATEST ON DAILY, WEEKLY & MONTHLY TECHNICALS, http://www.cityindex.co.uk/market-analysis/ashraf-laidi-blog.aspx

The upcoming session starts with New Zealand second quarter retail sales at 2245 GMT. Excluding inflation, sales are expected to climb 0.7%.

At 0130 GMT, the focus shifts to Australia and the NAB business conditions survey. The prior reading was -1.

The progress report from Wednesdays Premium Insights includes 1 EURUSD short hitting all targets, the other in progress. 1 GBPUSD long hit all targets, the other stopped out. 1 CADJPY hit all, other unfilled. AUDJPY hit all. AUDUSD stopped out by 3 pips. Both Gold and oil trades are in progress. Direct access here: http://ashraflaidi.com/products/sub01/access/?a=673 To subscribe, pls click here: http://ashraflaidi.com/products/sub01/

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JPY GDP slowed; Greek GDP shrank further; German WPI and French current account. Eurozone issuance for this week; Periphery yields marginally lower. 4 of Wednesdays Premium Insights trades hit all targets, with 2 stopped out and 5 in progress. See more info below.

JPY crosses largely ignored weaker than expected Japanese growth figures after Q2 GDP slowed to 0.3% from 1.3% q/q and to 1.4% from 5.5% y/y. On the positive side, this was fourth quarterly growth in a row and both quarterly and annual data was revised higher. USDJPY trades slightly weaker but still holds above the key short term support around 78.00.

USD Index shows a disconcerting pattern of lower highs and lower lows after failing to regain its 55 DMA. S&P500 is on its way to its 6th consecutive daily gain, the longest winning streak since March 2010.

The frustration with Greece seems to be growing according to a report published on Reuters. German deputy parliamentary leader Michael Fuchs said that Germany would veto further aid if Greece would not meet the conditions of the bailout. Meanwhile, Greek Q2 GDP contracted 6.2%, which is marginally better than 6.5% contraction in Q1.

European data calendar was light today with only second tier data. German wholesale price index rose in July 0.3% from -1.1% m/m which translates to 2% from 1.1% y/y and French current account deficit widened to EUR 4.9 bln in June from previous 4.0 bln.

According to MNI, Eurozone sovereign t-bill issuance is expected to rise to EUR 25 bln this week, more than double issued last week. Germany and Italy were the first to come to the market. Germany sold EUR 3.77 bln vs. EUR 4 bln target of 6 month bill with average yield -0.0499% from previous -0.0344% and cover declined to 1.3 from 1.7. Meanwhile, Italy reached a full target as it sold EUR 8 bln worth of 12 month BOT. The average yield rose slightly to 2.767% from 2.697% but cover improved to 1.69 from 1.55. Decent result helped to underpin the common currency that broke above the resistance and trades firmly above the 1.23 handle.

Spanish and Italian 10 year yields declined slightly to 6.83% and 5.86% respectively.

There are no US reports due during the US session.

In Wednesdays Premium Insights, 1 EURUSD short hit all targets, the other in progress. 1 GBPUSD long hit all targets, the other stopped out. 1 CADJPY hit all, other unfilled. AUDJPY hit all. AUDUSD stopped out by 3 pips. Both Gold and oil trades are in progress. Direct access here: http://ashraflaidi.com/products/sub01/access/?a=673 To subscribe, pls click here: http://ashraflaidi.com/products/sub01/