Intraday Market Thoughts Archives

Some VIDEO TESTIMONIALS on Ashraf's 1-day course on "Currency & Intermarket Dynamics" last Saturday. http://bit.ly/9krjLV

For those in CANADA, Ashraf give free 1-day seminars in Vancouver, Montreal & Toronto Register here http://bit.ly/acXvOH

The unexpected RATE HIKE from teh RESERVE BANK OF INIDA (first since 2008) must not be ignored especially since it occurred in an unscheduled meeting and 1 month ahead of its next scheduled meeting. This means that further tightening is ahead particularly with rates being at 3.5% and annual inflation at 9.9%. As both India and China raise interest rates, markets anticipate a potential dampening effect on oil prices and overall commodities. QUADRUPLE WITCHING DAY (simultaneous expiry of stock index futures, stock index options, stock options and single stock futures all expire) may extend the equity pullback into Asian Monday, especially as we expect the Fed to raise its discount rate next week (possibly before Bernankes speech).

USD EXTENDS GAINS gains after bottoming above 80 yesterday, with GBP joining the sell-off against USD pairs, eyeing $1.4970 into early Sunday Asia. EURUSD eyeing interim support of $1.3470 after 300-pip decline in past 3-days. AUDUSD failed the weekly trend line resistance of 0.9250 from the Nov high, calling for 0.9120 prelim target. QUADRUPLE WITCHING DAY seen increasing the volatility and sell-off in commodities. CHF was given an unexpected verbal boost from new SNB board member Danthine who said in his first speech that markets must prepare for higher rates. Such shockingly positive news for CHF was least expected especially as markets anticipated remarks that would weaken CHF. Nonetheless, EURCHF did bottom right above the Oct 2008 low of 1.4300. Register for ASHRAFs VANCOUVER SEMINAR tomorrow http://bit.ly/acXvOH MONTREAL + TORONTO follow next.

Watch Ashrafs conversation with CNBCs Maria Bartiromo http://bit.ly/bObAd6 on the US dollar, the rate hike cycle (discount vs. fed funds), euros inability to break $1.38 and central banks divergent cycles.

DEALER TALK OF a Fed DISCOUNT RATE HIKE TALK is pushing up USD, dragging down EURUSD to $1.3590. RATIONALE: Discount rate now at 0.75%, which is 50 bps above Fed funds and well below the 100-bps spread prevailing before the beginning of the easing cycle (Aug 2007 discount rate cut). Such reasoning helps address the question on why the Fed opted for an inter-meeting rate hike in February. The agenda of the Fed may have been to raise the discount rate by 25-bps in each of Feb, March and May (no FOMC scheduled in May as was the case in feb). EURUSD seen closing back below $1.36, testing $1.3570. USDJPY would retest 90.80. Watch ASHRAF TODAY LIVE ON CNBC CLOSING BELL FROM NYSE at 16:20 EDT (20:20 GMT).

FX MARKETS to soon realize that the 100-bp decline in the Greek-German 10-year spread was founded on "anticipation" of a Greek deal rather than an actual package, and will find little resistance in driving back down EURUSD towards its February lows of $1.34, followed by $1.32. A resolution over Greek aid is now unlikely before the March 25 EU Summit. Meanwhile, the Fed is due to end its purchases of $3.0 trillion in MBS this month, bringing its quantitative easing a step closer to the end. Such are the factors preventing EURUSD from regaining the all-important $1.3850 resistance. REGISTER for Ashrafs VANCOUVER SEMINAR this SATURDAY http://bit.ly/ acXvOH

SNB Policy Board Member Jean-Pierrre Danthine to make his first major policy speech as the newly-appointed member of the SNB board today (no time specified). Part of the reason to the SNB silence in the face of the collapsing EURCHF to 1 year lows is been the intensity of the selloff in EUR, which the SNB deem to be out of its control. Any intervention would therefore render the SNB intervention futile. But considering our expectations for $1.32 EURUSD and stabilizing USDCHF above 1.05, this may help support EURCHF above 1.4423. Considering latest strength in CAD and CHF, we note that CADCHF surges to a 2-week high of 1.0487. A breach above 1.0517 would be the highest since October 2008. USDCAD traders will attempt to take out USDCAD 1.0050 into parity as long as the Fed does not sound out any hawkish remarks and the Bank of Canada/Canadian Fin Min refrains from talking down loonie. Ashraf is on travel therefore frequence of updates will be less than usual.

More yen weakness emerges as the Bank of Japan doubles its 3-month lending facility to Yen 20 trillion. Although the amount was within market expectations, the MoF has made its intentions clear to battle deflation and fight excessive yen strength. USDJPY is still seen breaking 91 and onto 92 w/in next week while AUDJPY breaks 80.40. While the SP500 / VIX ratio has breached above 65 on Tuesday, this pattern is identical to that of mid Jan when the ratio hovered around 65 before tumbling down by 38%upon the Jan-Feb decline in equities. Keep close watch over the ratio. A close above 65 by week's end would call for a resumption of the risk trade. Ashraf is on travel therefore frequence of updates will be less than usual.

FOMC kept all rates unchanged, while Kansas Fed's Hoenig remained the sole dissenter against the view of exceptionally low federal funds rate for an extended period? The knee-jerk reaction was for the USD to drop (after low rates mantra was kept), but equities are unable to return to the session highs as is the USD is stabilizing. Oil settles at $81.70, while gold hovers around at $1123. S&P500/VIX ratio at 65.5, which is consistent with 2 or 3 daily rebounds towards 65-66 before a subsequent retreat as was the case in mid Jan. CAD was the biggest gainer vs. USD, USDCAD support seen standing at 1.0120, while CADJPY may exploit further yen weakness but resistance standing at 89.50. Were NOT abandoning our expectations for a Chinese rate hike to occur this month. EURUSD still fails to break above $1.38 and USDX remains well above the 79.20 channel support. Wednesdays Bank of Japan decision could drag JPY further, supporting our calls for 91.80 in USDJPY.

WILL FED RAISE THE DISCOUNT RATE TODAY? See chart http://chart.ly/q8994a Watch out for a possible 25-bp rate hike in the DISCOUNT rate to 1.00% at todays FOMC meeting, which would raise its differential over the fed funds rate by 0.75%. Such a move would be part of the normalization process to re-establish the spread (differential) between the discount rate and the fed funds back to its original 100-bps, prevailing prior to the start of the easing cycle in August 2007. Such reasoning helps address the question on why the Fed opted for an inter-meeting rate hike in February. The agenda of the Fed may have been to raise the discount rate by 25-bps in each of Feb, March and April (or June).

*** Ashraf's Video Preview of todays FOMC http://bit.ly/aVtRUA

Ashraf's Video Preview of todays FOMC announcement http://bit.ly/aVtRUA

FX & Commodity implications.

JPY weakness broadens amid expectations that Wednesdays announcement from the Bank of Japan will renew the case for quantitative easing. Reports that Japanese FinMin Kan would use FX reserves to fund DPJ programs were later denied but some sources say there may be some truth to them. USD weakness. We expect both the FOMC and BoJ decision to be negative for the JPY as long as there is no marked equity sell-off occurs as a result of the statement. USDJPY WEEKLY technicals point to further advances nearing 92 in the medium tem. GBPUSD is capped at $1.5200, which is the down channel from the Jan 19 high. GBP watchers are cautioned of a speech from BoEs Bean at 19:00 GMT. Note that todays FOMC announcement is due at 18:15 GMT and not 19:15 GMT. EURUSD still shows no signs of regaining $1.38.

Ashraf's CANADA TOUR

*** VANCOUVER Mar 20 ***

*** MONTREAL Mar 24 ***

*** TORONTO Mar 27 ***

Click to REGISTER: http://bit.ly/ acXvOH

IF THE DOLLAR CHART IS NOT ENOUGH, then not sure what is. http://chart.ly/vea8b7 The bullish engulfing pattern show in todays USD Index candle is typical of trigger to upcoming USD strength (as seen in previous occasions in the chart). S&P500 touched 1150 on Wednesday, Thursday and Friday but failed to close at that level in each of those days. EURUSD needed to close above $1.38 on Friday in order to break out of its 4-month trend line. It closed at $1.3760. Today it trades at $1.3670. USD Index was required to hold above 79.20 on Friday to sustain its 4-month uptrend. Today it trades at 80.19.

Register for ASHRAFs CANADA EVENTS (VANCOUVER-MONTREAL-TORONTO)

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Ashrafs interview earlier today http://bit.ly/b4E9bI discussing Chinas remarks forex remarks and the potential for a currency war between Washington and Beijing. DETERIORATING OIL technicals point to 77 as a viable target before weeks end, while sterlings rebound seen capped at $1.5120 before $1.50 emerges. USD provides a textbook case of stabilizing above its 4-month channel support of 79.20-30 before extending gains towards 80.20, now eyeing resistance at 80.50. USDCAD eyes prelim resistance at 1.0215-20, followed by 1.02550.

REGARDLESS OF THE FUNDAMENTAL catalysts headlined in the media, EURUSD cannot break above the top of the 4-month channel of $1.3810-20 and USDX continues to hold above the 79.30 support as indicated repetitively on Friday http://chart.ly/y4dxkq GBP is WEAKEST CURRENCY of the day after dovish comments from BoEs Kate Barker indicating the possibility of another negative quarterly GDP in the UK dragged down GBP across the board. GBPUSD 4-hour chart eyes interim support at $1.4990. We can see $1.4920 later in the week as we continue to expect tomorrows FOMC decision to be positive for the US currency.