Intraday Market Thoughts Archives

EURGBP has proven its ability to hold above the key support of 0.889050% retracement of the 0.8392-0.9394 rally. A possible REVERSE head&shoulder could be emerging, in which case 0.9050 would be the next target. A EURUSD weekly close above $1.4820 suggests stabilization for now, but we expect little support in that level if the same dynamics emerge that would cause a EURJPY break below 131.50. We still expect 1.0760 for USDCAD next week. For those who missed Ashrafs warning on the pattern shown in the major equity indices, heres a replay of yesterdays interview http://bit.ly/ 3qSooC

ANOTHER FRIDAY, ANOTHER YEN DAY. Business TV may be busy talking about the rebounding US dollar, but once again, the yen remains the best performer during these days of risk-aversion (falling stocks) just as was the case in the last 3 Fridays. The case for continued yen strength remains based on the currencys low yielding stature, the central banks looming end of corporate bond purchases (unlike FOMC whose desire to withdraw liquidity is strictly in talk rather action) and the US Treasurys escalating borrowing, which limits rebounds in the USD and renders JPY lustre against other FX. WATCH THE 1080 level in the S&P500, which will likely be tested next week. Today, we expect a probe of 1087. Keep an eye on the 1.4820 support in EURUSD, while any GBPUSD recovery is seen capped at 1.6580. See previous IMTs for other targets.

TRIPLE TWITCHING HOUR may intensify the speed of the selloff in equities, which could impact options expiry in FX. GBP broadens selloff as GBPUSD drops for the 4th straight session, nearing $1.6420, but support is found at $1.6280. EURGBP breaks out of its 5-week trend line resitance of 0.8950 and is likely to make a run for 0.9060. USDCAD eyes 2-month trend line resistance at 1.0770, a break of which to call up 1.0850. CADJPY, EURJPY and GBPJPY eyeing 82.20, 131.10 and 144.50 for next week.

Nikkei falls to 4-month lows, extending its 4th consecutive losing week, the longest since Sep-Oct of last year. Risk appetite takes a turn to the worst in FX as GBP, AUD, NZD deepen losses against USD and JPY, while EUR continues to hold firm across the board, with the exception against JPY. We stick with our 131.20 and 82.80 targets for EURJPY and CADJPY. We still expect EURUSD to attempt a fresh RETEST OF $1.4820 from the current $1.4880. GBPUSD hits out 1.4580 target, now looking for 1.6510 and a possible 1.6460 for next week. USDCAD probes 3-week trend line resistance, eyeing 1.0740.

NIKKEI ALERT. Japan's Nikkei-225 index is on its way to close lower for the 4th consecutive week, the longest losing streak since Sep-Oct 2008. Next week, markets will watch 9,35138% retracement of the Mar low to the Sep high. US stocks ended off their lows, with Dow -0.9% to 10,332, retreating below that 50% retracement (10,335) of the decline from the record high to the March low. The index closed above this level on Mon-Wed, therefore Friday will be deciding session for the weekly close.

Watch Ashraf on BNN earlier on BNN today discussing the Canadian dollar, equity indices, crude oil and yen crosses http://bit.ly/3qSooC

And once again oil fails to break 80.30, resuming the 4-week downtrend as the S&P500 fails to break above 1,120. GBPUSD faces next support at 1.6570 after failing the 1.6880, while EURGBPY is seen capped at 0.8975. EURCHF hit a high of 1.5149 after we warned of a boost from 1.5085. We expect renewed buying to test 1.5170. YEN STRENGTH IS GOING NOWHERE and is here to stay (see last weeks article). CADJPY seen targeting 82.85, EURJPY eyes 131.20.

Ashraf's interview on choosing an FX broker http://bit.ly/2A15pL $EUR

IS OIL CONVINCED by the 0.9 mln draw in EIA crude inventories? Oil briefly touched a session high of 80.28 before retreating to the 79.80s. With oil traders aware of the effect of the storm, it is unexpected for oil to reverse its 4-week downtrend and close above $80.50. Dollar also somewhat supported by comments from Atlanta Fed president Bullard indicating that the memory of housing bubble may push Fed to start rate hikes MORE QUICKLY than after past recessions. In the event that oil closes below 79.40, the dialy candle could become a bearish doji, with a relatively high shadow, suggesting fresh downside. EURGBP breaks above the 4wk trend line of 0.8910, calling 0.8930. 0.8975 is the next target after the 61.8% retracment support at 0.8820 managed to hold.

Markets do not like high inflation and 6-month lows in US housing starts. Dow futures move -16 pts from +20 prior to the data, USDCAD regains 1.05 from 1.0450s , while GBPUSD struggles to hold at $1.68. While the data are negative for risk appetite, markets will remain cautious, especially ahead of EIA report (15:30 GMt), expected to show a build of crude oil inventories +0.8 mln barrels following +1.8 mln barrels. But Tropical Storm Ida may have caused a drawdown of inventories (as did the API report showed -4.4 mln). CADJPY struggles at 85.15 trend line resistance, loking to regain 84.50, EURJPY capped at 133.70 trend line, eyeing 132.80. AUDUSD 4-hr shows bearish engulfing, pattern suggesting 0.9260.

Dollar drops across the board as risk appetite picks up from where NY left off, shrugging the sell-off in Japanese shares. GBP is amid the least gainers against USD after the minutes of the BoE revealed a 3-way split, with 7 members voting for a QE rise of $25 bln, one member voted for no raise (Dale) and one member voted for an increase of 40 bln. GBPUSD may not succeed in breaking the $1.6880s, while EURGBP faces a 1-week trend line resistance at 0.8910, with stochastics illustrating a possible 0.8930. GBPJPY enters a tight consolidation zone, which could signal a significant breakout. stochastics biased to downside. USDCAD expected to hold above 1.0460 support ahead of CAN Oct CPI (12:00 GMT) exp 1.7% y/y from 1.5%, core CPI exp 0.0% from 0.3%. CAD is propped by oil's constant probing of the $80 level. CAD EIA inventory data will also be key for CAD. US CPI and housing permits/starts due at 13:30.

Ashraf's Video Market Preview http://bit.ly/2JRgrK BoE minutes, Oil, stocks USD majors and JPY crosses.

Tomorrow's MINUTES BANK OF ENGLAND's November MPC meeting will make the case for the decision to raise QE by only 25 bln rather than 50 bln. Part of the reason to go with 25 bln has been a short term rise in inflation, before ultimately retreating below target. MORE IMPORTANTLY, watch for the breakdown of the MPC vote. If the decision was unanimous (9-0) then sterling could push higher on the rationale that all members wanted a more conservative increase in QE. If the number of dissenters (asking for 50 bln) was as many as 3 or 4, then GBP could be dragged lower, especially if stocks are under pressure at the time. Also, bear in mind the risk that the dissenters would have opted for no increase in QE at all, which could be negative. While failing to regain $1.6880 (Aug 4 low), Cable is seen supported at $1.6680 ahead of the minutes.

US Oct Indus production slows to 4-month low of 0.1% vs. exp +0.4% from revised +0.6%, while capacity utilization rose to 70.7 from 70.5. Expect further CAD losses with USDCAD eyeing 1.0615, CADJPY eyeing 83.90. EURGBP extends damage below the 0.89 support after stronger UK CPI, now eyeing 0.881561.8% retracement of the 0.8451-0.9406 move. EURJPY eyes 131.80 target. San Francisco Fed's Yellen saying stocks not massively overvalued is another way of saying liquidity to remain plentiful/rates, which is what she and Feds Lockhart and Rosengren said last week, prompting prolonged US weakness.

ASIAN & EUROPEAN markets fail to rally following the 1.4% gains in NY, further highlighting the unsustainability of the gains in the US, which have been largely dollar-driven. But even the dollar retreat stabilized as oil prices failed to break above the 21-day MA of 79. YEN STRENGTH still the name of the game as CADJPY hits 1-week low at 84.11, eyeing 83.40, EURJPY tests 132.50s and USDJPY is capped at 89.40s. GBP joins JPY in rallying after UK CPI jumped to 1.5% from 1.1% (matching forecasts), but the $1.6880 resistance still holds.

USD BRIEFLY STABILIZES after BERNANKE acknowledges USD weakness in his speech stating Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability. But as long as the central bank continues to say: inflation seems likely to remain subdued for some time, FX markets will find it hard to buy USD beyond 2 or 3 straight days WITHOUT any selling in equities. Bernanke drives down the message that USD was lower because financial stresses had stabilized. EURUSD still fails to regain 1.50 and oil fails at its 21-day MA. These important price parameters. YEN STABILITY also emegring as USDJOY remains clsoe to session lows and other yen pairs also slipping.

EURCHF DRIFTING BEYOND INTERVENTION territory of 1.51, now at 1.5082. The Swiss National Bank has intervened at 4 times near 1.51 this year in order to to stabilize excessive CHF strength. The pair did touch 1.5080s at about 4 occasions over the last 5 weeks but quickly rebounded without actual intervention. It is also possible for SNB to intervene at 1.0020s in USDCHF (currently at 1.0070s)) although the cenbank targets EURCHF rather than USDCHF. USDJPY eyes 89.10s.

Weaker than expected US Oct retail sales fail to dampen risk appetite as markets expect Bernankes speech (17:30 GMT) to once again prove negative for the greenback confirming the Feds broadening shift to dovishness (similar to this months FOMC statement and most recent FOMC speeches). Gold surges to 1134. As the Dow tests above the key 10,345 level and S&P attempts to stay above 1,100, USD weakness deepens across the board. GBPUSD still struggles to regain $1.6750s, a break of which to recall $1.6760. Oil regains $78.30, eyeing the 21-day MA of $78.94. USDCAD eyes 1.0380 support, while CADJPY and EURJPY seen retesting last weeks 86.00 and 134.30.

There was no surprise that APEC and China played failed to agree with US demands of revaluing the Chinese yuan. FX markets interpreted the news as a continuation of the status quo and more dollar weakness. US Oct retail sales due at 13:30 expected +1.0% from -1.5% and ex autos seen +0.4% from +0.5%. A return to positive territory would further boost selling of USD and JPY, but GBPUSD remains capped at $1.6740s and EURUSD still unable to regain $1.50. Keep a close watch on oil prices for the general stance in the USD, as the fuel eyes a possible recovery towards the 21-day MA of 78.94. The case of LOWER HIGHS has been an integral part of oils prci patterns over the 8 trading sessions as well as the 4 weeks. EURGBP proves once again to hold above 0.8900, now eyeing 0.8990,