Intraday Market Thoughts Archives

The euro lagged on Friday and closed near session lows after a Greek downgrade triggered a cascade of selling that was compounded by rhetoric suggesting a debt extension is off the table. The Canadian dollar had a soft tone on disappointing retail sales and lower inflation. CME speculative positioning showed euro longs pared by one third.

The single currency was assaulted from all sides as EUR/USD posted an outside reversal and fell more than 150 pips to 1.4155: 1) Fitch lowered Greeces rating to B+ and left it on negative watch. 2) The Bundesbank said current German GDP numbers considerably overstate the growth trend and will ease somewhat. 3) Norway suspended a $42 million grant to Greece because Greece did not live up to obligations 4)The ECBs Stark compared a debt extension to Lehmans collapse 5) Lagarde expressed frustration at Greeces inability to cut its deficit 6) Spain is holding weekend regional elections with the ruling socialists expected to lose 7) The ECB looks like its heading to the sidelines.

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The Swiss franc was the top performer as European investors looked for a safe haven and economic minister Schneider-Ammann urged the country to learn to live with a strong CHF. The second-best performer was NZD (these were also the two best performers on the week). The S&P 500 declined 0.8% and was lower for the third consecutive week. Copper flashed some optimistic signals on worldwide growth as it gained 1.3%; the weekly copper chart is beginning to look constructive after a 38.2% fall from the June-Jan rally.

Canadian retail sales were flat in March compared to the +0.9% consensus. Sales were flat for the quarter, suggesting that higher housing costs are biting into spending. Earlier CPI data was also soft, suggesting the BOC will be on the sidelines through the summer.

Weekly CFTC speculative positioning data showed that euro longs remain the largest-held position but that the net long was cut by 33% to 41.6K. Meanwhile, the overall net short USD position was pared back by 27%. The commodity block remains in a strongly net long position but it was scaled back for the second week. The net GBP position shifted to short from long and GBP is the only currency held short against USD. Positioning in JPY and CHF was relatively unchanged. All data shows positioning through Tuesday.

by AB - AshrafLaidi.com

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Euro is weak across the board on lingering Greece & Spain concerns as well as a negative Bundesbank report. CAD Dragged by weak CPI, now awaiting retail sales.

Euro fell on a combination of prolonged concerns with Greece and Spain as well as a report from the Bundesbank indicating German weakness in the foreseeable future. Also weighing on EUR were remarks by Bank of Slovakia Jozef Makuch who is also on ECBs governing council , indicating

that inflation spike is temporary and inflation is well anchored in mid to longer term in EZ. EUR currently weak across the board and even higher German April PPI rose to 1.0% from last 0.4% and on annualized basis firmed up to 6.4% from previous 6.2% did not provide support.

In Canada, May CPI decreased significantly to 0.3% (0.5% exp.) from

last reading of 1.1%. Core CPI was also on the weak side at 0.2% (0.1%

exp.) from previous 0.7% slightly undermining the need to increase

interest rates before Q4. BoC meets 5 more times this year in May,

July, September, October and December.

Markets awaits Canadian Retail Sales at 8:30 am EDT, expecting an improvement to 0.9% from Aprils 0.4%. Positive reading would mark a back to back improvement after two negative readings in February and March. Core retail sales are expected to improve slightly from 0.7% to 0.8%.

Today there are no economic releases from the US.

In absence of news releases, trading is likely to be determined by

risk on/risk off sentiment and technical indicators will become more

important.

After a strong USD close last week, USD bulls were ready to keep

pushing higher. Most US economic releases this

week disappointed (with the exception of slightly better than expected

unemployment claims yesterday) so the sentiment started to shift. Over

the past three days USD closed at lower levels each day and unless

there is a large, USD positive move during today's trading, USD will

have lost most of its gains from last week. USD bulls are unlikely to

give up just yet. Also watch out from options expiry in the US today, which could add extra volatility to indices later in the session.

By PU -AshrafLaidi.com Staff

The Bank of Japan left interest rates unchanged and didnt announce further measures to help the Japanese economy to recover from the after effects of the devastating earthquake and tsunami, preferring instead to wait and see the effects of the existing stimulus before acting further.

The yen has weakened over the past couple of days but has, as yet been unable to break and close above the 55 day MA at 82.01.

German April PPI is expected to increase slightly on a monthly basis to 0.6%, and slip back to 6% on an annualised basis. But even allowing for that it seems unlikely that any slight softness in price pressures will dissuade expectations of a further rate hike in July.

ECB member Yves Mersch is scheduled to speak on the European economy and is unlikely to talk down the prospects of impending rate hikes in the near term.

As such the single currency seems able to shrug off any concerns about sovereign debt problems and remains underpinned on rate hike expectations alone. Putting Greek worries aside, euros current strength is not that surprising given yesterday's poor US data, and its negative effect on the greenback.

The Philadelphia Fed business index for May came in at 3.9, the lowest level since October 2010 and well below expectations of 20.With existing home sales for April also declining 0.8% against an expectation of a 2% rise, market expectations remain of the view that US monetary policy is likely to remain loose even after QE2 has finished.

Also on the other side of the Atlantic Canada inflation data for April is expected to be the main focus with expectations that the recent strength of the Canadian dollar could well take the edge of inflation with expectations of a decline on a monthly basis to 0.5% from Marchs 1.1%.

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By KM - AshrafLaidi.com Staff

The dollar fell in New York trading after economicdata pointed to slowing growth and Fed speakers did nothing to haltspeculation they will remain on the sidelines for the long term. The upcomingsession features the Bank of Japan rate decision.

The USD was the worst-performing major after the Philly Fedunexpectedly tumbled to 3.9 from 18.5. It was expected to rise to 20.0. Thereport emphasizes the dawn of a manufacturing slowdown in the United States butit was just one part of an overall slump in economic data on Thursday. Existinghome sales fell to a pace of 5.05m from 5.09 (exp: 5.22m) and leadingindicators declined 0.3%. On the upside, initial jobless claims improved to409K from 438K (exp: 420K).

The data kept downward pressure on USD/JPY, which bumped uptoward 82.20 before closing at the days lows around 81.50. The Fed's Evans (dove) openly doubted that the Fed would hike this year. Fisher (hawk) continued to lament QE2 but noted that today's data was disappointing. Dudley (neutral, core member) noted that headline inflation was troubling but said it was transitory and that growth needs to pick up before employment improves. Stocks closed marginally higher for thesecond day, in part due to exuberance from the Linkdin IPO.

Asia-Pacific Preview

The Bank of Japan renders its interest rate decision in theupcoming session. There is no set time, but expect the announcement around 0500GMT. The market isnt expecting any policy changes but, as we have previouslymentioned, pressure is building on officials to do more to help the recovery.Yesterdays GDP was worse than expected and put Japan back into recession.Given the current trajectory of Q3 growth the contraction is likely to last atleast three quarters. The BOJ forecasts a negative GDP through June but may notyet see any reason to alter that stance. The key takeaways will be hints andproposals about further asset buying or other more creative measures. Theycould also try to talk down the yen. Last month Nishimura called for furtherasset purchases and a key will be if he garners support from others. Itshighly unlikely that the BOJ will announce further concrete measures but ifthey do, the reaction will be sell JPY. Otherwise, look for a flat reaction orsmall bump in JPY.

By A.B. - AshrafLaidi.com Staff

A Negative Trifecta in US data (US housing starts, leading indicators & Philly Fed) is just what the Doctor ordered for continuing Fed easing post-QE2. No, this does not mean were heading into QE3 yet. Instead, it means the normalisation process could take up to 6-months. We made our case in todays Premium piece on why the Fed will maintain its easing and the several steps it would take for it to remove accommodation. We called for EURUSD longs w/ prelim targets at 14340 and stops at 1.4210, but this needs to hold above 1.43 for the currency to avoid its 6th straight daily close below its 55 dma. See our full trading calls w/ charsts analysis in todays Intermarket Insights http://ashraflaidi.com/products/sub01/

Risk appetite is improving and higher yielding currencies are trading near their highs of the session. GBP is retracing a portion of yesterdays losses after May retail sales showed a solid reading of 1.1%, much improved from Aprils 0.3%. Retail sales often show volatile results and at least a portion of todays reading can be attributed to sales related to the Royal Wedding.

Relative strength loser is CHF after May Zew Economic Expectations index came out significantly weaker at -11.5 from last 8.8. CHF is weaker across the board. Last months print of 8.8 was the only positive reading since September 2010.

Upcoming US session will bring unemployment claims at 8:30 am EDT, expected to improve slightly to 421K from last weeks 434K. For the past five weeks market saw readings over 400K which shows labor market deterioration after 7 weeks of sub 400K readings seen during late February to early April.

At 10:00 am May Existing Home Sales will be released expected to improve to 5.21M from last 5.10M. Housing market is critically important for US consumers and while there are some encouraging signs, weakness persists. Existing home sales have been improving since August 2010 but are still far below pre-crisis levels. New home sales are still at decades lows.

Philly Fed manufacturing index will also be released at 10:00 am EDT. After a significant improvement seen at the end of 2010 and early 2011 Philly Fed index dropped in April from 43.4 to 18.5. May reading is expected to show slight improvement to 20.2.

Recent trend towards USD strength seems to be getting tired and the greenback has closed at weak levels over the past two days. From this point of view, the close of todays NY session is extremely important. Additional USD weakness and a close below yesterdays low would point to change in bias and USD could become a sell on rallies.

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by P.U, AshrafLaidi.com Staff

Sterling could extend gains on an April retail sales boost from Will & Kate, ECB on collision course with EU politicians, Japan falls into recession

After the battering the pound took yesterday from disappointing unemployment figures, and slightly dovish MPC minutes we could see a brief respite today, if as expected UK April retail sales improve from Marchs disappointing 0.2%.

Expectations are for a rise of 0.8%, as a result of a tourism and travel boost from the extended Easter break, as well as the Royal Wedding. The extended period of warm weather could also have brought forward purchases of summer clothing.

Nationwide consumer confidence data overnight has certainly not done it any favours though, slipping back slightly from the previous months 46 to come in at 43.

EURGBP resistance sits at 0.8870 after yesterdays break above 0.8780, while GBPUSD looks set to test 1.6060 while below 1.6300.

The single currency gained the most at the pounds expense yesterday on the back of some hawkish comments from Lorenzo Bini-Smaghi who insisted that monetary policy could not be tailored to suit the needs of the weakest economies, while going on to oppose any type of restructuring of Greek debt, putting him and the ECB on a collision course with EU politicians who are said to be mulling the possibility of some form of soft restructuring. Certainly Greece remains the wild card with respect to the Euro and will continue to weigh on sentiment. EURUSD resistance remains around 1.4290, the 55 day MA, but a break higher could see a run up to 1.4380.

Yesterdays FOMC minutes were pretty much a non-event with policy makers discussing how to go about normalising monetary policy post QE2, with a number of Fed members concerned about possible inflation risks. Most members felt that rate policy was the best way to achieve an exit, followed by selling off assets.

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US weekly jobless claims later today are set to remain stubbornly above the 400k mark, coming in at 420k, only slightly down from last weeks 430k.

Japanese first release of Q1 GDP figures not surprisingly marked the return of recession to the Japanese economy. Expectations had been for a decline of 0.5% with an annualised figure of -1.8%. In any event the figure was worse then expected coming in at -0.9%, with an annualised rate of -3.7%.

Industrial production data for March was also very disappointing, falling 15.5%, though given the quake hit in March, that shouldnt really have been a surprise either.

What it does mean is that the Bank of Japan will continue to keep fiscal policy as loose as possible bearing out BoJ governor Shirakawas comments yesterday about the severe state of the Japanese economy.

By KM - AshrafLaidi.com staff

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Indications that the Federal Reserve expects to see a stronger recovery before taking action helped to spark risk appetite on Wednesday. The pound underperformed on dovish BOE minutes while the kiwi dollar was the market leader. The Asia-Pacific session features Japan's Q1 GDP report.

USD/JPY slid through Asia and early European trading but climbed steadily higher in US trading as sentiment improved. Risk appetite was boosted by stocks as they bounced off key support levels. A commodities rally was led by grains and oil.

The FOMC minutes will diminish in importance because of the newly enshrined post-meeting press conference, but this edition shed light on the Fed's exit strategy. The minutes said the first step will be to halt the reinvestment of expiring securities. The second step "most" officials prefer is to hike rates which will then be followed by selling securities. This begs the question about when "extended period" will be removed, before or after re-investment ends?

The dollar slipped slightly in reaction to the overall tone of the minutes, which continued to stress that inflation was transitory. At the margins, this pushed out the horizon for rate hikes and spurred risk assets.

Asia-Pacific Preview

GBP was also hurt by ts own mcro data (Jobs & neutral stance in May minutes). GBP traders will be waiting for NATIONWIDE CONSUMER FIGURES at 1101 GMT. The market expects an improvement to 48 from 44. Confidence has been gradually declining since March 2010 and last month marked the first time confidence improved two months in a row.

JAPAN RELEASES ITS FIRST REPORT on Q1 GDP at 2350 GMT. Annualized GDP is expected at -1.8% after a -1.6% reading in Q42010. In quarterly terms, the expectation is -0.5% after a -0.3% prior. This should mark the official return to recession for Japan. The earthquake did not hit until mid-March and with the sharp declines in data since the disaster, the pain will continue as the regions badly affected by the tsunami contribute about 6.2% of Japans GDP. Expect a soft reading to be reflected in commodity currency declines and risk aversion, rather than JPY selling. Released at the same time is the broadest measure of y/y inflation in Japan, the GDP price index. Deflation is expected to worsen to -1.9% y/y from the last reading of -1.6%.

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By AB - AshrafLaidi.com Staff

GBP loses its luster after UK jobless claims come out much worse at 12.4K vs 0.700K expected. This is the worst reading since February 2010. To make things worse, March reading was revised up from 0.7K to 6.4K, which points to a significant weakening in the labor market. Nevertheless, unemployment rate has improved from 7.8% to 7.7% while the market expected worsening to 7.9%.

Another important UK news came in form of BoE MPC minutes. As

expected, voting pattern remained unchanged 6-3 in favor of keeping

rates steady. Rumors that Martin Weale had changed his vote proved

false as he did vote for a rate hike again. QE will continue to stay

at GBP 200B.

On the back of labor market disappointment GBPUSD loses all of its

yesterdays gains as it trades full cent off yesterday's highs and is

currently trading near session lows at 1.6170.

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Minutes from April FOMC meeting due at 2:00 pm EST could shed some light onto QE2 exit strategy. Considering the news conference that Ben Bernanke had right after the April FOMC meeting it is not very likely that todays minutes could shock the market with a big surprise.

USD is consolidating yesterdays losses and most currencies are trading near their yesterdays highs. It would be necessary to see another down day and another weak closing to turn the recent trend toward USD strength around and shift bias down.

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By PU - AshrafLaidi.com Staff

Bank of England minutes on tap, Greek re-profiling talk and weak US data help euro, and Australian consumer confidence.

This mornings release of the Bank of England May minutes arent likely to shed too much light on the thinking of the MPC at its June meeting given the recent change in the make up of the committee, with hawk Andrew Sentance leaving and Ben Broadbent joining.

Yesterdays surprise rise in UK CPI to 4.5%, and core CPI to record highs of 3.6% shouldnt really have been too much of a surprise given the recent record high oil price, and tax rises in the budget.

Nonetheless, GBP did rise sharply initially before slipping back again as the markets digested the fact that the Bank of England would still be in no hurry to raise interest rates due to as Mervyn King articulated earlier this month, a highly indebted consumer. The fact is the current mathematics of the voting patterns on the committee make any rate rise unlikely in the near term while we will need at least one meeting to determine new member Ben Broadbents policy take, is he hawkish or dovish?

GBPUSD resistance remains around yesterdays highs at 1.6300, near the 55 day MA.

The single currency had a slightly better day yesterday, more as a result of some pretty poor US economic data, and despite an admission from Luxembourg PM Jean-Claude Junckers that soft restructurings or re-profiling of Greek debt may be required. What this means is that the bailout terms could be extended, thus putting the day of reckoning off until further down the line. While it is an exercise in semantics it is at least an acknowledgement of some joined up thinking even if it is technically a default. The weakness in the US dollar however continues to underpin in the short term.

EURUSD resistance comes in around the 55 day MA at 1.4285, with a close above required for further gains to unfold towards 1.4380.

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AUD continues to retain its bid tone against the US dollar, holding above the 1.0500 level where there is significant support. However weakness in recent economic data underlines the recent reticence of the RBA to increase rates after data showing that wages rose by only 0.8% in the first quarter against expectations of 1.1%. Furthermore Westpac consumer confidence in May declined an unexpected 1.3%, suggesting some consumer caution in the face of concern about higher rates.

By KM - AshrafLaidi.com Staff

S&P500 is down 4% from its May highs, hitting 4 week lows. The index managed to close above its 55 dma. But do not assume that it will break it below it. Our latest Premium piece gauges the key support levels for the S&P500 as well as the other risk assets (Dow-30, FTSE-100, Russell 2000, Gold and WTI crude). We also look at 3 trading ideas for EURUSD. Click here to go directly to todays Premium piece http://ashraflaidi.com/products/sub01/

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The bond market flashed disinflationary signals on Tuesday as yields broke below key levels. Markets were otherwise calm as stocks were flat and the carry trade topped FX (AUD led and JPY lagged). The upcoming session features Japans tertiary index and data on Australian wages.

In the Treasury market today the inflation-sensitive 30-year yield fell 5 basis points to 4.22%, breaking below the 200-day moving average. Remember that just last week, the Treasury Dept. sold 30s with a yield of 4.38%. The 10-year and 5-year now also rest just above the 200 dma, with 10s today closing below 3.14% for the first time since December.

The fall in yields shows that the bond market is not concerned about inflation. The thinking is that QE2 was designed to promote inflation. As it ends, it will put downward pressure on prices as the economy slows, even though the Fed will no longer be a buyer.

Todays economic data further promotes this line of thinking. US industrial production was flat in April, missing the +0.5% consensus. The weak headline was due to a 0.4% slide in manufacturing production which was caused by slowing demand for US goods and a drop in automotive production due to the Japanese earthquake. Capacity utilization fell to 76.9% from 77.0%, it was expected to rise to 77.7%. This suggests US industry can absorb a great deal of rising demand before shortages begin to cause inflation.

We are also starting to see downgrades to US growth forecasts with Deutsche Bank pulling down its estimate for Q2 to 3.2% from 3.7% today. For inflation based on high commodity prices to take hold it the US, there needs to be stronger growth. The bond market appears to be signaling that growth will not be strong enough. This means the Fed will not implement an exit strategy, which is negative for USD. If yields continue to fall, especially long term yields, this will be one of the first signals that QE 2.5 or QE3 is being considered.

Remember that slowing growth is also a negative for growth-sensitive currencies, especially the Canadian dollar which is tightly tied to the US. The Australian dollar led today because it is tied more closely to Asia and the RBA minutes suggested interest rate hikes.

Asia-Pacific Preview

The yen slumped on Tuesday on signs that the earthquake is weighing heavily. Bank of Japan Governor Masaaki Shirakawa said the economy is in a very severe state At 2350 GMT, Japan releases the April tertiary industry index, which is a measure of the service sector. It is expected to fall 5.4% due to the earthquake but recent economic data suggests the potential for a large downside miss. Given Shirakawas comments today, pressure may be building on the BOJ to do more to support the economy.

Australias first quarter wage price index will be released at 0130 GMT. Its expected to show wages rising 4.0% y/y after a 3.8% rise in Q42010. Last weeks soft employment report cast doubt on whether the RBA will hike in June but a reading above 4.1% would probably tilt the balance in favour of a hike. A reading at 3.8% or lower may push expectations toward an August hike, rather than June or July.

By AB - AshafLaidi.com

GBP bounces off the lows after highest inflation reading since 2008, EUR supported by agreement to provide aid to Portugal. EURUSD still in a downtrend and far from turning bullish.

USD is little changed against most other currencies with the exception of GBP and JPY. GBP is once again supported by higher then expected inflation figures. UK CPI year over year came out at 4.5%, higher then expected 4.2% and up from the latest 4.0% (core 3.7% vs. 3.4%). Month over month CPI saw a print of 1%. As a result, GBPUSD jumped to 1.6307 but has met selling pressure and has retreated back pre-announcement levels at 1.6260. This reading is the highest since October 2008.

See Ashraf's long & short strategies for GBPUSD in yesterday's Premium insights http://www.ashraflaidi.com/products/sub01/access/?a=425

Bank of Englads governor Mervyn King in his Inflation Letter blames higher readings on VAT increase, high energy and import prices and sees further rise in CPI in coming months.

Euro has gained slightly against the greenback after European finance ministers agreed to provide 78B Euro aid package to Portugal. This aid has to be approved by all EZ countries. Euro is holding at session highs, currently at 1.4210 and that is despite the disappointing German ZEW economic sentiment index that came out at 3.1 much worse than previous 7.6. Market expected 4.8. This result is the worst since February and marks four months of gradual worsening in sentiment.

News releases published during the upcoming US session will include building permits that are expected unchanged at 0.59M and housing starts that are expected to improve slightly from 0.55M to 0.58M. These releases are published at 8:30 am EDT.

As QE2 is coming closer to its end, any indicators that can be used to gauge future inflation will become more closely watched. At 9:15 am EDT capacity utilization and US INDUSTRIAL PRODUCTION will be released. Capacity utilization has been slowly but steadily increasing since July 2009 and market expects another improvement from 77.4% to 77.7%. Generally, it is assumed that only move over 80% would start to create inflationary pressures. Industrial production is expected to worsen from 0.8% to 0.5%. It is however important to keep in mind that this indicator is very volatile.

Kiwi traders will be waiting for PPI q/q numbers coming out at 6:45 pm EDT. Market expects a decrease from 0.9% to 0.6%. Price action has been decidedly negative so any downside surprise is likely to punish NZD strongly.

by PU - AshrafLaidi.com staff

Euro rebounds on Portugal bailout ratification and Greek resolution optimism, UK inflation figures due and RBA minutes.

The single currency seems to be finding some support on the back of optimism that todays resumption of the EU ministers meeting will bring further clarity to the situation with respect to Greece. Formal ratification yesterday of the Portuguese bailout, overcoming Finnish objections has also calmed some frayed European nerves.

This optimism could well be misplaced, despite Angela Merkels assertion that she was against debt restructuring by any country before 2013. She went on to say that doing so could be damaging to Europes credibility. It does appear unlikely that the markets will gain any clarity today as the IMF has yet to finish its report, and Greece has until Thursday to submit a revised fiscal plan. EURUSD key resistance level remains 55 day MA at 1.4280, and support at 200 week MA at 1.4000

Sharing the limelight with Europe is the pound with the publication of UK inflation data for April. UK CPI is expected to rise slightly to 4.1% after Marchs surprise fall, though given that crude oil hit all time highs in sterling terms last month, it would not be surprising if the figures came in higher. Retail prices are expected to slip back to 5.3% from 5.4%. In any case even if the data were to come in on the high side of expectations it seems unlikely it will make any difference to the current low interest rate policy especially now that the main proponent for higher rates. Andrew Sentance, has now left the MPC to be replaced by Ben Broadbent, Goldman Sachs chief economist. Resistance on sterling at 1.6290, 55 day MA.

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The recent decline in the Australian dollar though partly due to the sell off in commodity prices was also down to this months decision by the Reserve Bank of Australias to keep interest rates unchanged at 4.75%. Given recent softness in economic data it could well be that policymakers had good reason for holding fire and todays publication of the minutes appears to confirm that prognosis. The minutes stated that the bank remained of the view that the current mildly restrictive monetary policy remains appropriate for now, even if higher rates would probably be needed later on.

Support on the AUDUSD remains around the 1.0500 level.

US housing starts and industrial production data is due out later and expected to show positive prints for April but at slightly lower levels than March.

More in depth analysis on these topics can be found in our Premium section - http://www.ashraflaidi.com/products/sub01/

By KM - AshrafLaidi.com staff.

Risk aversion was the dominant theme in markets once again Monday. The Swiss franc was the top performer followed by the yen while NZD and CAD lagged. The euro popped early in US trading while the S&P 500 fell to the lowest since April 20 and closed at 1330. The upcoming Asia-Pacific session features RBA minutes.

EUR/USD shot 150 pips higher in early New York trading to 1.4240 before slipping back to 1.4177. The reasons for the gains were unclear but several theories have been floated: 1) rumours Microsoft will by Finlands Nokia 2) the EU approved aid for Portugal and Ireland 3) German Fin Min Schaeuble hinted at further aid for Greece 4) talk that French Socialists will be defeated by Sarkozy due to Strauss-Kahns imprisonment. 5) the US officially breached the debt limit.

None of those theories are particularly convincing so we will side with flows and a possible short squeeze as the chief factors. US economic data may have weighed on the USD particularly the Empire Fed, which fell to 11.9 from 21.7 (exp: 19.6). Fears are growing that a slowdown in US manufacturing will exacerbate the trade deficit and cut into growth.

Ashraf reveals some important medium-term trend changes in EUR, DXY and GBP todays Premium Piece: http://bit.ly/jckTxN

The Canadian dollar struggled on Monday despite a 1.9% rise in March manufacturing shipments (exp: +1.7%). Some economists are now saying Q1 annualized GDP could be close to 5%. The forward looking measures in the report were excellent with unfilled orders hitting a record high and new orders posting the second largest gain on record. The market instead focused on a $2.60 fall in oil to $97 and comments from the BOCs Carney that were less hawkish than speculated. USD/CAD rose to the highest since March 29 and is trading just below the 100-day moving average a level that has been instrumental in capping rallies over the past 18 months.

Asia-Pacific Preview

The minutes of the May 3 RBA meeting will be released at 0130 GMT in the only meaningful event of the session. At the meeting the board left the cash rate unchanged at 4.75% and indicated it will remain on the sidelines as officials said the current mildly restrictive stance of monetary policy remained appropriate. The comment triggered a two-day drop in AUD but that reversed May 6 when the RBA foreshadowed a rate rise this year in the quarterly MPS. We know that a hike is not imminent but it will happen before year end. That still leaves a great deal of middle ground and the minutes may help to sharpen the focus on a particular month.

By A.B - AshrafLaidi.com Staff

EUR fails to close the day above its 55-dma after Friday's failure to do the same. These back-to-back daily failures are signaling upcoming downside for the single currency. Click on today's premium article for the updated levels on EURUSD, USDX, GBPUSD. http://www.ashraflaidi.com/products/sub01/access/?a=425

USD is giving up earlier gains after a number of US data releases disappointed this morning. Empire State Manufacturing Index disappointed when it came out at 11.9 from previous 21.7. Market expected 20.7.

TIC data describing net foreign purchases of long-term securities came out worse than expected at 24B. This reading marks deterioration as even the previous reading of 27.2B was regarded as highly disappointing. Market expected 57.7B.

Even NAHB Housing Market Index fell short of expectations when results came out at 16 compared to 17 expected.

As a result USD is giving up earlier gains across the board. EURUSD is currently 130+ points up from todays lows. Strong downtrend is however likely to attract selling. Only a close above last Fridays highs could be interpreted as a sign of diminishing bearish sentiment.

Aussie traders will want to pay attention to the minutes from the latest Monetary PolicyMeeting that will be released at 9:30 pm EDT. Over the past two weeks AUDUSD lost 500 points and according to COT report futures holdings were trimmed only a bit.AUDUSD can easily become sell on rallies and unwinding of accumulated longs could send AUD much lower. The market implied chances of a June hike fell from over 50% toabout 30% so even from a macro perspective holding AUD became less interesting then only a short time ago.

by P.U. - AshrafLaidi.com staff

Euro sustains fresh damage ahead of Ecofin, Australian home loans data undermines the AUD, Japanese consumer confidence remains low, while UK house prices slow.

The weekend news of the arrest of IMF chief Strauss-Kahn on sexual assault charges, while unlikely to affect Greece bail-out talks too much, throws an unneeded distraction and an unwanted element of uncertainty into the mix with respect to the IMFs role in bail-out talks at this weeks Ecofin meeting.

The euro had got a much needed boost early on Friday after much better than expected growth numbers from Germany and France had raised expectations of further rate increases in the short term from the ECB, after Germanys growth came in at 1.5%, well above expectations of 0.9%.

The gains werent to last, however as concerns about a plan to deal with Greeces problems continue to plague market sentiment and undermine risk appetite.

It is becoming increasingly apparent that higher interest rate expectations will not be enough to keep supporting the single currency through these testing times, especially if ministers are unable to convince the markets of a clear and coherent strategy with respect to Greece.

This mornings April euro zone CPI figures will still be monitored for any further rise in inflationary pressures. Expectations are for a month on month figure of 0.6% and year on year to remain at 2.8%.

The single currency having broken and closed below the 55 day MA at 1.4270 keeps the longer term outlook negative, and opens up the likelihood of a test of 1.4000 and the 200 week MA.

AUD slipped back recently on the back of lower commodity prices and this mornings home loans data could weigh further showing a surprise fall in March, dropping back 1.5% against expectations of a rise of 2%. This fall could stay the RBAs hand on interest rates in the short term as concerns linger about the already stretched housing market. The Australian dollar has support at 1.0500.

Economic data out of Japan showed is beginning to show an element of recovery after machine orders for March showed some recovery from Februarys earthquake affected numbers, rising 2.9% after Februarys 10% decline. Nonetheless consumer confidence remains fragile slipping back more than expected to 33.1 in April from 38.6. USDJPY has resistance at 81.30

The pound, despite concern about pressure on consumer finances due to the squeeze of austerity, is likely to remain sidelined ahead of the release of tomorrows CPI numbers which are expected to increase to 4.2% after the surprise fall to 4% in March. UK housing data continues to throw out mixed messages with Halifax house price showing some softness with a month on month rise of 1.3% for May, still positive, but slipping back from Aprils 1.7% rise.

Cable needs to get back above 1.6300 to relieve some of the downward pressure.

The US dollar index having closed above its 55 day MA for the first time since 12th January this year could well push even higher towards its 100 day MA at 76.83 if it is able to close above the 75.80 resistance area. Dovish comments last night from Atlanta Fed Lockhart, saying it was too early to talk about any type of exit from stimulus could well limit the upside initially in the short term but seeing as he is not a voting member and given the problems in Europe dips could well be fairly well supported.

May Empire manufacturing data is due out later and expected to fall back slightly.

By KM - AshrafLaidi.com Staff

The euro opened the week lower as sexual assault charges against IMF managing director Dominique Strauss-Kahn threatened to interrupt bailout talks aimed at stemming Greeces debt crisis. The upcoming Asia-Pacific session features data on Japanese corporate goods prices and Australian home loans.

Police officers in New York arrested the Strauss-Kahn leader after he boarded a plane destined for France. Strauss-Kahns lawyer said denied the charges and he will plead not guilty. Strauss-Kahn was widely expected to head the French Socialist Party and become a leading candidate in next year's presidential elections.

On Sunday, Strauss-Kahn was due to meet with German Chancellor Merkel about Greece and attend meetings in Brussels. IMF first deputy director John Lipsky will act as interim leader and European leaders said talks about Greece and other troubled nations will not be affected.

EUR/USD opened 30 pips lower at 1.4075 and the euro posted similar declines against other currencies. The scale of the declines suggests it could simply be a continuation of last weeks selloff but any fresh uncertainty about Greece is also a factor. Other market moves so far have been minimal with CAD as a minor outperformer.

The upcoming session features data on Japans corporate goods price index and core machinery orders at 2350 GMT. These are both second-tier reports. The CGPI is expected at +2.1% after a 2.0% reading in March. The data will offer some evidence about how commodity price increases are affecting business. Core machinery orders, which exclude orders for ships and from electric power firms, are expected down 9.7% in March due to the earthquake and disaster. In February, prior to the quake, orders fell 2.3%. The Cabinet Office will also release annual benchmark revisions and forecasts for April-June orders. These forecasts should shed some light on the effects of the disaster.

At 0130 GMT Australia will release data on home loans, with the media forecast calling for a 2.0% increase. The Australian dollar is vulnerable to soft housing figures because the sector is seen as overvalued.

By AB - Ashraf Laidi.com Staff