Intraday Market Thoughts Archives

Dollar stabilizes as stocks pause for breath after rallying as much as 20% from their lows of 2 weeks ago--now up about 14%. Interestingly how the story remains USD-driven as the yen is now weakening against the dollar, reversing previous gains when stocks were on the upside. Check out NEW FOREX CHARTING FEATURE on the site.

More swiss franc damage as the SNB reiterates franc strength is a "problem" and adding "it is important the franc does not rise further". Such remarks are evidently negative for the currency even against the dollar. EURCHF and AUDCHF spike higher to 1.5320 and 0.7790 respectively. Although USD weakness is being pared back partly due to equity selling, oil remains underpinned above $51,while gold stands atop $950.

The narrowing consolidation on the EURAUD chart (see new chart section on the site) reflects the thre broadening strength in both AUD and EUR as the former reaps the benefits of higher yielding rallies and accelerating gains in metals, while the latter acts as the anti-dollar. But the apparantly symmetric chart suggest gradually-negative bias (AUD positive), towards the 1.925 level.

Breaking news that a US amphibious vessel collided in the Strait of Hormuz today is unlikely to have been a result ofany attacks, but oil's prolonged footting above $50.80 should continue to draw momentum traders into the $53 level and beyond. In a day devoid of economic data at a time when hefty risk appetite is increasingly sticky, momentum is unlikely to turn higher in stocks and against commodities without the emergence of any significant catalyst. Long USDCAD positions as a defensive startegy against any down turn in equities (against long EURUSD and AUDUSD) are suggested.

I've mentioned earlier the strength in copper prices as the metal hits 4-month highs on increased Chinese imports, expectations that China's stimulus would re-energize infrastructure spending and yesterday's jump prompted by the Fed's latest dosage of monetary injection. Reports that miners such as AngloGold Ashanti, the worlds 3rd biggest gold producer, may get approval for exploration in Colombia, reflects creeping confidence by producers that their favorable price outlook would compensate for production costs. Aussie is the best G10 currency positioned for copper-drive gains as Australia is the world's second biggest producer. See Chapter 8 of y book for detailed analysis on the metal-driven currencies such as the Chilean peso and Aussie and how they fared since 2000, 2002, 2005 and 2008. Aussie retreat to test 0.6820, backed by 0.6770 until fresh attempt towards 0.69.

Dollar damage intensifies as key targets in oil and USDJPY at hit (50.80 and 93.80). Todays Hot-Chart lays out the outlook for oil. US stocks pare their losses, further supporting the equity-positive, USD-negative theme. Momentum traders are now joining the fray, adding to the trend. Cable has yet to rest $1.4680, while EURUSD key target stands at $1.3855. Gold is now up $80 from yesterdays lows after respecting the $888 TL support. Readers of IMT recall yesterday's signal on JP Morgan (leader of finacials when stocks were still down) at $24, alerting advances towards the $28 target.

Currencies gaining the most against the beleaguered USD are the NOK and the AUD, followed by the Canadian dollar. CAD has turned around largely due to the oil play as US crude hits 2-mnth highs at $51.99, breaking above its 50-day MA for the first time since Aug 4th (after failing to break on Aug 21). Aussie, which struggled to join the euros gains in past days, is now outperforming EUR as gold and copper accelerate their bounce. With Australia being the second biggest exporter of copper, coppers 4-month highs are helping the currency test the 0.6970s.

Today's Financial Times has 1/2 page article in about why the Norwegian Krone could be the new safe haven currency. http://www.ft.com/cms/s/0/ff6216e2-1424-11de-9e32-0000779fd2ac.html

Readers of this website will recall my positive outlook on the NOK since the beginning of the site in September. Owners of my book (published in December) will find Chapter 8 on Commodities highlight the NOK's outperformance since 2000, 2002 and 2005.

DOLLAR BITES THE FED BULLET as the FOMC purchases of up to $300 bln in long term US Treasuries and $750 billion in MBS, sending the yield on 10-year yield treasuries plunging by 45 bps, and battering the dollar across the board. EURUSD shot through our $1.33 target to $1.3434, Aussie hammers past the 0.67 target to 0.6790, while GOLD PROVES it held again at $885 before rocketing by $50 in one day READERS OF THE past 8 HOTCHART sections were continiously warned of equity market rallies, USD damage and EUR gains vs CAD and USD. STAY TUNED FOR MORE.

Although US stocks are down, watchers of currency mkts and risk appetite keep an eye on JP Morgan stock (considered as one of the few leaders for banking sector) as it tests key resistance at 24.00 A break above 24.00 to see 28 as it's strong signal of confidence for other banking shares and financials, as well as for rest of the index. US equities to end on the positive side as after the FOMC decision, further boosting EURUSD into 1.3190, but not enough for yen weakness to boost USDJPY back above 98.50.

Euro strength broadens as USD selling intensifies as this is underlined by USDJPY hitting session lows. EURCAD breaks above 1.6580, as was warned in yesterday's Hot-Chart. Today's Hot-Chart on EURUSD re-affirms last week's warnings for $1.33. GOLD pulls back towards $900 as financial stocks occupy extra capital, which was initially a major factor in Gold's gains. Keep an eye on the $885-$890 support.

Awful UK job numbers drive down GBP across the board and make GBP one of the few currencies to underperform USD. GBP/NOK drops to 9.33, its lowest since 1977. Cable to attempt holding above TL support of $1.3845, which could call up the $1,3750s, but persistent dollar weakness is likely to temper the declines in sterling. Today's FOMC decision will likely highlight the negatives of US overborrowing and further lift EUR, AUD and NZD.

EURUSD BREAKS above $1.3055, setting up the path for $1.33 as early as next week. Dollar sell-off extends on NEWSWIRE REPORTS that the UN will study proposals of moving away from a uni-polar reserve currency system dominated by the US dollar and into a basket of group of currencies. Speculation that major central banks would begin rebalancing their FX reserves has risen since the intensification of the dollars slide between 2002 and mid 2008.

Integrating technical analysis with Intermarket analysis allows investors to gauge/quantify the significance of fundamentally-driven moves. I mentioned earlier today the importance of EURUSD close above $1.3050 (100-day MA) for prolonged gains into $1.33 ahead. London traders failed to reach that level but NY are still trying. OIL TRADERS pushed US crude to 9-week high, which could CLOSE at its highest since November above $49 per barrel. VOLATILITY traders seek to send the VIX index back under its 200-day moving average for the first time since September (after last week's close call) to gauge fresh gains in appetite.

The Norwegian Krone is the highest performing currency year-to-date (amid 11 top-traded currencies), followed by the US dollar and the British pound. The Swiss franc is the worst performing currency, followed by the New Zealand dollar and the Japanese yen. Readers of my book will note that Chapter 8 titled "Commodities Super Cycles and Currencies" highlighted the Norwegian Krone's outperformance relative to other energy currencies (Canadian dollar, Russian ruble & Mexican peso) during the following periods: Jan 2000-May 2008, Jan 2002-May 2008 and Jan 2007-May 2008.

Prospects for EURCAD are now charted in todays Hot-Chart. The Norwegian Krone is the best performing currency among the majors as of NY close, followed by the NZD, AUD and USD. GBP lags behind, but JPY is the worst performer, reflecting persistent improvement in risk appetite, which was signalled by the fact that the Nikkei-225 rallied 3% despite a negative Monday close in NY. Pesistent oil strength despite OPEC's supply hold along with higher price lows in the Baltic Dry Index require more attention.

The anticipatory nature of equity and currency markets suggests that prolonged gains in the euro remain, especially vs. USD and CAD. Although the Current Situation index of the ZEW survey continued to deteriorate, the forward-looking Sentiment index hit a fresh 15-month high. Considering the ongoing negative correlation between the US dollar and global equity indices, further advances in indices are likely to amass fresh gains in EURUSD into the $1.33 territory. A successful close above $1.3057 (100-day moving average) would be a positive sign for the aforementioned scenario.

AUSSIE BULL INTACT: Tonight's release of the minutes (Tues 12:30 am GMT) from the Reserve Bank of Australia will shed light on the cenbank recent decision to hold rates unchanged for the first time in 6 months, after having cut rates by 400-bps. Although RBA appeared to keep the door open for further rate cuts, market conditions could prompt the central bank into another rate hold next month if signs of stability in global equity markets persists, however, temporary that proves to be. I'm not giving up the possibility for another unchanged decision on interest rates. Aussie eyes 0.6720 after breaching 0.6630 (target in Fridays charts analysis). Key resistance stands at 0.6820.

Watch Ashraf on CNBC Europe at 16:05 GMT discussing FX and market appetite. S&P500 rises for the 5th straight day, longest winning streak since November (EURUSD has its longest winning streak since Dec). keep an eye on my analysis for expecting a 2-month rising cycle for global equities, which would be especially negative for USD.This weeks Federal Reserve announcement could further boost market psychology by persisting its policy of balance sheet expansion, without resorting to purchasing long term treasuries.

Latest TICS data from the US Treasury showing total net inflows into US instruments showed a -$148.9 billion in January, the biggest outflow on record. This was largely prompted by selling of US Treasuries by private investors, and to a lesser extent sovereign accounts. The drop in holdings of US Treasuries fromUK and Caribean offshore centres indicate hefty selling from hedge funds and possibly sovereign accounts listed under private fund managers. But both Japanese and Chinese holdings of US Treasuries did move higher. Todays HotChart on USDNOK illustrates the 8% decline signalled last month Feb 11th & 26th.

EURUSD enters its longest wining streak since December (when Fed announced zero rates), further supporting the argument of the peak in the US dollar and a more solid foundation for global equities. The fundamental arguments for prolonged EUR gains could emerge from increased signs that ECB rates could bottom at 1.00% (from 1.50%) and from stabilized German borrowing. This sets up EURUSD for $1.3335 as early as this week, with 1.35 likely to act as the high for the month.