Intraday Market Thoughts Archives

The balance between contagion fears and mixed economic ndamentals swung in favour of the euro on reports that the Cypriote Parliament has reached a deal with regards to its banks and collecting the €6.7 bn from Cyprus instead of the previous €5.8 bn from deposits. Full analysis with charts on IFO, PMI & ZEW

Ashraf on Bloomberg TV discusses the various types of gold rallies, the euro, sterling and the yen. Full interview here.

Yen surges across the board as traders are unwilling to focus all of the safe haven flows on the US dollar after the Fed renewed its asset purchases. EURUSD bounces off its 200-DMA for the 4th straight day, but failing to close above its 6-week trendline. The quick knee-jerk reaction to 1.2920s resulted by unfounded rumours that Cyprus reached a deal with Russia, but news of Cypriote Fin Min Sarris' return home without any agreement sent euro back down. Euro awaits German IFO survey due at 9 am GMT/London, expected to show 107.8 from 107.4 in the Business Climate index, 110.5 from 110.2 in the Current Assessment index and 105.0 from 10.6 in the Expectations index.  A “beat” in the news will be required to sustain EUR above the 1.2880-00 support.  GBPUSD nears our Premium target as it creeps towards the Jan 02^nd trendline resistance. For thsoe Premium trades, please see our latest Premium Insights.

Gold rallies resulting primarily from Eurozone woes are more short-lived than gold rallies resulting from announcements of fresh QE.  The current gold bounce is a result of Eurozone investors seeking haven into the metal (as was seen in the Greece & Italy episodes in these charts ), but it does NOT imply a prolonged gold rally vs USD. We added a new Premium trading note on USDCAD affirming our 3 existing positions, 1 new trade on EURAUD as well as new commentary in highlighting the flow in the euro.  The long part of the DUAL GBPUSD trade remains in progress awaiting the stated limit (which was almost hit earlier), while 1 of 2 USDJPY was stopped out. See all trading and charts details in our latest Premium Insights.

UK retail sales excluding fuel post their rose 3.3%, post their highest increase since May 2008. FTSE100 tests the December trendline support at 6,380, struggling to preserve its first 10 monthly consecutive gains since 1997. Full Charts & Analysis here

Click To Enlarge

The Fed maintained its plan to buy $85 billion in assets each month but noted an improvement in the economy. The euro was the top performer as worries about Cyprus ease while the yen lagged. Early in Asia-Pacific trading the New Zealand dollar jumped after GDP rose an astonishing 1.5% in the fourth quarter. 2 more trades on GBPUSD were issued, as well 2 on EURUSD, 2 on USDJPY, 1 on Gold and 1 on EURGBP. 2 charts were issued on USDJPY and 2 on gold, illustrating 3 types of Death Crosses.

The main points of the FOMC statement were left unchanged although Bernanke said there has been an obvious improvement in the economy. The Fed chairman said accommodation will remain in place until the pick-up proves sustainable. The 2013 GDP forecast from the Fed was skewed slightly lower this year to 2.3% to 2.8% from the previous range of 2.3% to 3.0%. Overall, however the Fed cited a return to moderate economic growth.The knee jerk reaction to the statement was to sell the US dollar but the move was small and short-lived.

A much larger move came in the New Zealand dollar follow fourth quarter GDP. In the final three months of the year, the economy grew 1.5% compared to 0.9% expected. It was the fastest pace of growth since late 2009.NZD/USD immediately jumped a half-cent to 0.8270 following the release.

The focus now shifts to February Japanese trade balance numbers. Exports are expected to fall 1.7% y/y while imports are forecast to rise 15%. The releases is at 2350 GMT.

At 0430 GMT, Japan's January all-industry activity index is expected to fall 1.4% following a 1.8% rise in the final month of 2012.

The euro poked below the 200-day moving average after politicians in Cyprus voted against a plan to tax bank deposits. The euro was the weakest performer on the day while the yen rallied. Tokyo is on holiday today so markets may remain rangebound. Premium Insights will be added on Wednesday.

The Eurogroup-mandated bailout for Cyprus was completely rejected by parliamentarians. All opposition policymakers voted against the law and the main governing party abstained.

There is talk about a bailout plan using funds from social security but Eurogroup leader Dijsselbloem said some form of the tax is unavoidable. Leaders of the various parties will meet again Wednesday morning.

The market is fixated on the drama in Cyprus and the euro was jarred by various headlines and rumours but the general theme was lower. A wave of selling hit after the 200-day moving average gave way but dip-buyers ensured EUR/USD closed above the key technical zone, albeit slightly.

With the FOMC meeting Wednesday the risks shift back to the USD side of the equation. Less dovish comments from the Fed could further depress the euro.

With Japan closed for holiday, the market will be focused on some second-tier indicators from Australia. Up first is the Westpac leading index at 1930 GMT, there is no consensus estimate. Thirty minutes later, the reading on skilled vacancies from DEWR for February will be released. In January, the gauge declined 0.7%.

Ashraf Tells CNBC ways to play the Cyprus & Italy stories See video here

GOLD vs EUR breaks above its 18-week trendline, highlighting similar upside pattern as in May 2012  (Greek election impasse) and Nov-Dec 2011 (Italy debt selloff and political uncertainty). As the ascending weekly stochastics gain in strength, we could well see a break above the 100-WMA of 1250 and an extension towards 1,285. In order for EURUSD not to lose support below 1.2820-30, we may have to see a follow-up in Gold/USD towards 1645/50.See chart & full analysis here

Click To Enlarge

The market is fixated on the wrangling and hang wringing over the deposit levy in Cyprus. The euro continued to close the opening gap but is vulnerable to headline risk. After Europe goes to bed the market will shift to Shirikawa's departure from the BOJ. Sticking with the 2 existing EURUSD trades alongside 1 GBPUSD, 1 EURAUD, 2 USDJPY and gold. More on these from the latest Premium Insights

Fears of bank runs outside Cyprus never materialized on Monday and European finance minister held a hasty teleconference to minimize the damage. A statement from the call urged Cyprus to exempt account holders with less than 100,000 euros while maintaining the 5.8B euro target.That would mean a 15.6% tax for larger accounts but would be far more acceptable to the public. A formal proposal has not yet been made but a vote is scheduled for Tuesday.

Throughout the crisis many politicians have been pinned into a corner by circumstance and the knee-jerk reaction is to defeat the new laws initially. This is a ploy for voter sympathy and could generate a buying opportunity before the law passes on the second attempt.

Outside of Cyprus, news was quiet. The lone indicator was the US NAHB home builder sentiment survey. It fell to 44 compared to 47 expected. Given that most housing indicators have been upbeat, it's too early to fret.

The Asia-Pacific calendar includes the 0030 GMT publication of the minutes of the March RBA meeting. Early in the session, the RBA's Lowe said the country must accept the strong AUD.

At 0530 GMT, Japan releases department store sales figures for Tokyo and nationwide. In January, national sales rose 0.2%.

Markets say goodbye to BOJ Governor Shirakawa at 0630 GMT as he holds a farewell press conference. Ultimately Shirakawa will be remembered for his failure to defeat deflation but overall he was a solid central banker. The outcomes of the financial crisis, Fukushima disaster and constant political turmoil would have been much worse without his steady leadership.

The market is fixated on the wrangling and hang wringing over the deposit levy in Cyprus. The euro continued to close the opening gap but is vulnerable to headline risk. After Europe goes to bed the market will shift to Shirikawa's departure from the BOJ. Sticking with the 2 existing EURUSD trades alongside 1 GBPUSD, 1 EURAUD, 2 USDJPY and gold. More on these from the latest Premium Insights

Fears of bank runs outside Cyprus never materialized on Monday and European finance minister held a hasty teleconference to minimize the damage. A statement from the call urged Cyprus to exempt account holders with less than 100,000 euros while maintaining the 5.8B euro target.That would mean a 15.6% tax for larger accounts but would be far more acceptable to the public. A formal proposal has not yet been made but a vote is scheduled for Tuesday.

Throughout the crisis many politicians have been pinned into a corner by circumstance and the knee-jerk reaction is to defeat the new laws initially. This is a ploy for voter sympathy and could generate a buying opportunity before the law passes on the second attempt.

Outside of Cyprus, news was quiet. The lone indicator was the US NAHB home builder sentiment survey. It fell to 44 compared to 47 expected. Given that most housing indicators have been upbeat, it's too early to fret.

The Asia-Pacific calendar includes the 0030 GMT publication of the minutes of the March RBA meeting. Early in the session, the RBA's Lowe said the country must accept the strong AUD.

At 0530 GMT, Japan releases department store sales figures for Tokyo and nationwide. In January, national sales rose 0.2%.

Markets say goodbye to BOJ Governor Shirakawa at 0630 GMT as he holds a farewell press conference. Ultimately Shirakawa will be remembered for his failure to defeat deflation but overall he was a solid central banker. The outcomes of the financial crisis, Fukushima disaster and constant political turmoil would have been much worse without his steady leadership.

Ashraf's take on the Cyprus crisis for BNN and the likelihood of a contagion http://watch.bnn.ca/#clip886784

EURUSD trades between the confluence of support (200 DMA & 55 WMA downside & 100 DMA upside) ahead of the Cypriote Parliament decision to confirm the bank levies or shift the burden onto bigger depositors (such as 12% on > €100K & 4% on < €100K). Adding a new trading note on EURUSD as last night's gap down triggers the 2nd long (just above the 200 DMA seen in Friday's triple charts). Until the Cypriote parliament confirms the new bank levies around 14:00 GM, we will maintain the existing 2 EURUSD trades alongside the EURAUD, USDJPY and gold. We will revisit these trades after announcement from Cypriote Parliament. A jam-packed trading week starts with the  German ZEW on Mar 19, MPC minutes and FOMC decision on Mar 20 (FOMC Statement at 14:00 ET, 18:00 London/GMT & Bernanke Press Conference 30 mins later). Eurozone Flash PMIs on Mar 21 & IFO on Mar 22. Our new EURUSD trading note is in the latest Premium Insights.

Euro is dumped across the board after as the Euro debt crisis morphed into a hit on bank depositors. The €10 bn bailout would be financed by a 9.9% haircut on accounts at €100,000 or more and a 7% haircut on accounts below €100,000. Such Argentinean solution has no precedent in Europe, which is exactly what's causing the renewed selloff in the euro in a week when the US central bank will likely reiterate the case for further QE. We now have 2 Premium Insights in EURUSD, while 1 of the 3 USDJPY is stopped out, and both AUDUSD and US crude shorts are nearing targets. All of these trades are in the Latest Premium Insights

A hint at further QE from the Bank of England governor ended sterling's short-lived rebound on Friday. Last week, the Australian dollar was the top performer while USD lagged. Weekly CFTC data showed another increase in yen shorts.

Cable climbed as high as 1.5177 on Friday after sinking as low as 1.4831 early in the week but the rally ran out of gas late in the session. Part of the reason for the selloff was a comment from King who told UK television that he sees a case for further asset purchases.

GBP/USD ended the week at 1.5114. The inability to sustain the rally shows how aggressive and confident cable shorts are feeling.

The overarching theme of the week was a reversal in recent USD strength. USD/JPY sank to 95.27 on Friday – about 150 pips from the cycle high. Part of the reason was a surprisingly weak reading on consumer sentiment. The University of Michigan reading fell to the lowest since late 2011 and is a sign that recent economic buoyance hasn't spilled over to shoppers.

For now, the moves look like a simple retracement in the US dollar after weeks of gains but it will bear close watching in the week ahead.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -25K vs -26K prior JPY -93K vs -73K prior GBP -50K vs -44K prior AUD +23K vs +7K prior CAD -53K vs -47K prior NZD +19K vs +19K prior CHF -13K vs -11K prior

US Dollar Index longs at 32K vs 26K prior

Not a great deal of movement but JPY shorts neared a 5 year low on Tuesday and that helps explain some of the profit taking in the yen crosses. The rebound in AUD positioning shows how eager the market is to be long.