Intraday Market Thoughts Archives

The ongoing hostage crisis in Algeria's highest-producing gas field adds a new "known" factor to the "unknown" elements in the oil risk equation. And here is what Brent chart looks like relative to the S&P500 as the risk premium to energy prices is added to central banks' reflationary policies. Click here for rest of analysis

Chinese GDP rose y/y but slowed q/q; British retail sales fell; USDJPY at 100 would not cause inflation fears according to PM Abe's advisor. Market turns to Canadian retail sales and UoM consumer confidence. 1 of 2 EURUSD, 1 of 2 GBPUSD, 1 of 2 CADJPY & remaining silver all hit their targets. See which of the 18 trades remain in progress. Here is a snapshot of those Tuesday trades/charts here and here  

The greenback is stronger against all majors except CHF and JPY. European equities are trading within narrow ranges and relatively weakest are CAD and GBP.

Chinese Q4 GDP accelerated to 7.9% on annual basis from previous 7.4%, which is slightly more than analysts expected. However, q/q growth slowed to 2.0% from previous 2.1%. AUDUSD that usually reacts the most to Chinese releases ignored the improvement and trades around 1.0505 about 50 pips below today's highs at 1.0558.

GBP is weaker across the board after British retail sales disappointed as they declined 0.3% in December from previous 0.2% growth while the core figure fell 0.1% from a previous flat reading. GBPUSD fell to 1.5923 and EURGBP rose to 0.8386.

JPY pairs are consolidating yesterday's large gains amid expectations for new easing next week. Koichi Hamada, an advisor to PM Abe said today that even if USDJPY rose to 95 or 100 it would not cause inflation fears. Nikkei 225 closed the day 2.86% higher and USDJPY trades around 89.85.

The data calendar for the US session is light as it only contains Canadian manufacturing sales at 8:30 am ET that are expected to rise 0.9% in November from previous -1.4% and the university of Michigan consumer confidence at 9:55 am, which is seen higher in January at 75.1 from prior 72.9.

Major moves continued and USD/JPY broke above 90 and as the heightened volatility of 2013 continued. The euro was the top performer while the yen lagged; EUR/JPY broke 120 and the pair was nearly 300 pips higher on the day. The excitement will continue through Asia-Pacific trading with major Chinese data on the docket, including Q4 GDP. For a sample of the latst Premium Insights, please see below.

Chatter about the Fed pulling back on QE programs ramped up after initial jobless claims fell to a five-year low, dropping to 335K compared to 365K expected.

At the same time, housing starts surged to a post-crisis high of 954K, soaring past the 890K expected. The US dollar was broadly stronger after the reports and the euro slid to 1.3335 from 1.3375.

The euro gains began to reverse after a disappointing Phily Fed. The manufacturing index was at -5.8 compared to the +5.8 consensus forecast.

SAMPLE OF TUESDAY'S PREMIUM INSIGHTS, CLICK HERE: http://twitpic.com/bvzibl/full  AND http://twitpic.com/bvztwt/full

Overall sentiment helped boost commodity currencies and the S&P 500 closed 0.6% higher to a 5-year high.

The yen slowly and steadily wilted throughout European and US trading. A Reuters report helped give EUR/JPY the final push above 120. According to a source, the BOJ is considering a pledge to unlimited asset purchases until 2% inflation is within reach. That could be combined with a removal of the 0.1% floor for interest on excess reserves.

The BOJ decision is on Tuesday and it is one of the most highly-anticipated Japanese decisions in years. As speculation grows so does the chance of nervous longs taking profits so stay on guard.

The major event of today's Asian session is Chinese fourth quarter GDP at 0200 GMT. The consensus is 7.8% but given the strong import/export numbers last week, there could be an upside bias. At the same time, December industrial production and retail sales figures will be published.

Early in Asia-Pacific trading, New Zealand released quarterly CPI numbers. Prices declined 0.2% q/q compared to the 0.1% rise expected and the kiwi dollar fell nearly a full cent to 0.8328 before rebounding to 0.8360.

Today's US housing and jobless data showed the best figures in five years. Here is a closer charts look at those sectors. View here for more

AUD labor market data disappoints; minister Amari sends JPY lower; Swiss PPI slows, EZ construction output falls; Spanish auction. Market turns to real estate market data; jobless claims, Philly fed index and by the end of the session NZD CPI.18 new trades were added on Tuesday to the Premium Insights. 1 of 2 CADJPY hit all targets, 1 of 2 EURUSD longs is near its final 1.3380 target. See Premium entry below for full detail.

AUDUSD is weaker after labor market data showed a marked deterioration. Employment declined 5.5K in December after posting 17.1K growth in November and the unemployment rate rose to 5.4% from upwardly revised 5.3%. AUDUSD fell about 80 points to 1.0495 and now trades around 1.0515.

JPY pairs moved sharply higher after Japan's economy minister Amari said that his Monday's (!) comments about excessive weakening of the JPY were misinterpreted. USD/JPY trades around 89.35 and EUR/JPY soared from 117.01 to 119.49.

The only report from the Eurozone was construction output that fell 0.4% in November after a flat reading in October. EURUSD trades higher around 1.3355.

Swiss PPI eased to 1.0% in December from prior 1.2% y/y

EURCHF pushed higher to 1.2457 and still trades near session high.

Spain sold various bonds totaling EUR 4.505 bln vs. EUR 3.5 -4.5 bln target. Average yields declined.

The US session begins at 8:30 am ET with building permits and housing starts that are both expected to improve in December to 0.91M, respectively to 0.89M. Jobless claims are seen marginally lower at 369K from 371K. Philly FED manufacturing index is anticipated to decline to 7.1 in January from prior 8.1.

NZD traders await Q4 CPI that is due by the end of the session at 4:45 pm. Prices are expected to rise 1.2% from 0.8% y/y and but slow to 0.1% from 0.3% q/q.

The Australian crept higher in US trading on optimism about the jobs report and the Chinese economy. On the day, the yen was the top performer while the pound lagged. US economic data continues to point to modest growth.

The euro rebounded above 1.3300 in US trading from a low of 1.3257. Overall, the market lacked inspiration. US CPI rose 1.7% compared to last year which was slightly lower than the 1.8% consensus. The Fed is unconcerned with inflation at the moment so it was not a market mover.

US industrial production rose 0.3% in December, which was in line with the consensus estimate. The underlying data was stronger than the numbers suggest because of a sharp drop in utility production due to warm weather. The manufacturing component rose 0.8% which augurs well for future growth.

The final report was the Fed's Beige Book anecdotal report. All 12 districts reported modest or moderate growth and markets had no reaction.

The market reacted after PM Monti told Italian TV the financial crisis was over. He added that the economic crisis was ongoing but some cheeky traders decided his first comment was a sign that leaders had grown overconfident and sold the euro, dropping in 20 pips.

The focus now shifts to the Australian dollar, which has been trapped between 1.0520 and 1.0600 for the past week. It could break out on the employment report upcoming at 0030 GMT. The three previous reports have handily beat expectations despite doom and gloom in the local press. That could mean it's payback time or it could point to a reading higher than the 4.5K expected. The unemployment rate is forecast to rise to 5.4% from 5.2%.

news of the Bundesbank planning to repatriate parts of its gold reserves held in New York and Paris is triggering all sorts of gloomy interpretations regarding the global monetary system. The parallels with France's 1930 and 1967 decisions to cash in its gold reserves from the UK and US respectively -- as a result of unsustainable external positions in both countries are considerable. But dont understimate Merkel's role in this. For more Click here: 

Japanese jawboning; Eurozone CPI as expected; Swiss retail sales rose but below expectations; German auction. Markets await CPI, TIC flows, capacity utilization and IP, Beige book. 18 new trades are added today to the Premium Insights, including 3 charts on EURUSD & US crude oil. See details below for access.Sticking with our USD shorts while cautiously issuing constructive bias in metals and oil at the expense of the Japanese yen.

JPY was gaining across the board throughout the Asian and London sessions. Jawboning continued as the secretary general Ishiba said that weaker yen is worrisome for some industries and firms. Japanese equities experienced significant losses and Nikkey225 closed over 2.5% weaker. USDJPY fell to 87.80 and now trades around 88.20 while EURJPY fell to 116.46 and now trades around 117.40.

On the data front we learned that Eurozone CPI was in line with expectations as it was steady in December at 2.2% y/y but the core figure rose to 1.5% from previous 1.4% and that Swiss retail sales disappointed as they rose only 2.9% in November from 2.7% but market expected a 3.3% growth.

Germany allotted only EUR 4.007 bln of 2023 bund vs. EUR 5.0 bln target. The average yield rose to 1.56% from 1.4% and cover rose to 1.7 from 1.5.

The US session kicks off at 8:30 am ET with CPI that is forecasted to remain steady in December at 1.8% on annual basis. The core figure is also seen without change at 1.9%.

Net long term TIC flows are due at 9:00 am and they are seen higher in November at USD 19.8 bln from prior USD 1.3 bln. Capacity utilization and industrial production will be announced 15 minutes later and they are expected higher at 78.6% respectively lower at 0.2%. The last item on the list is the Beige book that is due at 2:00 pm.

The euro plunged after the Eurogroup leader lamented the 'dangerously high' euro on Tuesday. The single currency and the Swiss franc were the worst performers on the day while the yen rebounded after weeks of declines. An upexpected surge in Japanese machine orders has boosted risk trades early in Asia-Pacific trading.

The euro plunged 80 pips after the comments from Juncker, which were the first attempt to jawbone the currency lower in more than a year. It later recouped about half the declines to trade close to 1.3300.

Otherwise, US and early Asian trading was choppy with most currency pairs consolidating after the larger moves in Europe.

US economic data was a mixed bag. Core retail sales which exclude autos, gas and building supplies rose 0.6% compared to 0.3% expected. That was balanced by the Empire Fed manufacturing index which was forecast to be flat but fell 7.8 points.

The yen finished the day weak but all the declines were in Asia and Europe. With yen crosses near the lows of the day a report in Jiji said the BOJ will commit to a 2% inflation target, citing a draft agreement with the government. That helped USD/JPY rebound to 88.80 from 88.40.

Early in Asia, a strong reading on Japanese core machine orders boosted risk trades early in Asia. Orders jumped 3.9% in the month compared to a +0.3% reading expected.

The remainder of the session features Japanese household confidence data at 0500 GMT. The consensus estimate is for a 40.7 reading.

It's not the end of the world when the Federal Reserve pauses from easing, or even starting to raise rates. Often times, the opposite happens. The charting evidence shows once the Fed has reached a neutral stance (sign of economic trengthening), equities have rallied during such a phase. Here is the evidence

JPY pairs plunge; British CPI steady; Eurozone trade surplus rose; Fitch warns Spain. Retail sales, PPI and empire state manufacturing are next.new edition of the Premium Insights will be released this evening.

After a long holiday weekend,  JPY crosses pushed higher but then fell sharply lower after Japanese economy minister Amari warned over excessive weakness of the JPY that could lead to "negative effects on livelihoods". A number of officials noted the speed of JPY depreciation over the past few days. USDJPY fell from 89.60 to 88.35 and EURJPY from 119.97 to 117.80.

On the data front we learned that British consumer inflation was steady in December at 2.7% y/y while the core figure eased to 2.4% from 2.6% and that Eurozone trade surplus rose to EUR 11.0 bln in November from prior EUR 7.4 bln. GBPUSD and EURUSD are weaker and trade near session lows around 1.6040 and 1.3330 respectively.

In other news, Spanish yields ignore Fitch ratings comments that the country is at a risk of a downgrade even if it manages to avoid going into the rescue program. The 10 year yield continues to trade below 5%. CHF continues to weaken across the board which pushed EURCHF higher again to 1.2386.

The US session begins at 8:30 am ET with retail sales that are seen growing 0.2% in December from prior 0.3%. Core sales are expected to rise 0.2% after a flat reading in November. Producer prices are forecasted to ease to 1.4% from 1.5% on annual basis and core PPI is seen at 2.1% from 2.2%. Last on the list is the empire state manufacturing index that is anticipated to improve to 1.9 in January from -8.1 which would be the first positive result after five months of sub zero readings.

The Fed Chairman stayed away from topics that might move markets in a speech late Monday. The kiwi was once again at the top of the leaderboard while the Swiss franc lagged. Japanese machine tool orders are the lone item to watch for in Asia-Pacific trading as Japan returns from holiday. The latest on those Premium trades from Jan 7-8 is the following: All 2 EURUSD longs hit all targets , 2 USDJPY hit all targets, 2 GBPUSD hit all targets, 1 EURGBP hit all targets, both Gold in progress, one of which missing the final 1679 target by 1 point. Both Silver longs in progress, 1 of 2 AUDUSD hit all targets, the other missing the highest entry of 1.0450 by 2 pips. Both CADJPY unfilled, 1 of which missed highest entry of 87.90 by 8 pips, Both EURJPY stopped out.

Markets were looking for signals from Bernanke about when monthly QE programs would begin to taper but his comments were bland. He emphasized the need for a Congressional debt limit deal and the most-insightful comment was probably that he was 'cautiously optimistic' on the economy. Markets didn't react.

Earlier in the day, regional Fed presidents Lockhart and Williams said they were comfortable with the current status quo.  Williams forecast 2.5% growth this year and Lockhart 2-2.5%. Other Fed members have recently forecast growth faster than 3%.

The euro was effectively unchanged on the day at 1.3375. In a sense, the stability is impressive because Spanish 10-year yields rose 14 basis points on the day to 5.03%. It could also be a sign that the daily correlation between periphery yields and the euro is weakening.

Japanese markets reopen on Tuesday after a long weekend. The fresh liquidity could increase volatility. The preliminary December report on machine tool orders is also due at 0100 GMT. Orders should rebound after a 21.3% drop in November.

JPY weakens further; Eurozone industrial production disappointed; EURCHF rose. The only item for the US session is chairman Bernanke's speech. 2 The latest on those Jan 7-8 trades: 8 trades hit all targets, 3 were unfilled, 4 remain in progress & 2 stopped out. All 2 EURUSD longs hit all targets , 2 USDJPY hit all targets, 2 GBPUSD hit all targets, 1 EURGBP hit all targets, both Gold in progress, one of which missing the final 1679 target by 1 point. Both Silver longs in progress, 1 of 2 AUDUSD hit all targets, the other missing the highest entry of 1.0450 by 2 pips. Both CADJPY unfilled, 1 of which missed highest entry of 87.90 by 8 pips, Both EURJPY stopped out.

Despite the fact that Tokyo was closed for holidays, JPY continued to weaken. USDJPY rose to 89.62 as traders expect the PM Abe to choose a head for the central bank that shares his belief in easing efforts. The BOJ is expected to review the inflation target and possibly raise it from 1% to 2%. USDJPY fell slightly and trades around 89.30.

EURUSD initially rose to a new 11 month high at 1.3403 but now trades around 1.3360 after Eurozone industrial production fell 0.3% in November while analysts expected 0.2% rise. On a positive note, October's result was revised higher to -1.0% from -1.4%.

Other data showed that Italian industrial production fell 1.0% in November, marginally less than prior decline 1.1% and German WPI was flat in December after declining 0.7% in November.

EURCHF showed an unusual volatility and rose to 1.2276 which is a level last seen in December 2011. The key resistance is 1.2472 which is a high from October 2011 that was reached in reaction to the SNB announcement of the 1.20 floor.

According to MNI calculations, EZ sovereign t-bill issuance this week is seen around  EUR 15 bln, lower than last week's EUR 30.5 bln. Bond issuance is estimated at EUR 18.7 bln vs. 26.6 bln last week.

There are no US reports due today. Market volatility could heighten at 10:30 am ET when the BOC releases its business outlook survey and also by the end of the session at 4:00 pm when the FED chairman Bernanke speaks on monetary policy.

Before tackling 2013, it's important to understand the cross-market performances from 2009 to 2012 in order to highlight the shifting relationships underpinning currencies, equities and commodities. We also created an 11-currency performance chart vs gold for each of the last 4 years.  Find out the 4 similarities in Intermarket Dynamics between 2009 and 2012 How did Gold fare against currency baskets & what it means for 2013? See the Highlights Column to best understand the past to anticipate 2013 CLICK HERE for analysis

The yen sell off is continuing into the new week, breaking above the 89.50 mark. The yen was the worst performer last week while the euro led the way and the new week is starting out with the same theme. Data is light to start the week.

The euro continues to benefit from improved periphery borrowing costs. The drop in Italian and Spanish yields since the summer has been near-miraculous. On Friday, Italian 10-year borrowing costs closed to within a shade of 4.00% and Spanish yields fell below 5%.

The lower yields likely mean the crisis stage in Europe has passed, at least for the next few months. As the market buries concerns about a euro breakup, it will continue to benefit the currency. Eventually, however, the focus will shift to growth.

The pound is a case in point as it struggled to keep pace with the euro last week as worries about the UK economy increased. The NIESR UK forecast for the fourth quarter suggested a 0.3% GDP contraction as the austerity headwinds continue to damage growth.

This week features the BOJ decision and expectations for further easing are high. The proximity to 90 coincides nicely with the timing of the Tuesday decision. A failure at the big level or a break and reversal cannot be ruled out. Expect Japanese corporations to introduce major hedging programs around that level.

The week begins with a light sprinkling of data from Australia. Home loans and ANZ job advertisements will be released at 0030 GMT. Loans are expected to rise 0.5% in the November period but the release is unlikely to move the market.