Intraday Market Thoughts Archives

I'm on my way to New York for the Traders Expo (see banner for more detail) so there will be no updates today. For those in the Tri-state area, please feel free show up to the Expo at the Marriott Marquis (Saturday 4-7pm, Sunday & Monday 9-5 pm). I will holding book signings, seminars and mini lectures at and away from my booth. I'll also be distributing my latest Workbook for Intermarket Strategies.

25-year lows in japan's broader Topix index have reinvigorated the yen, while a better than expected increase in UK retail sales fails to boost sentiment. EURCHF rallies in line with yesterday's Hot-Chart analysis despite a deccline in risk appetite as the SWISS FRANC DEEPENS LOSSES across the board on the back of UBS's need to disclose the list of suspect clients and the implications for the bank and the Swiss economy. USDCHF chatters yesterday's 1.1770 target extending beyond 1.1830 resistance, while EURCHF eyes 1.50.

NOK again proves its mettle, standing as the top performing currency amid G10 FX since Wed NY close and the beginning of the month. I reiterate my bearish stance in USDNOK (as seen in last week's Hot-Chart). The 7.20-6.63 consolidation is increasingly appearing as a bearish flag, with intermediate support levels at 6.73 and 6.60. Recall that Norwegian interest rates are at 2.50% and may bottom at a much higher level than those in US, EU, UK and JP. The bullish oil inventory data are also helping NOK via the $3.00 oil bounce.

NOT A TYPO... the Fed Philly Fed plunged to an 18-yr low of -241.3 from 24.3 vs forecasts of no change. The employment and new order components were equally ugly. The higher than expected +0.4% in the Jan Leading Indicators index may be offsetting conditions, but the overall data may impose renewed downside on CAD but is unlikely to prevent USDJPY from breaching the 94.60 high.

Swiss Franc extends losses across the board after the Swiss Govt supports UBS to release the names of US clients suspected of tax fraud. While the JPY is falling against all major currencies, it is the Swiss franc that is the biggest loser of G10 currencies. With the Norwegian krone, Aussie and sterling leading the top of best performers, AUDCHF, GBPCHF and NOKCHF are posting hefty gains. USDCHF hits a 9-week high at 1.1783, coinciding with the 76% retracement of the 1.22-1.037 decline. EURCHF surges to 1.49, eyeing the 1.4970.

Yen is biggest loser and gold is the broadest winner as the metal tests $978 and JPY hits 5-week lows vs USD at the 100-day MA of 94.01. Since the MA breach hasnt been seen since September, a clear break would consist of a close above 94. But changing dynamics between risk appetite and the yen may be unfolding as the deepening gloom of the Japanese economy may not permit further yen gains during rising risk aversion. Consider starting partial yen longs vs USD at 94 and NOK longs at 7.08-10.

While much has been published about the inverse correlations between JPY and equities, the Canadian dollar is increasingly showing powerful positive correlations with equities. Despite more data gloom and weak oil prices, CAD rebounds across the board, albeit less so against AUD and NZD. A medium term outlook of 1.3100 in USDCAD is plausible, which would denote 69 in CADJPY. Argument from equities is illustrated in today's Hot-Chart.

Sterling is the second worst performer amid G10 FX since NY trade behind the franc as the minutes of the Bank of Englands latest meeting show the MPC voted unanimously in favour of credit easing (purchasing corporate bonds). Yesterday GBP fared better against USD relative to other FX mainly due higher than expected CPI but cable will likely hold above $1.4080 until M3 and retail sales on Thurs and Fri. One more intermed. downleg towards $1.3930 has yet to be played out.

Watch Ashraf discussing commodities, Baltic Dry Index, the Gold/Oil Ratio, the Canadian dollar, Australian dollar and the interaction with risk appetite.

http://watch.bnn.ca/clip140559#clip140559

Tomorrow, Ashraf will on CNBC's WorldWideExchange at 9:50 am GMT. Arabic speakers can watch Ashraf on CNBC Arabia at 8:40 GMT discussing forex, gold and the major equity indices.

As US equity indices approach Nov lows (12-yr lows in S&P and 6-year lows in the Dow), a breach of those levels is increasingly imminent. My forecasts suggest at least another 30-35% slide in the major indices into the next 6-8 months to be made possible by the next round of hedge fund (and mutual fund) redemptions. Recall that that 52% and 38% peak-to-trough declines in the S&P and Dow in the 2000-2 bear market emerged mainly due to overvalued stocks (and not on a banking or housing crisis). the likelihood for additional declines from the current 53% and 47% peak-to-trough declines is significant. I will demonstrate my cyclical analysis at next weeks New York Traders Expo. See the banner for more detail.

GBP supported by Higher than expected CPI, damaging EUR down to 0.8844 and may extend losses towards 0.8770s, but tomorrow's release of BoE minutes may stabilize EURGBP. CAD is the worst perfomer of G10 FX on combination of risk aversion and dismal CAD data (see yesterday's Hot-Chart). Euro damaged on concerns of E.European banks. USDCAD targets 1.2695, while further USDNOK upside beyond 7.09 seen unsustainable. Yesterday's HotChart on AUDCAD will remain valid for today.

Gold hits a fresh 7-month high at $962 and a new all time high vs GBP and EUR. Against the yen, gold is at 2-month high of 88,348, nearly breaching the 61.8% retracement of the move from the July record high to the October low. Japanese investors will undoubtedly target the 90,000 mark, which will fuel the metal in other currencies. The upcoming UK inflation figures are also expected to further boost the metal, and could call up the $1.4080 target for cable.

Watch Ashraf on Bloomberg TV discussing the yen and G7

http://tinyurl.com/by2orb

Canadian audience can watch Ashraf on Tuesday on BNN at 14:30 EST (19:30)

Tuesday's UK CPI release marks the start of a busy UK econ schedule as inflation couldve fallen to as low as 2.7% y/y in Jan from 1.1%, while the core rate is seen as low as 1.0% from 1.1%, which would be in line with the latest inflation reports outlook for rising disinflationary risks. Friday's Jan retail sales figures are the other major figure of the week. $1.4640 remains a key intermed resistance, while negative bias is expected to persist towards $1.4070. Today's Hot-Chart updated for AUDCAD.

Yen withstands the global sneeze as the currency maintains strength despite the 3.3% contraction in Q4 GDP after the G7 statement omitted the issue of yen strength. The JPY chart in the FUTURES SPECULATORS SECTION in the WEBSITE shows the number of contracts of yen longs relative to USD shorts at the Chicago Mercantile Exchange slipped last week to a net 43,597 contracts, down from 50,518 contracts the prior week. Considering that the figures stand below the all time high of 65,920 reached in April 2008, the yens current strength is partly underlined by lack of Japanese appetite into foreign stocks and bonds following the destruction of capital wealth of the past 2 years. Also boosting the yen is the anticipated rate cuts in the UK and Eurozone, as well as prolonged zero rates in the US.