Intraday Market Thoughts Archives

Thanks for an enjoyable seminar on FX & Intermarket Analysis today in Dublin. We had to stretch out it by an extra 3 hours by demand. Well do it again at the Westbury Hotel tomorrow at 11 am.

GOLD and SILVER are set to make their first 2-day losing streaks since mid August. So far this year, gold has never started a new uptrend after a losing week that followed 2 straight winning weeks. Thus, a lower close this week is unlikely to renew the current upswing past the 1,020s this time. We still expect a retreat towards 960 before a more successful attempt past 1030 high and eventually towards 1,200 as early as end of Q4. The 4-day selloff in equities was instrumental in propping gold's latest run-up, but the next sell-off in equities may not be as gold-positive, especially if it is caused by broadening talk of tighter monetary policy in US and EU.

AUDUSD on course for extending declines following yesterdays bearish candle, but 0.8610-15 must be broken before additional retreat calls ups 0.8540s. Conflicting signals about whether the FOMC wants to start withdrawing liquidity are making the rounds, but many G20 nations intend to oppose the US intentions to sell some of their banking stakes. Traders must be aware that a host of events in the US (IMF/WB meeting in DC, UN conference in NY and G20 in Pittsburgh) could include some USD-supporting remarks such as the sale of gold proposed at the April G20.

GBP sustains more damage for the first time in the same week after Lloyds said is considering ways to exit the govts Asset protection program. 8-10 months ago, markets have witnessed periodic bouts of selling in sterling at each news release that the UK govt would extend its hand to UK banks. GBPUSD falls a full cent below our $1.64 target, while EURGBP regains the 90 pence level for the first time in 5 months, eyeing the next key resistance at 0.9090 50% retracement of the decline from the 0.9790 record high to the 0.8387 low. USDCAD regains 1.07 after having held above the 1.059 support (61.8% retracement), now eyeing the TL resistance at 1.08.

Stocks pare their earlier gains following stronger than expected Philly Fed's survey, while oil retreats by more than 70 cents off its $73.12 session high, attempting a close above the elusive 72.40-50 territory. We still deem the 200-week MA at 74.85 as a powerful resistance for the fuel. While both gold and silver are continue to show potential for further gains in the long term, silver remains 23% below its $21.27 highs, and has yet to regain the key 76% retracement from the decline from the 2008 high to the 2008 lows. NZDGBP eyes more losses towards 0.4270 (GBPNZD towards 2.34). Awaiting to see whether AUDUSD produces a doji candle or a bearish gravestone doji (in case of a close below 0.87).

US jobless claims fell to 545K from 557K but Aug housing starts +1.5% to 598K (exp 600K) and permits +2.7% to 579K (exp 580K). Oil still failing to regain that right shoulder at 72.50. USDCAD bounces off its 1.06 lows after further CPI weakness. USDCAD SUPPORT STANDS 1.0605-1061.8% retracement of the rally from the 0.907 low (Nov 2007) to the 1.3038 high (Mar 2009). GBPUSD struggles to hold above $1.65 but is holding STEADY AGAINST HIGH YIELDERS (AUD and NZD). Expect further gains in NZDGBP towards 2.34.

Markets await UK Aug retail sales (8:30 GMT) exp +0.1% from +0.4%, and y/y exp +2.7% from 3.3%. GBP strength vs. USD is not reflected against EUR and JPY. Better than exp figures could retest the 1.6580 TL resistance from Fridays highs and onto $1.6630s. UNUSUALLY YEN-POSITIVE comments were issue by Bank of Japan governor Shirakawa who said yen strength was good for the economy in the long term. The fact that the new Fin Min Fujii reiterated that yen weakness is NOT not in Japan's interest (and that no currency intervention is planned) remains supportive for the currency. SNB decision at 12:00 GMT followed by conference.

Tomorrow's monetary policy decision from the Swiss National Bank (12:00 GMT) is widely expected to hold the 3-month LIBOR target range unchanged at 0.0%-0.75% with 0.25% as the focus point. At the June 18 meeting, the SNB said it would "take firm action to prevent an appreciation of the Swiss franc against the euro." In late August, SNB added We have not yet reached the moment for a change of direction in monetary policy in Switzerland and that the appreciation of the Swiss franc will continue to be prevented." After some CHF strengthening over the last 3 weeks, EURCHF found support at 1.5120, right at the 200-day MA before recovering towards 1.5190. CAUTION from the SNB's latest views on currency strength and whether its officials express satisfaction with current levels. Upside risks for EURCHF at 1.5240.

Dollar preserves robustness despite stronger than expect +0.8% in US indus production. CPI comes in line with expectations (CPI +0.4%, core +0.1% m/m). Todays EIA inventory report (14:30 GMT) expected to show a drawdown of 2.4 mln brls in crude supplies, while distillate stocks (heating oil and diesel fuel) seen to show a build of 600K and gasoline stocks showing a build of 600K. Bearish figures were released by the American Petroleum Institute, which reported a jump of 631K barrels in crude (vs. expectations of a 2.4 mln brls drawdown). Gasoline stocks rose 1.3 mln brls and distillates jumped 5.2 mln brls. CADJPY seen testing 84.20, followed by 83.80. $GBPUSD seen retesting 1.64.

FX markets once again shift to the dual play of USD weakness and yen strength, sending USDJPY to fresh 7-month low of 90.14. JPY strength is also dragging down GBPJPY to 2-mth lows at 148.67, calling for 147.15 as the next target. UK unemployment hit a fresh 12-yr high of 5%. While USDJPY and GBPJPY are testing key support levels, EURJPY is increasingly showing more downside ahead, with 132.20 and 131.70 as the next focal points. USDCAD aims for the 1.0635 low as oil awaits todays EIA inventory data. US CPI & US Industrial production due next.

Broad USD strength emerges on stronger than expected US retail sales, with the core figure ex-autos and gasoline) jumping 2.4%. The consumer-friendly number is triggering the unusual development of rising dollar/rising oil/rising equities, all at the expense of the Japanese yen. GBP remains a broad loser following BoEs Kings remarks on reserve remuneration. GBPUSD breaks below $1.6480, calling for $1.6380 as the next major target, with upside capped at $1.6500. USDCAD risks extending losses below 1.0770, in which case is to stabilize at the TL support of 1.0730.

KING SLAMS POUND. Sterling is sold off across the board after BoE King says may reduce the interest rate on bank reserves. Markets are uninspired by the +0.2% in the Nikkei & Shanghai as well as the smaller than expected improvement in German ZEW survey. Both EURUSD and GBPUSD drifting towards session lows, but EURGBP is outperforming strongly after Kings comments, looking to break out of 0.8850 resistance and into next target at 0.8920. USDCAD bounces back to session highs looking for 1.0880s despite modest pullback in oil. $GBPUSD eyes 1.6470, followed by 1.6400.

Tomorrow's release of Aug CPI from UK & US and Aug retail sales from the US bears more importance than Germanys Sep ZEW index. The prevailing slowdown in global inflation has emerged from China to the US, which has forced central bankers to maintain policy stimuli. UK annual CPI is seen +1.4% from 1.8%. US retail sales are seen recovering 1.9% from -0.1% with +0.4% in sales ex autos from -0.6%. But with market players aware that such a rebound is mainly driven by the cash-for-clunker programs boost for autos and gasoline, market reaction may not be as cheerful. Notably, excluding cars and gasoline, US retail sales decreased for 5 consecutive months. GBPUSD reallies are limited to $1.6630 trendline resistance, while EURGBP faces interim pressure at 0.8835-40, a break of which leads to the 9-mth trend line resistance of 0.8880.

Oil holding steady above $68.50 despite falling equities, prompting USDCAD above 1.00--50% retracement of the decline from the 1.11 high to the 1.0676 low. 1.09 is also the trend line resistance from the Sep 2 high. But a close above 1.0900-10 would suggest a possible follow-up to the next target at 1.0995. GBPUSD extends weakness, with GBP and USD being the primary beneficiaries. USDJPY rebound is now seen probing 93.20-30s as the new Japanese govt formally takes over and may deliver some ceremonial remarks about excessive currency moves.

Trade tensions are usually negative for the currency of the country initiating them and in this case it was the US dollar that reacted first to pres Obamas announcement to impose duties on Chinese-made tries. But the dollar later rebounded when China said it would investigate dumping by of autos and chicken products from the US. The possibility of a trade war would be detrimental for the world economy and post-crisis financial markets recovery. The dollar rally was boosted by falling Japanese and European equities, while the unexpected decline in NZ retail sales accelerated the sell-off in the high yielding NZD. With Dow futures -77 pts, USD outperforms JPY on global risk aversion. USDCAD attempts to regain 1.09, while AUDUSD is vulnerable to tetsing 0.8470.