Intraday Market Thoughts Archives

German Ifo and PPI rose; UK retail sales soared by the highest in 14 months. Canadian CPI and leading indicators are next along with G20 and IMF/World bank meeting. Our short in USDCAD was unfilled by 6 pips, EURUSD longs remain in progress, the long EURJPY is done, now nearing the sort trade of the pair, Short CL_K (US crude) nears execution. See more below.

USD trades lower against all majors except JPY. European equities are gaining about 1% and the relative strength winner is CHF while JPY lags.

Despite the ongoing turmoil in the Eurozone, the German economy proved to be resilient as all of the components that form German Ifo data improved in April. Business climate rose to 109.9 from 109.8 which is the sixth monthly increase. Current assessment improved to 117.5 from 117.4 and expectations were unchanged at 102.7. German PPI rose in March to 3.3% from previous 3.2% as energy prices continue to rise. EURUSD trades at session highs near 1.3200.

UK retail sales also surprised to the upside in March as they rose to 1.8% (highest since January 2011) from -0.8% m/m (3.3% from 1.0% y/y). Core sales grew 1.5% from a revised -0.7% m/m (3.3% from 1.0% y/y). Warm weather that boosted gardening tools and clothes sales and especially car fuel sales that jumped nearly 5% as people prepared for a possible strike by fuel tanker drivers all contributed to the increase. GBP was boosted across the board on the release but it is currently losing against the EUR. GBPUSD trades above 1.6100.

The US session is limited to Canadian reports that are both due at 8:30 am ET. March CPI is expected to slow considerably to 2.1% from 2.6% y/y (core CPI seen lower at 1.9% from 2.3%). March leading indicators are anticipated lower at 0.4% from 0.6%.

There are no US reports today.

Today marks the second day for the G20 meeting in Washington. The IMF/World bank meeting begins today and continues tomorrow. The total amount in new emergency funding will be the key.

Our short in USDCAD was unfilled by 6 pips, EURUSD longs remain in progress, the long EURJPY is done, now nearing the sort trade of the pair, Short CL_K (US crude) nears execution. Both AUDUSD and gold are in progress. For direct access to these ideas, click here: http://ashraflaidi.com/products/sub01/access/?a=628 Non Subscribers, can click here to join: http://ashraflaidi.com/products/sub01

Another disappointing report on initial jobless claims fanned the QE3 flames. GBP was the top performer on the day while JPY lagged. The upcoming session is quiet, save for the Japanese tertiary industry index. Thursday's Premium Intermarket Insights charts the periodicity of Eurozone bailouts and has trading ideas on EURUSD, EURJPY and more below.

Initial jobless claims at 386K were well above the 370K expected. The previous report was also revised higher to 388K from 380K. At the same time, existing home sales fell 2.6%, well below to +0.5% consensus.

The reaction was a fall in USD/JPY and a rally in gold as the market priced in a renewed chance of QE3. The soft jobless claims report is the second in a row but it may have been skewed by the Easter holiday. A third consecutive miss would raise concerns at the Fed and about the durability of the US recovery.

Early in US trading a rumor about a French downgrade sparked a fall in EUR/USD to 1.3070 but as officials denied the chatter, the euro climbed back above 1.3150.

European stocks continued to decline, including a 2% fall in Spanish stocks pushing them to a 2-year low. The S&P 500 fell 0.6% to 1377.

The focus now shifts to the IMF meetings in Washington. A draft communiqué said significant downside risks still remain but made no mention of increased funding. The IMF hoped to raise $600 billion to give it the firepower to deal with a potential European disaster but US opposition means it will likely fall short with estimates around $450 billion in new funding. A total of $350 billion has already been pledged but China and other developing nations are expected to kick in the rest.

The lone event on the Asia-Pacific calendar is Japan’s tertiary index for February at 2350 GMT. The consensus is for a 0.7% rise after a 1.7% decline in February.

Thursday’s Premium Intermarket Insights charts the periodicity of Eurozone bailouts and has trading ideas on EURUSD, EURJPY, AUDUSD, USDCAD, gold, and US crude oil. For direct access to these ideas, direct access is found here: http://ashraflaidi.com/products/sub01/access/?a=628 Non Subscribers, can click here to join: http://ashraflaidi.com/products/sub01

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FX algos and mean-reversion traders see no economic value in breaking EURUSD out of its 2-week long consolidation range of $1.30-1.32 before next Wednesdays key FOMC decision, which could well deliver market-destabilizing outcome of one-more hawkish member in addition to Mr. Lacker. Looking at the frequency of Eurozone rescue packages and ECB operations, note that the first three bailouts were given at 7-month intervals (see chart), followed by the first LTRO (December 2011), which was deployed 8 months after Portugals bail out. For the trading implications of these ideas, see our latest Premium Intermarket Insights here: http://ashraflaidi.com/products/sub01/access/?a=628 Non Subscribers, can click here to join: http://ashraflaidi.com/products/sub01

French and Spanish bond auctions. The market will focus on jobless claims; existing home sales; Philly FED manufacturing and Eurozone consumer confidence. GBP could respond to Adam Posen speech during the afternoon.

The greenback was under pressure after the London session started but later erasd all losses. European equities are gaining about 0.75% and the relative strength winner is CAD while JPY is the weakest.

There were no European data releases during the London session. The focus was on the French and especially the Spanish bond auctions. France nearly reached a full take up as it sold various bonds worth of EUR 7.973 bln vs. EUR 8 bln target.

Spain had a solid auction as it sold EUR 2.541 worth of 2014 and 2022 bonds vs. EUR 2.5 bln target. 2014 bond averaged marginally higher yield 3.463% from 3.495% with improved cover 3.29 from 2.0 while the 2022 bond yield rose to 5.743% from 5.403% and cover improved to 2.42 from 2.2. The common currency strengthened on the release but quickly gave up most of its gains. It currently trades around 1.3115. The 10 year yield trades comfortably below the 6% mark around 5.80%.

The US session starts with jobless claims at 8:30 am ET that are seen at 370K after jumping to multiweek highs at 380K last week.

The next batch of data is due at 10:00 am ET. Existing home sales are seen higher in March at 4.62M from 4.59M and Philly FED manufacturing is anticipated slightly lower in April at 12.1 from 12.5. Eurozone consumer confidence is expected to remain steady in April at -19.

GBP could respond to MPC member Adam Posen's speech in Edinburgh that starts at 1:00 pm. Adam Posen's decision not to vote for additional QE underpinned GBP yesterday and the strength continues today. Financial markets could also react to G20 meeting that starts today in Washington. Topics for discussion include persistently high oil prices and IMF's calls to increase available resources.

Monday's Premium Trades saw our both EURUSD shorts and $EURJPY longs hit all targets, with AUDUSD and shorts & 1 gold short in progress. 1 oil long done it all targets & 1 oil short stopped out. Direct Access : http://ashraflaidi.com/products/sub01/access/?a=626 Nonsubscribers can join here: http://ashraflaidi.com/products/sub01/

Markets are already bracing for Thursday's Spanish 2 and 10-year auctions. The sale aims to raise between 1.5-2.5 billion euros. The two-year auction should be relatively well-subscribed because Spanish banks are estimated to have 30% of their LTRO still to invest. NZ CPI was in line with expectations. Japan trade data is next. Mondays Premium Trades saw our both EURUSD shorts and EURJPY longs hit all targets, with AUDUSD shorts in progress. See below for detail

The key is the 10-year sale. The benchmark borrowing rate has fallen to 5.82% after hitting a four-month high of 6.16% on Monday. We believe the fall comes due to the market anticipating a successful result.

This is a re-opening, meaning the government is adding to an already-existing benchmark. It was originally sold in November but the most-recent re-opening of this bond came Feb 8 with a yield of 5.40%.

There is already more than 11 billion euros outstanding in this issue so this auction will amount to only about 10% of existing supply -- an amount that should easily be swallowed below 6%. This, combined with a bid-to-cover ratio above 2.2 and more than 1 billion euros dedicated to 10s is a relatively easy feat to achieve and is likely to push the euro to the top end of its recent range at 1.32. A yield above 6% with a bid-to-cover below 2 is a red flag that would send the euro toward 1.30.

The results will be released at 0840 GMT

Wednesday’s US session was relatively quiet as the euro edged higher to 1.3120 from 1.3080. The pound was an outperformer due to the more hawkish comments from the Bank of England and EUR/GBP fell to a 19-month low.

An IMF report highlighted the enormous task of deleveraging European banks, saying they may have to sell $3.8 trillion in assets. This will create positive inflows into EUR, leading to inexplicable moves higher but it will eventually give way to long-term weakness.

The Asia-Pacific session has been relatively quiet with Q1 New Zealand inflation as expected at 1.6% y/y. At 2350 GMT, Japan releases trade balance numbers for March. A deficit of 223B yen is expected but export growth is more critical to the economy. A rise of 0.2% is expected.

Mondays Premium Trades saw our both EURUSD shorts and $EURJPY longs hit all targets, with AUDUSD and shorts & 1 gold short in progress. 1 oil long done it all targets & 1 oil short stopped out. Direct Access : http://ashraflaidi.com/products/sub01/access/?a=626 Nonsubscribers can join here: http://ashraflaidi.com/products/sub01/

Ashraf's Video & Charts Analysis with the Financial Times' John Authers, discussing April tops and potential catalysts from the Fed later this month as well as Spain http://video.ft.com/v/1568274853001/Another-cruel-April-

UK labor market improved; smaller chance of more QE in the UK after dovish Posen refrained from voting for more QE;; Eurozone current account in deficit; Swiss ZEW rose; German auction. Market turns to IMF report, BOC monetary policy report and press conference and crude oil inventories. Mondays Premium Trades saw our both EURUSD shorts and EURJPY longs hit all targets, with AUDUSD shorts in progress. See below for detail

USD firms across the board except against GBP in the ongoing session. European equity indices are losing over 1% and the relative strength winner is GBP while JPY is the weakest.

The GBP experienced soared after the labor market data showed a slight improvement. UK claimant count declined to 3.6K in March after 4.5K in February while the claimant count rate remained steady at 4.9% of the workforce. The ILO unemployment rate declined to 8.3% from previous 8.4%.

Also powering GBP were chances of diminishing QE after MPC meeting minutes revealed that the dovish Adam Posen voted to keep QE unchanged which keeps David Miles as the only member who wanted to increase asset purchases by GBP 25 bln. The decision to keep rates unchanged was unanimous. The BOE also noted that the CPI is likely to remain above 3% into the 2H while the MPC could not judge when the inflation will return to target.

In other news, Eurozone current account changed from EUR 3.7 bln surplus to EUR 1.3 bln deficit in February and the Swiss ZEW economic expectations rose to 2.1 in April from previously unchanged print.

German sold EUR 4.206 bln in 2 year bond vs. EUR 5 bln target. The average yield hit a record low at 0.14% from 0.31% and the cover remained unchanged at 1.8.

The calendar for the US session is short today. The IMF will publish the global financial stability report at 9:00 am ET, at 10:30 am ET the BOC will release its monetary policy report and the Energy Information Administration will publish the latest crude oil inventories that are expected to decline to 1.6M barrels from 2.8M barrels.

CAD traders will also focus on BOC press conference that starts at 11:00 am ET.

Mondays Premium Trades saw our both EURUSD shorts and $EURJPY longs hit all targets, with AUDUSD and shorts & 1 gold short in progress. 1 oil long done it all targets & 1 oil short stopped out. Direct Access : http://ashraflaidi.com/products/sub01/access/?a=626 Nonsubscribers can join here: http://ashraflaidi.com/products/sub01/

The Bank of Canada hinted at future rate cuts, sending CAD broadly higher. Risk trades strengthened on optimism about Europe and the yen lagged. Chinese real estate data will be the highlight of the upcoming session. Latest Premium Intermarket Insights on EURUSD, EURJPY, with USDCAD shorts and US crude longs hitting all targets.

The Bank of Canada said removing monetary stimulus “may become appropriate” after holding rates at 1.00%, as expected. The BOC also raised its outlook for Canadian growth this year to 2.4% from 2.0% while taking its 2013 GDP forecast down by roughly the same level.

The market has raised expectations of a hike in 2012 to 70% and some economists say it could come as soon as June. USD/CAD slumped to 0.9864 after the decision but remains in its well-established range from 0.9850 to 1.0050.

Overall news was mixed as US housing starts and industrial production disappointed but the market was focused on a decent Spanish bond auction and the positive ZEW data. The S&P 500 climbed 1.5% and the Italian MIB gained 3.7%. EUR/USD finished the day virtually flat but the yen was broadly weaker.

The IMF raised its global growth forecast to 3.5% from 3.3% (as rumored) and said US growth will be 2.2%, which is above its previous forecast but below the consensus. IMF officials said Spain and Italy are likely to miss deficit forecast by a significant margin.

The first notable report of the session comes at 0030 GMT when Westpac releases its leading index for Australia. In January, the index climbed 0.6%.

At 0130 GMT, China will release data on property prices for March. This is a relatively new report but it is quickly gaining attention because of the potential for Chinese housing to damage global growth.

Latest Premium Intermarket Insights on EURUSD, EURJPY, with USDCAD shorts and US crude longs hitting all targets. For direct access, click here: http://ashraflaidi.com/products/sub01/access/?a=626 Nonsubscribers can join here: http://ashraflaidi.com/products/sub01/

UK and Eurozone CPI rose; German ZEW improved; Eurozone ZEW higher; solid Spanish auction. Market turns to BOC rate decision, building permits, housing starts and IMF economic outlook. Latest Premium Intermarket Insights on EURUSD, EURJPY, AUDUSD, gold & US crude oil are below.

Strong European data along with solid Spanish auction helped to underpin risk during the London session. The USD is lower across the board and European equities are gaining over 1%. Relative strength winners are GBP and CAD.

High consumer inflation in the UK proved to be stickier than the BOE anticipated as March CPI rose 3.5% from previous 3.4% (core CPI rose 2.5% from 2.4%). This is the first inflation increase since September 2011 and it greatly reduces chances of additional QE announcement during MPC May meeting. GBPUSD rose sharply on the announcement to 1.5968.

Rising prices are also a problem in the Eurozone as CPI rose in March to 2.7% from 2.6% y/y (core CPI rose to 1.6% from 1.5%). The increase is mainly attributed to rising energy costs.

German ZEW economic sentiment rose to 23.4 in April from 22.3 in March and the current conditions improved to 40.7 from 37.6. Eurozone April ZEW economic sentiment improved to 13.1 from 11.0 which was the 5th back to back advance.

Awaited Spanish auction for 12 and 18 month bonds resulted in higher yields but the cover improved and the take up was above target as Spain sold EUR 3.18 bln vs. target EUR 2-3 bln. Spanish 10 year yield fell back below 6% to 5.92%.

The NY session starts at 8:30 am ET with March building permits and housing starts that are seen at 0.71M from 0.72M and at 0.71M from 0.7M respectively. The market could also respond to ECB president Mario Draghi who delivers opening remarks at the ECB statistics conference in Frankfurt.

BOC announces their rate decision at 9:00 am ET. It is widely expected that the rate will remain unchanged at 1% but if the BOC hints a coming hike in the accompanying statement, the CAD would rise.

The markets also await world economic outlook that the IMF will release at 9:00 am ET. Capacity utilization and industrial production come 15 minutes later and are expected to decline slightly to 78.6% from 78.7% and rise to 0.4% from 0% respectively.

Our latest Premium Intermarket Insights contain Trades in EURUSD, USDCAD, EURJPY, gold, & USD crude. Direct access to these trades is found here: http://ashraflaidi.com/products/sub01/access/?a=626 Nonsubscribers can join here: http://ashraflaidi.com/products/sub01/

A strong US retail sales report was balanced by a sharp fall in the Empire Fed. The US dollar fell in North American trading and the yen was the best performer on the day. The RBA minutes are the highlight of the upcoming session. Latest Premium Intermarket Insights on EURUSD, EURJPY, AUDUSD, gold & US crude oil are below.

US retail sales climbed 0.8% in March compared to the +0.3% expected. Excluding autos and gas, sales rose 0.7% compared to +0.5% expected. Weather effects continue to plague analysis of economic news as some market watchers blamed an outside gain in building materials for the gains.

Separately, the Empire Fed dropped to 6.56 from 20.21, well short of 18.0 expected. The details of the report were less gloomy than the headline as new orders were flat and employment picked up.

The market entered US trading amidst heightened concerns about Spain after 10-year yields rose as high as 6.16%. Spain is considering seizing power from regional governments who have been unable to trim deficits. Worries about Italy also arose as leaders delayed the release of public borrowing forecasts.

But worries about the European crisis were brushed aside in US trading as EUR/USD surged to 1.3148 from 1.3025 on what could be repatriation of funds by European banks to relieve the tension on the latest market woes. The move left many market watchers without answers but many fingers were pointed at repatriation flows. Ultimately, if periphery yields continue to rise, the euro will fall.

The highlight of Asia-Pacific trading are the RBA minutes at 0130 GMT. The central bank was dovish in the statement and further comments that suggest rate cuts will weigh on the Australian dollar.

Another report to note comes at 0430 GMT when Japan releases final February industrial production data. The initially reported +1.5% y/y reading is not likely to be significantly revised. A meeting of Japan’s cabinet may also include renewed talk of yen intervention.

The last time we had 6 consecutive monthly declines in the VIX was in 2003, which was also the end of the Feds easing campaign following the 2000 tech bubble. S&P500 is down 3.3% from 4-year high. But 7% is the maximum decline the index has posted without making any deeper correction. Find out what it means for our latest Intermarket Premium Trades http://ashraflaidi.com/products/sub01/access/?a=626 Nonsubscribers can join here: http://ashraflaidi.com/products/sub01/

We warned back in March that April proved to be a difficult month over the last 2 years. The VIX is on its way of posting the first positive month since September. The last time we had 6 consecutive monthly declines in the VIX was in 2003, which was also the end of the Feds easing campaign following the 2000 tech bubble. S&P500 is down 3.3% from 4-year high. But 7% is the maximum decline the index has posted without making any deeper correction. Find out what it means or our latest Intermarket Premium Trades http://ashraflaidi.com/products/sub01/access/?a=626 Non-Subscribers can click here http://ashraflaidi.com/products/sub01/

Ashraf reiterates the warning from March that April proved would be a difficult month in equities as was the case in over the last 2 years. Also adding his take on Chinas currency, Eurozone volatility, solvency vs. liquidity & nervousness ahead of the April 25 FOMC. http://youtu.be/4bMpNeKzU34

EURUSD declines to 1.30 as Spanish yields hit 6.17%; Swiss PPI declined and Eurozone trade surplus fell; sovereign issuance; Chinese yuan declined. Market turns to US retail sales, empire state manufacturing, TIC flows and business inventories.

Euro came under pressure immediately when Asia opened and the selling intensified further when European traders got to their desks. Once EURUSD triggered various option structures below 1.30 it started to consolidate. The tone remains heavy and retracements have been shallow.

Spanish yields hit a fresh high on th eyear at 6.15% on continued concerns about the banking sector and the budget deficit. Spanish 10 year yield reached 6.156% today while even two weeks ago it yielded 5.3%. The 10 year German-Spanish spread rose to 444 bps.

European data calendar was short today: Swiss PPI declined in March to 0.3% from 0.8% m/m (-2% from -1.9% y/y) and Eurozone trade surplus declined in February to EUR 3.7 bln from March's EUR 5.3 bln.

The bond market will continue to be in focus this week. According to MNI, the sovereign bond issuance is estimated at EUR 19.63 bln this week from EUR 14.4 bln last week. Focus will be on especially on Spanish debt auctions on Tuesday.

The first day of trading with the new 1% trading band, Chinese yuan declined 0.3% which would be comfortably within the old 0.5% band. Yuan closed at 6.3150 from Friday's 6.3030.

The US session starts at 8:30 am ET with March retail sales that are expected to decline to 0.4% from 1.1% (core sales to fall to 0.6% from 0.9%). Empire state manufacturing is seen lower in April at 18.1 from 20.2.

Canadian foreign securities purchases from February are due at 8:30 and should rise to CAD 4.23 from CAD -4.19.

Long term TIC flows are due at 9:00 am ET and are anticipated lower in February at USD 40.7 bln from USD 101 bln and February business inventories at 10:00 am should stay steady at 0.7%.

Market volatility could also increase at 12:30 pm when Cleveland FED president and FOMC member Sandra Painalto delivers a speech on economic outlook.

Risk trades reeled at the end of last week but early indications suggest a small bounce in sentiment. Last week, the yen was the best performer while the pound sterling lagged. Weekly CFTC data showed a renewed interest in euro shorts. See below regarding Ashraf's take on China's decision to widen its RMB band.

The S&P 500 closed down 1.25% to 1370 on Friday to cap the worst week of 2012. Early indications are for modest gains in risk trades to start the week, with AUD and NZD higher.

On the weekend, the ECB’s Asmussen told the WSJ that Spain is on track to regain investor confidence. The brave words mask what is surely concern behind the scenes as Spanish 10-year yields climbed 16 basis points on Friday to close at 5.98%. Asmussen added that the worst of the crisis appears to be over.

European officials are travelling to Washington this week to lobby the IMF and partner nations to contribute more funds. Success is not assured as many nations continue to call on Europe to do more to add to its firewall.

Spain’s deputy prime minister called on the ECB to resume bond purchases in comments on Friday.

Data is light to start the week with Japan releasing March nationwide department store sales at 0530 GMT. The figures are unlikely to make waves in the market.

Released earlier were New Zealand house sales from REINZ. March sales rose 1.9% m/m for the best monthly result since Nov. 2001.

On CHINA’s DECISION TO WIDEN its currency fluctuation band against the USD to 1.0%, Ashraf told ALArabiya (see here: http://youtu.be/C0JyNySbyIY ) is another signal that the Chinese yuan (RMB) will be heading lower or remain flat at best into the end of the year. Ashraf has shown one day before today's announcement how CNY (green line) was immobile during the 2008 financial crisis. Today, the currency seems to be entering a new phase of immobility, but this time, justified by weakening data (GDP, CPI and trade balance) . As the currency remains unchanged (or declines) and GDP growth consolidates to 7.5% level, this raises serious questions about Chinese overall commodity demand. Copper (China's hot commodity) is already 20% below last year's highs. If commodity traders no longer find solace from the Fed asset purchases, then the short-lived declines we saw recently in metals and energy may be here to stay... especially when combined that sluggish Chinese demand and a weaker CNY.

Commitments of Traders

EUR net short position increased to 101K from 79K

JPY shorts were relatively unchanged at 66K compared to 65K

Sterling shorts more than doubled to 19K from 9K

CHF shorts cut positions after the breach of the floor, to 10K from 15K

Commodity currencies remain in net long positions against the US dollar

AUD longs were scaled back to 39K from 49K

CAD longs were trimmed to 28K from 29K

NZD longs edged higher to 7K from 6K

The data is as of the close on Tuesday

Ashraf tells AlArabiya (300-word English synopsis provided below video clip) that China's decision to widen its currency fluctuation band against the USD to 1.0% is another potentially negative sign for the RMB. He also talks about whether the implications of traders' assault on Spanish government bonds. Watch here: http://youtu.be/C0JyNySbyIY