Intraday Market Thoughts Archives

BoE Posen suggests QE still on the table; German PPI eased and Italian

industrial orders rose. Markets turn to Canadian CPI and headlines from G8 meeting. VIX eyes the 25 level, after touching its 55-WEEK MA for he first time since Dec. Thursdays Premium Intermarket Insights are starting to get filled after the market had ran away in Asian trade. USDCAD & CADJPY already filled, while both gold trades remain in progress. See below for more detail.

The greenback is giving up some of its recent gains in the ongoing session as it trades slightly weaker across the board. European equities are mixed, trading within -0.7% and +0.3%. The relative strength winner is CAD while JPY lags.

GBPUSD retraced to above 1.58 after dropping to 1.5732 earlier during the session after MPC member Adam Posen said that he was too optimistic about the economy and that it may have been premature to say that the BOE has done enough QE, MNI reports. This important opinion shift which suggests that QE is still on the table was further reinforced by comments that Mr. Posen was disappointed with the efficacy of the latest round of QE. Additional suggestions of more QE might be a way of preparing the markets for possible Greek EMU exit.

On the data front, German PPI eased to 0.2% in April from previous 0.6% m/m (2.4% from 3.3% y/y) which is the lowest level since June 2010 and monthly Italian industrial orders surprised do the upside as they grew 3.5% in March from previous -2.6%.

In other news, unconfirmed reports suggest that Spain could impose a ban on short selling on IBEX, Spanish government hired Goldman Sachs to provide Bankia's valuation and the ECB deposits continue to be elevated at EUR 762.42 bln on Thursday.

The NY session is limited Canadian CPI that is expected to ease to 0.3% in April from previous 0.4% m/m and remain steady at 1.9% y/y. Core CPI is seen at 0.1% from 0.3% m/m and unchanged at 1.9% y/y.

Markets are likely to respond to headlines coming from the G8 meeting that starts today in Camp David. Eurozone crisis will be the key topic for discussions but the focus will also include strategic oil reserves and global food accessibility.

Thursdays Premium Intermarket Insights include EURUSD, AUDUSD, USDC AD, CADJPY, gold and US crude. Also included is a chart outlining Philly Fed vs. ISM manuf, ISM services and Empire Fed. Premium subscribers get direct access here: http://ashraflaidi.com/products/sub01/access/?a=637 Nonsubscribers visit here: : http://ashraflaidi.com/products/sub01/

Ashraf tells CNBC about the latest bounce in gold, the 7% parameters in S&P500 and the historical macro implications of the turns in the Philly Fed survey http://video.cnbc.com/gallery/?video=3000091010&play=1

Another day, another slump in risk trades as US economic data and relentless worries about the European periphery weighed. The yen shot higher and the market will certainly be on guard against intervention in Asia. The top risk event in the upcoming session is April Chinese property prices. Thursdays Premium Intermarket Insights include new ideas on EURUSD, AUDUSD and a turn in CAD pairs. See more details below.

USD/JPY fell more than a full cent as cascading stops below 80.00 and in the yen crosses led to a relentless run. The trigger was the Philly Fed which dropped to -5.8 compared to +10.0 expected. Earlier, initial jobless claims were 370K compared to the 365K consensus. A think-tank report suggesting the next BOJ move will be an Operation Twist rather than more QE also boosted the yen.

Widespread rumors about a Spanish bank downgrade weighed on the euro late in Europe, sending the pair to 1.2665 but it rebounded to 1.2735 on renewed US QE3 expectations. After the US close, the downgrade came with giant Santander among the 16 victims.

Greece remains a moving target but there were some good signs as New Democracy took the lead in one poll. Syrizas Tsipras hinted at his strategy in a CNN interview, saying that the rest of Europe cant afford to let Greece fail. He appears to believe the core rather let Greece stay in the eurozone with better bailout terms than rise contagion.

Spain remains in crisis as Reuters sources revealed that it can only afford to fund itself for several months at yields above 6%.

US stocks fell to a 4-month low with the S&P 500 down 1.5% to 1304 but the more-important development was in bonds with 10-year Treasuries at 1.69% -- just two basis points from a record low. If that level gives way, USD/JPY could plunge anew.

Risks remain high in Asia-Pacific trading with China revealing April property price data for 70 cities at 0130 GMT. Prices fell in 37 of 70 cities in March but Beijing and Shanghai were flat. If the number of cities rise substantially and major cities begin to slump, look for risk trades to erode further.

Our latest Premium Intermarket Insights make a turn in CAD bias, while maintaining the same in EURUSD, AUDUSD and gold, albeit at different tactics. Premium subscribers get direct access to todays Insights here: http://ashraflaidi.com/products/sub01/access/?a=637 Nonsubscribers visit here: : http://ashraflaidi.com/products/sub01/

-AB

Markets worsened in late session, with S&P500 futures at 1302 as the May Philadelphia Fed index on business outlook fell to -5.8 from April's 8.5, its worst and first negative reading since September 2011. The last time the Philly Fed survey ENTERED below zero territory was in August 2011, 1 month before the Fed began its "Operation Twist" the same month when Italian bank woes were eroding global risk appetite. Find out what this means in our latest Premium Intermarket Insights, with new ideas on EURUSD, AUDUSD and a turn in CAD pairs. Premium subscribers get direct access to todays Insights here: http://ashraflaidi.com/products/sub01/access/?a=637 Nonsubscribers visit here: : http://ashraflaidi.com/products/sub01/

EURUSD hits 1.2667 and equity futures deteriorate further as Moodys warned it will downgrade 21 Spanish banks, Syriza party says will never join pro-bailout coalition and more chatter of Greek bank run. S&P500 eyes 1320 territory, marking the 7% peak-to-trough decline at which buying the dips pevailed frequently throught 2011. This level now becomes the key point, separating dip-buyers and momentum chasers. US markets turn to jobless claims, Philly FED and leading indicators. EURUSD hits first of our targets at 1.2670 with 1.2650 awaiting for 2nd sort. Both Premium gold & AUDUSD shorts hit all targets, while USDCAD long was stopped out. More detail on the 6 Premium charts and other ideas is found below.

USD pushes higher across the board but the volatility has been slightly smaller as German, French and Swiss banks are closed today in observance of Ascension Day. European equities are losing about 1% and the relative strength winner is JPY while GBP lags.

Greek uncertainty continues to punish the common currency as the current state of paralysis will continue at least until new elections on June 17th. In a new development, the ECB no longer offers liquidity to some Greek banks which it considers insolvent. According to Reuters, bank run continues as Greeks withdrew hundreds of millions of EUR recently due to growing fears that the country might be forced out of the Eurozone. According to some estimates, disorderly exit could come with a price tag of as much as USD 1 trillion. German bund yields hit new low

Spain reached the upper limit of its EUR 1.5 to 2.5 bln target range as it sold various bonds totaling EUR 2.49 bln. All average yields rose but cover improved. The auction came only a few hours after Q1 GDP was confirmed at -0.3% q/q and -0.4% y/y. Spanish 10 year yield rose to 6.35% earlier during the session and now trades around 6.32%.

The US session will bring jobless claims at 8:30 am ET that are seen only a little changed compared to last week at 368K from 367K followed by Philly FED index at 10:00 am that is expected to rise in May to 10 from April's 8.5. April leading indicators are anticipated to rise only 0.1% from previous 0.3%.

Canadian data includes international securities purchases that are seen lower at CAD 8 bln in March from previous CAD 12.5 bln and wholesale sales which should rise 0.3% from previous 1.6%.

The market could also react to a pre G8 meeting video conference among key European leaders that is according to Italian government sources scheduled to start around 3:30 GMT.

Tuesdays Intermarket Insights 6 charts are on EURUSD Option Volatility, EUR Volat vs EUR cash, S&P500, Dax Weekly, Gold Monthly vs. Weekly. Shorts in US crude are in progress. Subscribers can click here for direct access: http://ashraflaidi.com/products/sub01/access/?a=636 Nonsubscribers can click here: http://ashraflaidi.com/products/sub01/

In our April 18 article we warned how April showers, could bring May Bearish Flowers (see here: http://ashraflaidi.com/content/images/articles/SPX%20April%20Apr%2011.JPG_640W.gif) Stocks are now down nearly 7%. In the SP500/VIX ratio chart (also in the article here: http://ashraflaidi.com/articles/april-fears-ahead-of-fed-spain-china.asp ), we warned the ratio could lose further as the bears drag down the index & volatility pushes up across the board. The ratio is now down 20% Cycles do NOT always recur, but when they do in these highly watched indicators, the downside could be severe. For our latest Premium Intermarket Insights; Tuesdays Intermarket Insights 6 charts are on EURUSD Option Volatility, EUR Volat vs EUR cash, S&P500, Dax Weekly, Gold Monthly vs. Weekly. Shorts in US crude are in progress. Subscribers can click here for direct access: http://ashraflaidi.com/products/sub01/access/?a=636 Nonsubscrobers can click here: http://ashraflaidi.com/products/sub01/

UK labor market improves; GBP drops as BoE slashes growth forecast to 0.8% from 1.2%; Eurozone CPI unchanged; German and French bond auctions; gold at key support. Market turns to building permits, housing starts, industrial production, Draghi's speech and FOMC meeting minutes. The Premium gold & AUDUSD shorts hit all targets, while USDCAD long was stopped out. EURUSD not quite hit the 1.2680 target. More detail on the 6 Premium charts and other ideas is found below.

The greenback trades higher against GBP but unchanged against most other majors. European equities are trading within -1% and +0.2%.

UK labor market improved marginally as the claimant count declined 13.7K in April after rising 3.6K in March, the claimant count rate remained at 4.9% and the ILO unemployment rate ticked down to 8.2% from previous 8.3%. Nevertheless, the GBP declined after the inflation report was released and BOE governor King started his press conference. The BOE now expects inflation to decline to the 2% target in mid 2013 which is six months later than originally projected while the GDP will not reach pre crises levels till 2014. The BOE also noted that the Eurozone crisis continues to be the biggest threat to the UK recovery and it sees the possibility of a "disorderly" outcome for which contingency plans are being discussed. GBPUSD fell to 4 week low at 1.5889.

Eurozone April CPI was unchanged at 2.6% (core remained at 1.6%) and March trade surplus widened to EUR 4.3 bln from EUR 4.0 bln as imports were unchanged while exports rose 4%.

Spanish 10 year yield rose to 6.51% earlier during the session but has declined to current 6.32%. German 10 year bond auction resulted in a lower yield (1.47% vs. previous 1.77%) and improved cover (1.5 vs. 1.1) but fell short of a target (EUR 4.1 bln vs. 5 bln). France reached the upper end of its EUR 7-8 bln target as it sold bonds totaling EUR 7.99 bln.

Gold trades in the middle of a key support zone 1520-1550 where a sovereign interest is expected. Silver too trades at a similarly important zone around 27.40.

The US session starts at 8:30 am ET with April building permits that are seen lower at 0.73M from previous 0.75M and housing starts that are expected to rise to 0.69M from 0.65M.

Capacity utilization and industrial production are due at 9:15 am ET and they are both seen higher in April at 78.9% from 78.6% and at 0.6% from 0% respectively.

Markets are also likely to respond to the ECB president Mario Draghi's speech on monetary policy that starts at 10:00 am.

The key event will be the FOMC meeting minutes that are due at 2:00 pm. Considering the statement and the press conference on 4/25 it is unlikely that the markets will be surprised. Given the slightly improved FED projections, today's minutes are not likely to reverse the recent USD uptrend.

Tuesdays Intermarket Insights 6 charts are on EURUSD Option Volatility, EUR Volat vs EUR cash, S&P500, Dax Weekly, Gold Monthly vs. Weekly. Shorts in US crude are in progress. Subscribers can click here for direct access: http://ashraflaidi.com/products/sub01/access/?a=636 Nonsubscrobers can click here: http://ashraflaidi.com/products/sub01/

Last-ditch efforts to form a Greek government failed and an election call is imminent. The move was well-anticipated but the euro fell hard, dropping to 1.2730. Japans tertiary index fell, while Australia Westpac consumer confidence rose but remained below Octobers level. There 6 charts in tonights Premium Intermarket Insights, with new ideas in EURUSD and a change of focus in US crude oil. AUDUSD, USDCAD and gold trades remain in progress. See more below

The market not likely to be caught off guard by the failure of Greek political talks but the announcement pushed the euro over the edge, which today was at 1.2830. It was a steady slide a full cent lower from there.

US economic data was inconsistent. April retail sales rose 0.1% compared to +0.2% expected and CPI was in-line at 2.3%. The market focused on upbeat readings on the Empire Fed and NAHB home builders index. These numbers werent good enough to spur optimism about the recovery but were good enough to beat back QE3 expectations and spark a dollar rally.

The broad USD gains were also fuelled by a technical breakout in the Dollar Index and commodity-price drops. Gold and oil fell to a 2012 lows while copper fell to the lowest since January.

European bond markets remain in shambles amidst a growing sense that a Greek eurozone exit is inevitable. Japan March machine orders 2.8% vs a median forecast of -3.2%, while the Tertiary Index was -0.6% m/m vs unchanged in Feb.

Australia May Westpac consumer confidence +0.8% m/m to 95.3, remaining below Octobers level. Westpac expects the RBA rate cut to be brought forward to June.

Today's Intermarket Insights has 6 charts , including EUR volatility, S&P500, Dax and Double Charts in Gold Weekly & Monthly. Subscribers can click here for direct access: http://ashraflaidi.com/products/sub01/access/?a=636 Nonsubscrobers can click here: http://ashraflaidi.com/products/sub01/

-AB

EURUSD 1-month option volatility breaks out of its 8-month trendline resistance, suggesting the fear element of holding euros has ascended beyond its habitual parameters (see chart below). The inverse correlation between EURUSD spot rate and 1-month option volatility (lower-right chart) shows the interrelation between currency rate & volatility. Today's Intermarket Insights has 6 charts , including EUR volatility, S&P500, Dax and Double Charts in Gold Weekly & Monthly. Subscribers can click here for direct access: http://ashraflaidi.com/products/sub01/access/?a=636 Nonsubscrobers can click here: http://ashraflaidi.com/products/sub01/

Germany grows faster than anticipated; Eurozone growth flat; German and Eurozone ZEW declined; UK trade deficit unchanged; RBA minutes. Market turns to CPI, retail sales, Empire state manufacturing and business inventories. Monday nights Intermarket Insights include strategies of buying the dips in GBPUSD, while shifting focus to short-term tactics in EURUSD. More on USDCAD and AUDUSD below.

European equities are gaining about 0.75% and the relative strength winner is AUD while GBP is the weakest.

Unexpectedly strong German GDP helped the common currency to recover a portion of its recent losses at the beginning of the London session. The German economy grew 0.5% in Q1 q/q and 1.2% y/y which bested expectations and helped the Eurozone to avoid a technical recession as Eurozone Q1 GDP remained unchanged both q/q and y/y after declining 0.3% q/q in Q4. However, the EU outlook remains negative due to worsening labor market and above target inflation. EURUSD trades near session highs around 1.2860.

Meanwhile, the ZEW economic sentiment fell in Germany to 10.8 in May from previous 23.4 and in the Eurozone it declined to -2.4 from previous 13.1. The uncertainty surrounding Greek and French elections combined with reappearing rumors of a Greek EMU exit contributed to the declines.

GBP came under pressure after the UK trade deficit remained at GBP 8.6 bln in March which was worse than estimated 8.4 bln. On the positive note, exports to growing countries (US, China, Germany and other non EU countries) rose. EURGBP retraced regained 0.8000 but daily chart continues to look weak suggesting further downside.

Yesterday's RBA minutes did not provide any surprises as the RBA noted slowing inflation and below trend growth. Nevertheless, AUDUSD pushed slightly higher during the Asian session and trades only a few points below the parity level.

The busy New York calendar starts at 8:30 am ET with April CPI that is expected to ease to 2.4% from 2.7% while the core annual CPI is seen steady at 2.3%. Retail sales and May empire state manufacturing index are due at the same time and they are anticipated lower at 0.2% from March's 0.8% and at 9.3 from 6.6 respectively.

March net TIC purchases are due at 9:00 am ET and they are seen higher at USD 19.4 bln from previous USD 10.1bln. Business inventories which are the last report today are due at 10:00 am and are seen lower in March at 0.5% from 0.6%.

The trades in Mondays Intermarket Insights are all in progress, with shorts in AUDUSD & longs in GBPUSD. More ideas on EURUSD, USDCAD and gold. Direct Access is found here: http://ashraflaidi.com/products/sub01/access/?a=635 Nonsubscribers can click here http://ashraflaidi.com/products/sub01/

Moody;s Downgraded Italian banks, European bond market was in turmoil again on Monday, sending the euro to a four-month low. The pound sterling was the daily top performer while the euro and NZD lagged. The RBA minutes are the highlight of Asia-Pacific trading. Monday nights Intermarket Insights are out, with GBPUSD & EURUSD included.

Bond spreads and credit-default swaps blew out on continued questions about Greece, Spanish banks and the viability of continued austerity. The Spanish bank plans are viewed as inadequate and the Greece is paralyzed. Greeces President held meetings aimed at forming a coalition technocratic government but Syriza senses its chance to seize power and will hold out for fresh elections, which could be called tomorrow.

A Greek exit is looking increasingly likely as ECB members begin shifting their attention to minimizing contagion from such a move. Early in the year, a Greek exit was called absurd by ECB members, now they are saying it is manageable.

The SNBs Jordan spoke but he delivered the same rhetoric that the CHF is massively overvalued and the cap will be defended with utmost determination. The words did not move EUR/CHF a single pip and the pair fell as low as 1.2009.

Late in US trading, Moodys downgraded 26 Italian banks, sending the euro to a fresh low since mid-January.

At 0130 GMT the RBA releases the minutes of the May 1 meeting where officials lowered the cash rate by 50 basis points. Comments about global growth will weigh on AUD and other growth-sensitive currencies. Otherwise the session is quite, Japan sells 40-year bonds at 0345 GMT and at 0500 is the April Japanese consumer confidence report.

Ahead of tonights RBA minutes, 2 ideas on AUDUSD are included in todays Premium Intermarket Insights. Direct Access is found here: http://ashraflaidi.com/products/sub01/access/?a=635 Nonsubscribers can click here http://ashraflaidi.com/products/sub01/

-AB

The Financial Times' "Short View" column & video discusse Ashraf's take on the mid-month low patterns in EURUSD, shared with Premium subscribers last week. The Column (to appear in Tuesday's issue):

http://www.ft.com/cms/s/0/8c38bc2e-9de3-11e1-9a9e-00144feabdc0.html#axzz1uryjF3Ho The video:

http://video.ft.com/

Ashraf

Ashrafs interview on AlArabiya w/ English Synopsis covering, the fundamental issues weighing on Euro instruments as well as on the technical dynamics in S&P500, Dax and EURUSD. http://youtu.be/9npMf5XRxY0

Failed negotiations among Greek political parties suggest another election is the most likely consequence. China cut its reserve requirement by 50 bps, making the 3rd cut over the past 9 months following Fridays disappointing industrial production and retail sales. The best reading on US consumer sentiment since 2008 sprung risk trades on Friday but the moves faded on concerns about Greece and Spain. The Australian dollar was the laggard on the day and the week, while the Canadian dollar made good gains on the April jobs report. The weekly CFTC data showed a 63% is US dollar longs. None of Thursdays euro shorts in Intermarket Insights were filled but we shall await the rebounds following Sunday declines.

Greeces top-three political parties have all failed to form coalition governments and the mandate has been to the President who will try his best to cobble together a consensus. That looks increasingly unlikely as Syriza continues to poll strongly.

Spain announced it will pump 15 billion euros into banks while forcing them to create real estate bad banks. The funds fall short of the 30-50 billion euros analysts say will be required to loosen Spanish credit markets. There is also growing talk of LTRO3 to assist Spanish banks.

The euro and risk-sensitive AUD climbed midway through US trading on Friday as the University of Michigans consumer sentiment survey climbed to 77.8 compared to 76.0 expected. Its the highest since June 2008 and showed that Americans are feeling better about the current situation while remaining cautious about the outlook.

In Canada, the outlook is also improving as the economy added 58.2K jobs compared to the 7K expected. The details of the report were sterling with the gains all in full-time and private sector work. USD/CAD fell nearly a full cent after the report but the gains later faded.

The jobs report showed why CAD is the darling of the speculative market. CAD longs at 60K -- down slightly from 70K last week but still the markets favoured currency.

EUR net shorts hit -143,984 contracts versus the prior week's net short of

-106,990 contracts. This contrasts to the record net euro shorts of

-171,347 contracts seen January 2012. The former darling, AUD, saw its longs halved to 25K from 52K. EUR shorts surged to 143K from 107K while yen shorts were scaled back to 41K from 50K. The pound remains a favorite at 25K compared to 16.5K a week earlier.

Thursdays Intermarket Insights include trades on EURUSD, AUDUSD, USDCAD and gold. Direct access click here: http://ashraflaidi.com/products/sub01/access/?a=634 Non subscribers click here: http://ashraflaidi.com/products/sub01/

-AB