Intraday Market Thoughts Archives

Since I'm currently away in Paris for an expo, the only updates Im posting are on twitter. http://twitter.com/alaidi

I just posted that story in Ireland from the Independent that it is PERILOUSLY CLOSE to the IMF

More updates on my twitter page @alaidi

Ashraf

SP500 moves further above its 200-day MA of 1116, with a weekly close above it signifies the potential to recapture the 1138 resistance-61.8% retracement of the decline from the 1220 high to the 1006 low. USD losing across the board, except for against the JPY, which remains weak against all currencies. 85.90 is the 55-day MA last broken in June, but given the weekly stochastics we could see renewed run-up next week. The pair shall focus on todays Univ of Mich sentiment survey, with a figure above 70 should help maintain USDX underpinned above 85.50. $USDCHF failed 1.02, eying 1.0055 trendline support.

SWISS NATIONAL BANK SAW WHAT BANK OF JAPAN DID and left rates unchanged as well as issuing an unexpectedly dovish statement. The SNB may not have intervened, but it did not need to do so when it downgraded its growth and inflation forecasts. Evidently, franc dropped sharply, especially against EUR as some traders were being cautious for a rate HIKE as was predicted by UBS. Looking ahead, I still see fresh DOWNside in USDCHF after any gains being capped at 1.0250s. CHF shall continue to act as the preferred currency during Eurozone debt concerns and/or the next round of treasury purchases by the Fed. If you think Japans trade surplus account for 3% of GDP is solid, how about Switzerland's trade surplus account for 11% of GDP. USDCHF sub parity is to come back & so will 0.9860.

Ashraf is in Paris, speaking at the Annual Salon du Trading Friday & Saturday http://www.salonat.com/

CHINA-JAPAN FOREX BATTLE. Wednesday's powerful intervention (JPY 2 trln worth of currency selling) may be a loud warning shot to Beijing given the record buying of Japanese Government Bonds from China. Cynics (possibly realists) could reason that China aims at hampering Japan’s recovery by keeping the yen excessively strong, while profiting along the way (via accumulating appreciating yen and gradually reducing exposure to depreciating US dollars). After all, the race for the 2nd biggest economy remains in close contention between China and Japan. Japans finance minister Noda has already stated I dont know the true intention, referring to Chinas JPY 583 bln purchases of JGBs in July after JPY 457 bln of purchases in June. Why would the Japanese Finance Minister raise suspicions about a nation purchasing bonds of the 3rd largest economy. The post-intervention statements from Tokyo regarding its resolve to pursue further action sound like a warning shot to Beijings yen-purchases as opposed to the average currency speculator. HOW WOULD BEIJING REACT? It could do so by tightening monetary policy via a rate hike and not merely raising the reserve requirement especially-- after August CPI jumped to 3.5%. A PBOC tightening would have TWO OBJECTIVES; 1) address Washingtons currency pressure on China. Followers of US-China currency diplomacy RECALL THAT BEIJING HAS USUALLY RESPONDED to mounting US FX pressures by tightening policy (either via raising rates or the reserve requirements on the basis that it is moving towards a market-based mechanism of monetary policy) instead of via currency revaluation; 2) A policy tightening would upset the risk trade (especially as S&P500 struggles near the 1130 resistance) and lead to fresh JPY strengthening, which would work in the favour of Chinas growing yen holdings.

HOW HIGH USDJPY ? USDJPY faces a 4-month trendline resistance at 85.90s, which coincides with the 55-day MA and the 23.6% retracement of the decline from the same May high. Technically, 1-day gains in USDJPY of more than 2.5% have usually seen follow-up buying, which raises chances of seeing an 87.50s print this month (capped under 88), with the help of neutral to positive US data. It is important for the pair to close above 86.00 to draw more sustainable bids. CONSIDERING YEN SEASONALS and the inability for global BOND YIELDS to undo-their multi-month downward trendlines, I see a gradual pullback towards 81 and 80 later in the year. As for the seasonals, the Japanese currency has usually appreciated in August/September ahead of the end of the first half of the fiscal year (Sep 30), which usually involves repatriation by Japanese corporates and life insurers into the end of the month. RBNZ left held rates unchanged at 3% as expected but the statement was more dovish than expected, which weighs on NZD across the board.EURNZD rallies +120 pips as per Pre-RBNZ tweet, daily stochastics 1.8020s.

Ashraf's BNN Interview on today's yen intervention, how long will it last, how effective will it be and more

http://bit.ly/amC1qy

Ashrafs Video Analysis for Thomson/Reuters on todays FX intervention and the relationship between USDJPY & the US Fed Funds Rate http://bit.ly/aeOC32

JAPAN INTERVENES in FX markets for the first time since March 2004, acting in solo yen-selling. History is against the Japanese authorities as central bank interventions alone have proven to never completely stave off speculation. Japans last intervention campaign lasted for as long as 2 years and the only reason it ended was because the Fed began signalling interest rate HIKES in March-April 2004, which eventually materialized in June of that year. This is by far not the case today, as the Fed is expected to add a fresh dosage of QE as early as next weeks FOMC meeting. Todays intervention aims at slowing the yens rise will trigger additional yen selling against the currencies most likely to benefit from anticipation of Fed quantitative easing; CADJPY 83.90s and AUDJPY 80.80. USDJPY appears to face 4-month trendline resistance at 85.80s, while GBPJPY faces interim resistance at 132.50-55. We could well see a fresh mix of verbal and real intervention in subsequent days, but the policy realities suggest that Japan would have to intervene for months to successfuly stave off unwated appreciation of its currency.

ASHRAF IN PARIS: Ashraf will be presenting at the Paris Expo this coming Fri-Sun http://www.salonat.com/, discussing the Mult-FX approach to gold as well as intermarket technicals http://www.salonat.com/

THE US DOLLAR IS QEd; this may turn into the latest 2-letter dirty word for the US currency as Goldman Sachs reiterates its call for quantitative easing being inevitable this year; with as much as $1 trillion in fresh purchases of US Treasuries by the Fed seen ahead. Credit Suisse had already predicted $500-700 bln in purchases before year-end. But lets not blamed it all on QE for the Swiss Franc is rallying on UBS reports of an SNB rate hike this Thursday (to stem inflation & normalize policy); CAD rallying on positive industrial capacity figures (announced on twitter.com/alaidi) and JPY gaining on Ozawa defeat. GOLD HITS NEW RECORD at $1271 and silver surges past $20.30, as momentum traders target the March 2008 high of $21.30 which has yet to be hit. I still $1330 for gold this year, while calling for $23.30-70 for silver. USDCHF rebound seen capped at 0.9980s for now as traders eye the 0.9870s. USDCAD resumes its fall since the US jobs report (2 Fridays ago) triggered the 1.0570s failure in USDCAD. Use the ARCHIVES CAPABILITY of the IMTS to read prev entries. Going as far as 2 years ago.

The 0.4% rise in US retail sales coupled with the 0.6% recovery in core sales leads to a muted reaction in risk appetite, but FX traders are capitalizing via long CAD due to positive internal CAD dynamics and positive spillover from any US figures (see below for more CAD). Last Friday's IMT mentioned 1.0250 im USDCAD, which has been hit today. Further downside seen stabilzing near 1.0238--76% retracement of the gains from the 1.0105 low to the 1.0668 high. Buyers on the dip may start emerging at 1.0230-20 likely running into 1.0320 as the new barrier.

KAN DEFEATS OZAWA to retain premiership of Japans DPJ. USDJPY hits fresh 15-year lows at 83.26 as the defeated Ozawa was a vocal proponent of yen-selling intervention. This is Japans 3rd Prime Minister w/in a year. Meanwhile, markets continue to ignore Japans Fin Min Nodas pronouncements about readiness to intervene in FX and that rapid prolonged yen rise is bad for economy. 80 USDJPY remains in focus, with 79.20s a viable target for as early as October. Any USDJPY rebound is seen capped near 84.20. $AUDJPY proving unable to follow-up above 78 despite soaring AUDUSD. EURO AWAITS 9 am release (10 BST) of ZEW survey. Economic Sentiment index seen falling to 10 from 14 but Current Conditions seen at 48-49 from 44.3 EURUSD seen testing 12920s as USD weakness goes from bad to worse. USDCHF drops to 1.0022 supporting my reiterations of CHF strength from fundamental stand points (see prev tweets). GBP awaits CPI while broadening losses after poor RICS house price figures (-32 from -8). EURGBP seen capped near 0.84. FOLLW ME ON TWITETR FOR MORE FREQUENT INSIGHTS & ANALYSIS http://twitter.com/alaidi

*** 6870 followers *** 12,516 tweets/updates *** 95% tweets relevant to the market. **** http://twitter.com/alaidi

FOR MORE FREQUENT INSIGHTS & ANALYSIS follow me on TWITTER at http://twitter.com/alaidi

6870 followers

12,516 tweets/updates

and 95% relevant to the market.

http://twitter.com/alaidi

KAN-OZAWA RUN OFF tomorrow will be closely watched by yen traders. The DPJ presidential election will be decided tomorrow, where voters include Party representatives in Japanese Diet (parliament) as well as local assembly members. Former PM Hatoyama is now supporting Ozawa against incumbent Kan. Latest polls indicate a very close race after Kan was in front last week. Ozawa, a vocal critic of the US has expressed his support for outright FX intervention to counter excessive yen strength. Thus, the immediate reaction to an Ozawa win would be seen as yen-negative, but do not forget that September is the end of the 1st half of the Japanese fiscal year, which usually involves repatriation by Japanese corporates and life insurers into the end of the month. Although USD weakness held into US afternoon trade, JPY made a sharp turnaround ahead of Wednesdays presidential race. EURJPY vulnerable to 107.20, but daily EURJPY oscillators show a viable push towards 108.60s. FOR MORE FREQUENT INSIGHTS & ANALYSIS follow me on TWITTER at http://twitter.com/alaidi

CHINESE YUAN HITS NEW RECORD HIGH at 6.75 as Beijing seeks to avoid new currency confrontations with Washington. The stronger than expected 14% increase in Chinas August industrial production validates prolonged yuan strengthening. US Congress may move a step closer to enacting legislation forcing Beijing to revalue. Strong Chinese data and new highs in the Chinese currency are synonymous with rising equities. CAD extends its run-up, focusing on 1.0270, followed by 1.0220s. USDCHF broke below 1.0150 trendline support, now acting as a med term resistance, w shorts eyeing 1.0090. AUDJPY gapped up breaks above 78 trendline resistance; a daily close above 78.20 would pave the way for 78.80s.

The CHINA-EUROZONE DUO is due to make a comeback to the markets after a 4-5 month absence. China was worried about excessive lending, now has inflation added to the mix. Eurozone was worried Spain and Portugal, now has Ireland and Greece back to the mix. Recall the period elapsing Feb-May when markets alternated their attention span between credit downgrades of the PIIGS and Chinese tightening measures (hiking reserve requirements and clamping down on bank lending). Saturdays release of China August CPI showed a 22-mth high of 3.5% y/y, further placing deposit rates deep into real negative territory. Rising inflation means China has a new reason to tighten policy, but this time could mean raising rates, which would have a more punishing impact on global risk appetite than raising the reserve requirements. As you should expect to hear more about Chinese tightening and concerns with Greek/Irish debt, the forex impact should provide fresh support for CHF and JPY.