Intraday Market Thoughts Archives

Moody's downgraded the UK's govt credit rating to Aa1 from AAA after the US closing bell on Friday, sending GBPUSD to 1.5130 from as high as 1.5320s. Moody's said sluggish UK growth likely to extend to H2.Despite identifying a doji candle in GBPUSD in Thursday's candle, we used the formation to anticipate a rebound from 1.5220s to 1.5320s on the following day before selling again. Both cable shorts from Thursday were filled at 1.5300-1.5350 on Friday, and hit their final targets at 1.5190 & 1.5150. Here is the rationale used for Thursday's Premium Insights on GBPUSD “The downtrend remains intact despite the bullish turns in the short-term (daily) shown in terms of the daily doji candle and their stabilizing stochastics. Weeklies are also appearing stable but we should not let that overshadow the deteriorating bearishness on the monthlies. This has been the prevailing theme in the last 3 Premium editions. Instead of issuing a dual trade of going long and followed by shorts, we will issue 2 shorts placed higher from current levels. Capping the bounce near 1.5280-1.5320 remains the strategy for the next 7-10 days”.  Both USDCAD trades hit their final targets and two more were open on Friday. The short in EURUSD awaits final target at 1.3140. See latest Premium Insights for the charts & latest trades.

Moody's downgraded the UK's govt credit rating to Aa1 from AAA after the US closing bell on Friday, sending GBPUSD to 1.5130 from as high as 1.5320s. Moody's said sluggish UK growth likely to extend to H2.Despite identifying a doji candle in GBPUSD in Thursday's candle, we used the formation to anticipate a rebound from 1.5220s to 1.5320s on the following day before selling again. Both cable shorts from Thursday were filled at 1.5300-1.5350 on Friday, and hit their final targets at 1.5190 & 1.5150. Here is the rationale used for Thursday's Premium Insights on GBPUSD “The downtrend remains intact despite the bullish turns in the short-term (daily) shown in terms of the daily doji candle and their stabilizing stochastics. Weeklies are also appearing stable but we should not let that overshadow the deteriorating bearishness on the monthlies. This has been the prevailing theme in the last 3 Premium editions. Instead of issuing a dual trade of going long and followed by shorts, we will issue 2 shorts placed higher from current levels. Capping the bounce near 1.5280-1.5320 remains the strategy for the next 7-10 days”.  Both USDCAD trades hit their final targets and two more were open on Friday. The short in EURUSD awaits final target at 1.3140. See latest Premium Insights for the charts & latest trades.

Euro shrugs the powerful jump in Germany's Feb IFO survey as it struggles around 1.3150s ahead of the Sunday's Italy elections. Both USDCAD longs hit their final targets from Feb 19 trades, causing a breakout of an important confluence –i) breaking the Sep channel; ii) testing above the 200-WMA and possibly closing above it for the 1^st time since July 2009. As  a result, we are adding 2 NEW TRADES on USDCAD as well as 2 new charts on EURUSD and 1 on USDCAD. The SHORT part of the 2 DUAL trades in EURUSD is 5 pips away from hitting all targets, while we await the LONG part of that trade to be executed. Expect much volatility ahead and after Sunday's elections in Italy but do NOT lose sight of the fact that risk-off in FX (boosting USD & JPY) is diverging away from equities, with the latter showing unusual resilience in European bourses. Latest Premium Insights show these latest charts & trades.

Relatively hawkish remarks from RBA governor Stevens on Friday morning (Aussie time) indicating the end of the slowdown in China, lifting the currency. Stevens also explained the Aussie remained robust due to other central banks' monetary policies.  After adding 5 new trades on Feb 21 (GMT evening), we are adding the rest of the trades, on AUDUSD, EURJPY, AUDJPY, EURGBP, gold, silver and oil. USDCAD and AUDUSD remain in progress. See all in the latest Premium Insights.

Weaker-than-expected economic data weighed on risk trades and USD/JPY on Thursday. The yen was the top performer while the euro lagged on soft Eurozone PMIs. Early in the Asia-Pacific region, comments from RBA Governor Stevens have boosted the Australian dollar. New Premium Insights have been issued on Thursday evening: EURUSD (2 dual), USDJPY (1) and GBPUSD (2) ahead of Friday's IFO survey from Germany. The key event remains Tuesday's testimony by Fed Chairman Bernanke. Trades on the rest of the markets will be issued on Friday in an update to the latest Premium Insights.

The market was less-certain of the direction of the US economy after some softer figures. The Philly Fed declined to the lowest since June at -12.5, much worse than the +1.5 reading expected. Initial jobless claims also disappointed with a 362K reading compared to the 355K consensus forecast. The four-week moving average for claims is now moving higher.

The weak numbers weighed on the slumping commodity currencies. USD/CAD rose for the fifth consecutive day and AUD/USD declined to the lowest since October. The industrial metals have declined sharply in the past two weeks, which is flashing a warning sign about the global economy.

A number of Fed officials spoke Thursday and attempted to shed light on the direction of economy and rates but minimal new ground was broken. Fisher and Bullard repeated their usual hawkish rhetoric while San Francisco Fed President Williams said he expects unemployment above 7% through 2014.

Yesterday's FOMC minutes expressed no concern about inflation and that tone is likely to continue after the Feb CPI rose 1.6% year-over-year, precisely in line with estimates.

 In Australia, Stevens boosted AUD/USD a half-cent during testimony to lawmakers. He continued to warn the investment boom was peaking but said China's economy is picking up and that a great deal of stimulus was already in the pipeline. The final comment could indicate an unwillingness to lower rates further.

There are no other noteworthy events in the region.

Weaker-than-expected economic data weighed on risk trades and USD/JPY on Thursday. The yen was the top performer while the euro lagged on soft Eurozone PMIs. Early in the Asia-Pacific region, comments from RBA Governor Stevens have boosted the Australian dollar. New Premium Insights have been issued on Thursday evening: EURUSD (2 dual), USDJPY (1) and GBPUSD (2) ahead of Friday's IFO survey from Germany. The key event remains Tuesday's testimony by Fed Chairman Bernanke. Trades on the rest of the markets will be issued on Friday in an update to the latest Premium Insights.

The market was less-certain of the direction of the US economy after some softer figures. The Philly Fed declined to the lowest since June at -12.5, much worse than the +1.5 reading expected. Initial jobless claims also disappointed with a 362K reading compared to the 355K consensus forecast. The four-week moving average for claims is now moving higher.

The weak numbers weighed on the slumping commodity currencies. USD/CAD rose for the fifth consecutive day and AUD/USD declined to the lowest since October. The industrial metals have declined sharply in the past two weeks, which is flashing a warning sign about the global economy.

A number of Fed officials spoke Thursday and attempted to shed light on the direction of economy and rates but minimal new ground was broken. Fisher and Bullard repeated their usual hawkish rhetoric while San Francisco Fed President Williams said he expects unemployment above 7% through 2014.

Yesterday's FOMC minutes expressed no concern about inflation and that tone is likely to continue after the Feb CPI rose 1.6% year-over-year, precisely in line with estimates.

 In Australia, Stevens boosted AUD/USD a half-cent during testimony to lawmakers. He continued to warn the investment boom was peaking but said China's economy is picking up and that a great deal of stimulus was already in the pipeline. The final comment could indicate an unwillingness to lower rates further.

There are no other noteworthy events in the region.

New Premium Insights have been issued on EURUSD (2 dual), USDJPY (1) and GBPUSD (2) ahead of Friday's IFO survey from Germany. The key event remains Tuesday's testimony by Fed Chairman Bernanke. Trades on the rest of the markets will be issued on Friday in an update to the latest Premium Insights.

As powerful as the Fed's December decision to go “all in” via its $85bn in monthly asset purchases, evidence is increasingly showing that such aggressive easing may have been supported by a slim majority inside the FOMC. Here is why via charting unemployment, Fed balance sheet, S&P500 & Fed Funds rate.

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Ashraf's webinar on FX & commodities with James Chen for City Index Account Holders is at 18:00 GMT. Ashraf's part begins at 19:00 GMT. Click here to subscribe

Dollar Jumps After FOMC Minutes, Gold Sinks

A less-dovish tilt in the FOMC minutes led to a US dollar rally and a drop in gold. On the day the US dollar was the top performer while cable fell to a two-and-a-half year low. The Asia-Pacific calendar is light but includes Chinese leading indicators. Ashraf has opened FULL ACCCESS to the latest Premium Insights for a limited period of time. see link below at the FINAL PARAGRAPH of this IMT.

Several FOMC members argued the Fed should be ready to alter the $85 billion monthly pace of QE, according to the minutes of the Jan 30-31 meeting. The comment certainly wasn't a smoking gun but it emphasized that QE has peaked.

The US dollar made broad gains following the minutes, particularly against the euro and pound. EUR/USD dropped 75 pips to 1.3275 while sterling plummeted below the 2012 low of 1.5235 to the lowest since 2010.

Earlier in the day, Ashraf argued for continued to cable shorts based on relatively neutral positioning in the CFTC data.

Gold was the other big story of the day as it fell more than $40 to $1564. There were rumors about a commodity fund liquidating but it was more-likely a short squeeze after several days of declines. The mid-2012 lows near $1525 are now in focus.

Despite the improved tone from the Fed, there are reasons for concern. Heavy equipment maker and global economic barometer Caterpillar warned of a 4% y/y drop in business and US housing starts fell 8.5% in January. Canadian house prices also declined for the fifth consecutive month.

Another look at the health of the global economy comes with the Conference Board's January leading index for China at 0200 GMT. The release isn't typically a market mover but with nothing else on the calendar, it will attract extra attention.  TEMPORARY FULL ACCESS TO LATEST PREMIUM INSIGHTS

We will not restate the usual fundamental & technical factors cited in every blog on why GBP is falling because those were mentioned in our Premium service 6 weeks ago. In fact, all 4 GBP shorts agaist USD & EUR hit their targets over the last 8 days. Instead, here is a chart on why GBP sorts are far from their 2010 highs. Remember what happened in May 2010? See here for more detail

The pound hit a fresh seven-month low on worries about the BOE minutes and a downgrade rumor. The Australian dollar was the best performer on the day. Upcoming events include the Japanese trade balance and comments from the RNBZ leader. A rumour circulated in early US trading that S&P was prepared to downgrade the UK's sovereign rating. Cable slipped 30 pips to 1.5460 and eventually to a 7-month low of 1.5416. Both GBPUSD Premium shorts remain in progress as do USDCAD longs. EURJPY, USDJPY, AUDJPY and EURJPY hit their targets. See more on the trades in progress in the latest Premium Insights.

The rumour appears to be false but the price action shows the unwillingness to buy the pound, especially ahead of the BOE minutes on Wednesday. The minutes could show a lively debate about further easing as the economy struggles.

The Canadian dollar continued to weaken after a disappointing wholesale sales number and indications of weakness in the Toronto housing market. USD/CAD broke above 1.01 on Monday in low liquidity but held above that key technical level today, indicating more weakness is likely on the way.

Highlights on the calendar in Asia trading include January Japan trade balance at 2350 GMT. BOJ member Morimoto also delivers a speech at 0030 GMT. There is also the all industry activity index at 0430 GMT; it is expected to rise 1.7%.

At 0230 GMT, the focus shifts to a speech from RBNZ governor Wheeler. With the kiwi dollar just 3 cents from a record high, he may attempt to talk down the currency.

On Jan 23 we issued a piece reiterating CAD bearishness at a time when several pundits favoured the loonie over its commodity counterpart down under. A few days later we brought back USDCAD to the Premium Insights. As USDCAD breaks above 1.01 today, coupled, it is worth issuing the latest balance of upside/downside risks without being too short-sighted.  We have just added 2 new trades on USDCAD as well as Weekly & Monthly charts backed by detailed fundamental rationale in the latest Premium Insights.

A clip from Ashraf's CNBC appearance discussing Japanese politics, the candidacy of the next BoJ governor & the race for higher CPI & lower yen  http://video.cnbc.com/gallery/?video=3000147908&play=1

USD/CAD bulls took advantage of quiet holiday conditions and pushed about resistance in the 1.01 area to the highest since August. The 1.0090 final target in Ashraf's Premium Insights has finally been hit. The Australian dollar was the top performer while JPY lagged alongside CAD. Overall trading was light but it's likely to pick up with Japanese department store sales on the calendar. 2 trades in CADJPY remain in progress in the latest Premium Insights, in addition with 1 of 2 EURUSD in progress, the other unfilled; 1 of 2 USDJPY hit all targets, other in progress 2 GBPUSD of 2 in progress 1 AUDUSD short in progress (9 pips away from 1.0270 final target) 1 of 2 EURJPY hit all targets, other in progress. 1 of 2 AUDJPY in progress, the other unfilled 1 CADJPY in progress - 11 pips away 1 EURGBP in progress 1 of 2 Gold in progress, the other unfilled 1 of 2 Silver in progress, the other unfilled 2 of 2 oil in progress

USD/CAD rallies toward 1.01 have been beaten back several times in the past month. The pair rallied late last week on soft Canadian manufacturing data and the pair pushed through the key level shortly before the European close.

It is dangerous to chase a breakout in low liquidity so the day ahead will be important for USD/CAD. A definitive fall below 1.0080 would point to a false breakout and possibility of a drop back to parity.

Euro and yen trading was extremely light during US and European hours. Draghi spoke to EU parliament but his comments rehashed previous statements. He continues to expect more economic weakness early in the year and a gradual pickup late in 2013.

In Japan, speculation about the nominee for BOJ leadership continues to mount. A decision is expected before the end of next week. The leading candidates are Iwata who has vocally advocated for more easing and a weaker yen and Muto who is the favorite but is less likely to endorse further radical moves.

Economic data in the upcoming session includes January Japanese department store sales at 0530 GMT. There is no consensus estimate and in Dec, sales fell 1.3%.

Both of Germany's main business surveys are scheduled for release this week; due on Tuesday is the February ZEW Survey (survey of financial market participants), and on Friday is the February IFO Survey on business sentiment (survey of business managers). Here's a chart look at ZEW, IFO, PMI, EURUSD & the Dax

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The yen retains its decline despite all the noise ahead, during and after the G20 statement. Friday's Empire manufacturing survey confirmed the current narrative of a US recovery but Wal-Mart delivered a warning. The pound was the best performer on Friday while the kiwi lagged in a reversal of the prior 4 days price action. Weekly CFTC data showed a sharp decline in AUD longs. Progress from latest Premim Insights: 1 of 2 EURUSD in progress, the other unfilled 2 of 2 USDJPY in progress 2 of 2 in progress 1 AUDUSD short in progress (9 pips away from 1.0270 final target) 1 USDCAD in progress, 8 pips away from 1.0090 final target 1 of 2 EURJPY hit all targets, other in progress. 1 of 2 AUDJPY in progress, the other unfilled 1 CADJPY in progress - 11 pips away 1 EURGBP in progress 1 of 2 Gold in progress, the other unfilled 1 of 2 Silver in progress, the other unfilled 2 of 2 oil in progress

Fed chairman Bernanke said the US economy is recovering on Friday and the economic data continues to confirm a better tone. The Richmond Fed jumped to a 9-month high at +10 compared to -2 expected. Consumer sentiment was also stronger than forecast and hit a three-month high.

In addition, the Fed's Pianalto – who is normally a dove – said it may be appropriate to taper Fed asset purchases by year end. She is among the first 'core' members of the Fed to talk about lowering the $85 billion in monthly bond buys.

Those headlines propelled USD/JPY more than a cent higher to 93.82. Technical buying added to the move with the 92.00/20 area now looking like a solid support zone.

Later, however, some shocking headlines emerged from Wal-Mart emails obtained by Bloomberg. In them, an executive calls February month-to-date sales in the US 'a total disaster' and 'the worst start to a month I have seen in my approximately 7 years with the company.'

The rhetoric does not always reflect reality but Wal-Mart is the biggest retailer in the US and has an incredible breadth of real-time data on sales. The executives blamed the expiry of the payroll tax break and delays on income tax refunds.

The emails are the first hint that Q1 may not be as strong as it appears.

Weekly Commitments of Traders

The data on speculative futures positioning from the CFTC; collected at the close on Tuesday.

EUR + 24K vs +38K last week JPY -61K vs -68K last week GBP -16K vs +1K last week AUD +54K vs +81K prior CAD +27K vs +28K last week NZD +21K vs +23K last week