Intraday Market Thoughts Archives

Listen to Ashraf live on Talk Radio today (Saturday) from 1pm to 2 pm EST. Visit the site and click LISTEN. http://www.talk1370.com/ Ashraf will be discussing his book, and his outlook for the currencies, interest rates, equities and gold.

GBPJPY slumps 300 pips on the day almost hitting a fresh record low at 132.55 in line with the analysis made in the earlier Intraday Market Thought today. CMC Markets clients receive a more detailed analysis with charts outlining the extent of the drop in JPY crosses and as well as S&P500. Chapter 5 on Risk Appetite in my book illustrates detailed examples on the relationship between risk appetite, volatility and low yielding crosses such as JPY.

Neither the BoJ cut nor the White House bridge loan to US automakers succeeds in considerably shoring up risk appetite. JPY crosses extended their damage despite the BoJ's 20-bp rate cut to 0.10%. The White House's announced $13.4 billion short-term loan to Detroit requires them to show profit by end of Q1 2009. Quadruple witching Friday often includes surging volatility, therefore the JPY crosses will show most of the action. GBPJPY and USDJPY seen targeting 133.20 and 88.80 as both remain capped by multiple downward trend lines. gold to remain supported at $817. All this leaves USDJPY as the more consistent short pattern ahead with 92 acting as considerable short term resistance.

Catch Ashraf on Bloomberg TV at 5pm EST (10pm GMT) today discussing FX, gold and his book.

back to risk aversion trades as USD rises along with JPY on deteriorating GE outlook from S&P dragging equities lower. Short USD trades against EUR, GBP and antipodeans (AUD, NZD and CAD) could reduce exposure by prompting short positions in these high yielders against JPY. EURJPY underpinned by 121.60, AUDJPY showing imprioved signs of stability and reduced volatility backed by TL support at 57.60. GBPJPY faces record low of 132 andcapped at interim TL resistance at 138.

Euro's increased ability to act as the anti-dollar is in part boosting its rally across the board, including its 4-week highs against the strengthening yen. And with sterling fundamentals remain strained by deteriorating twin deficits and falling interest rates (lower than Eurozones), the road to EURGBP parity is bound to meet our long established forecast. Technically, EURGBPs overshoot is defying conventional measures. Daily RSI reached record highs and 9-month highs on the weekly chart. 97 pence seen as the next target before a deepening retreat extends towards 91 pence. Renewed gains seen in Q1.

A look at Ashraf's book making CNBC TV, while discussing gold and why the rally does not yet herald the net supercyle for now.

http://www.ashraflaidi.com/media/ashraf-laidi-cnbc-21.asp or (http://www.cnbc.com/id/15840232?video=969213907&play=1)

Catch Ashraf on CNBC's CLOSING BELL discussing gold and the dollar. 3.15pm EST (8.15 pm GMT). Gold makes a fresh attempt to break the 5-month trend line resistance after failing to do so at 2-month intervals. After breaking its 200-day moving average for the first time since October 10, gold faces the next target at $895, corresponding with the said trend line resistance. Subsequent barrier at $930.

EURUSD shows the currency on its way to mount the biggest weekly gain (6% week-to-date), breaching the 5-month trend line resistance and breaking out of $1.42--50% retracement of the decline from the record high to the years low, as well as the 200-week moving average. Key target now stands at $1.4640, which is the 61.8% retracement of the said move and the previous support from December 2007.

Fed shifts towards a range of 0-0.25% in its fed funds targe, tintensifying the yield assault on the dollar, leaving little chance for traders but to extend speculative and directional selling in the currency. Readers of this website have been persistently warned of a major dollar sell-off in December accompanied with extended equity rallies as the reflationary trade is triggered by the global major central banks.

With USDJPY breaching below 90 yen, 2 yen below last weeks 13-year lows and the rest of the yen crosses (EURJPY and GBPJPY) rising, the dollar impact shows emerges despite improved risk aversion. EURUSD breaches our year-end target of $1.37 and testing above a major resistance of $1.3750--the 38% retracement of the decline from the $1.6038 record high to the $1.2328 low. $1.3880 acts as the next obstacle. GBPUSD faces interim resistance at $1.55, a breach of which seen extending to as high $1.57.

AUDJPY Daily chart may regain the trend line resistance at 62.25 extending from Nov 25 and the bigger trend line resistance of near 62.50 extending from Oct 2007. With AUDJPY currently standing at 60.40, there is ample room for a 2 yen rebound. A 75-bp Fed cut comprises a major catalyst to empowering JPY crosses such as AUDJPY, while a 50-bp cut may also help risk appetite in the event of explicit FOMC statement asserting willingness to extend persistent liquidity to credit markets. Also bullish for AUDUSD, NZDUSD and bearish for USDCAD.

Both EURUSD and GBPUSD near my year-end targets of $1.37 and $1.56 as the dollar's woes feed on every negative hand available. Intensifying dollar- selling pressure extends due to (i) elevated concerns about inflationary implications of the Treasurys swelling balance sheet to $2.25 trln (ii) the parlous state of US automakers and its impact on the overall economy and (iii) renewed assault on the currencys yield foundation as the Fed is set to cut by as much as 75-bps to 0.25%. A fourth factor weighing on the dollar could be a surprisingly bigger than expected OPEC cut of 1.8-2.0 million barrels per day rather than the expected 1.5 mln bpd.