Intraday Market Thoughts Archives

5-straight monthly declines in the USD index, the longest monthly losing streak since 2009. The last time USDX fell more than 5 consecutive months was in 2002-2003 when it fell 10 months in a row. There is little in the way of fundamentals that will reverse the USDs rout for now.

Disappointing US data and next week's anticipated weak advanced reading in US Q1 GDP should keep the doves in control at the Fed with regards to their relaxed view about inflation and continued preoccupation about unemployment. Meanwhile, the inflation situation in the Eurozone is unexpected to alter the ECBs hawkish stance. The ECB does not have to raise rates in May or June in order for EURUSD to maintain its upward pat. USDX weekly and technical suggest a slow grind downwards of about 4-5% and a $1.49 target in EURUSD before quarter's end.

AL

The dollar slump stabilized on profit taking ahead of the long weekend and a soft Philly Fed hurt sentiment. Flows will dominate as trading slows to a trickle through the Easter holidays.

USD took another beating in Asia and Europe on Thursday and the Dollar Index fell below the 2009 lows. The final flush came after strong UK retail sales, but as London traders headed to the exits for the long weekend USD shorts began to take profits. Cable fell to 1.6523 after hitting a high of 1.6600. EUR/USD fell to 1.4553 from 1.4648. USD/CAD closed higher at 0.9526 after hitting a three-year low of 0.9454. The dollar wasnt able to make any headway against the yen and closed at the lowest levels of the month.

The Philly Fed slumped to 18.5 from 43.6 (Exp: 36.5) in the worst reading since October. U.S. manufacturing has been a pillar of strength during the recovery and this is the first sign of weakness. But last weeks Empire Fed beat expectations and with the dollar so weak, its likely an aberration. Next weeks data on durable goods (Wed) and the Chicago Fed (Thurs) now grows in importance. Initial jobless claims which disappointed again with a 403K reading compared to the 390K consensus. The house price index also fell 1.6% in the month (exp: -0.2%). Earnings were mixed but note that GEs industrial arm was a disappointment pointing to softer global spending/growth at the margins.

ASIA PACIFIC PREVIEW

Most markets are now closed and typically this means flat trading in Asia. With the yen rallying once again Thursday, however, there is a risk that policymakers try to talk down JPY during thin trading. The same risk applies to Monday which will be quiet with Australia closed for ANZAC day and several other countries closed for Easter Monday.

Expect to see the DOLLAR RHETORIC HEATING UP in the days ahead after Americans are blasted with headlines lamenting the dollar over the long weekend. This could boost the USD but we cant imagine savvy traders doing anything but selling the bounce. The only thing able to prompt dollar buying at the moment is risk aversion. Even then, the dollar comes in third place to the yen and Swiss franc. Traders are also getting more aggressive in using those opportunities to establish short USD positions. We cant help but speculate about what can stop the falling U.S. dollar?

The Treasury Dept. is entrusted with protecting the value of the buck but it has neglected this responsibility for nearly a decade. There is almost nothing now that Geithner can say to spark a rally. Obama is focused on jobs and the weak USD is boosting manufacturing. The Fed thinks along the same lines and hawkish hopes for Wednesdays meeting are a pipe dream. So who is going to take action? The dollars best (only?) hope may be that leaders elsewhere decide to start selling their currencies. Japan is already back in the intervention zone while leaders in New Zealand, Canada and Australia are likely drawing up contingency plans. Otherwise, we cant see any reason in the week ahead to be buying dollars.

By AB -AshrafLaid.com Staff

USD accelerates sell-off, hits new record low on CHF. Euro rally slowed by 3-month low in German IFO. GBP supported by strong retail sales. Canada retail sales expected to recover from last month's disappointment. Philly Fed seen slowing from last month's multi-year high. Four Dow components report before the open.

EURUSD hits fresh highs for the year after a brief retreat following slightly weaker than expected German IFO. 110.4 was below consensus 110.6 and also marks the second consecutive decline from January's 111.2 peak. AUD/USD sliced through $1.07 to hit a new high of $1.0774. Aussie will shift focus to Australia's CPI next week that may potentially usher in renewed talk of policy tightening at the RBA. JPY and CHF - traditionally the safe-haven destinations at a time of panic and victims of risk appetite - are also benefiting from indiscriminate USD selling. USD/JPY fell below Y82 with an outside bearish candle on yesterday's rally, while USD/CHF knifed through its all-time low below the 0.8850 mark.

Cable is the single best outperformer in early London session, boosted by a much stronger than expected retail sales. Both headline and core figures rose 0.2%, as GBP/USD hit session highs above $1.6540 - its best level since late November of 2009. UK public sector net financing data also revealed much less borrowing than expected at GBP16.4B. There is little in terms of long-term resistance for cable before 1.6720.

In US/Canada economic data, Canadian retail sales at 8:30amET are expected to show a substantial core m/m increase to 0.5%, well above the prior month's disappointing flat figure. Canadian dollar maintained its solid pace of risk-on strength, with USD/CAD falling as low as 0.9467 - the lowest level since late 2007 - before rising to 0.9490 in early London session. In the upcoming US data, 8:30amET weekly jobless claims are expected to fall back below 400K after last week's disappointing 5-week high. In contrast, Philly Fed manufacturing survey is expected to fall to 37.1, the first m/m decline since December.

Among the most notable pre-market US earnings, Dow components GE, McDonalds, Verizon, and DuPont will report quarterly results.

Tech earnings see risk appetite soar, US dollar plunges, Australian PPI rises, euro shrugs off Greek debt talk, UK Public finances & retail sales may undermine the pound, Canada retail sales set to push loonie higher, and gold and silver surge.

The earnings story continued apace after the Dow closed at 34 month highs last night as Apple continued the good news theme after the bell, trouncing expectations of $5.36c a share coming in at $6.40c a share.

On the flip side the US dollar got an absolute caning as investors deserted the greenback in the belief that the Federal Reserve will make no attempt to tighten monetary policy anytime this year. Given that virtually every other G10 country with the exception of Japan, are looking at tightening monetary policy the US dollar appears friendless for the moment as the US dollar index breaks below its 2009 lows at 74.17 and looks headed for its all-time lows at 70.70 posted in 2008.

Even fairly positive economic data was unable to save it with positive existing home sales data for March rising by 3.7%. Todays US weekly jobless claims are expected to drop back under the 400k mark to 390k after last weeks surprise jump to 412k, while US Philadelphia Fed for April is expected to slip back slightly to 36.4 from Marchs 43.4.

The Australian dollar continues to pump in fresh post float highs day after day, pushing above 1.0700, as quarterly Australian PPI exceeded expectations of 1%, coming in at 1.2% and increasing the likelihood of firmer rates in the coming months.

The single currency has shrugged off all manner of bad news as it benefits from the ECBs continued hawkish tone, while it was also helped by successful Spanish and Portuguese bond auctions yesterday albeit at fairly high yields. Talk of a possible restructuring of Greek debt over the Easter weekend was shrugged off with the 2010 highs at 1.4580 taken out with a sustained break targeting the 1.5000 level.

UK public finances for March are also due and being the last month of the tax year Public Sector Net Borrowing is expected to have increased from Februarys 10.3bn to 18.7bn, however the figures are expected to come in under the Chancellors annual borrowing forecast of 146bn. The health of the UK consumer also comes under scrutiny with expectations of a slight improvement in retail sales for March after Februarys dreadful number. Expectations are for a decline of 0.4%, an improvement on Februarys 1% decline. Key levels in EURGBP are 2010 highs at 0.8940, and on the GBPUSD at 1.6460, the 2010 highs with a break targeting 1.6780.

Canadian consumers are also in the spotlight with retail sales for February set to bounce back by 0.5% from Januarys decline of 0.3% which in turn could well see the Canadian dollar make fresh highs after making new all-time highs against the US dollar yesterday.

Gold and silver ratio pushes to new 25 year lows as silver continues to outperform, declining 12 out of the last 13 weeks, as gold breaks through $1,500 and silver $45.

EUR, AUD, CAD, CHF, gold and silver jumped to fresh cycle highs as USD slumped on growing risk appetite following strong earnings. The final day of the holiday-shortened Australian week features the producer price index; otherwise, flows will dominate Asia-Pacific trading.

U.S. economic data was light with existing home sales climbing to 3.7% in March (exp: +2.5%) after a 9.6% decline in February. US EARNINGS REMAINED THE BIG STORY, with yesterdays strong Intel earnings setting up the best day on the Nasdaq since Oct. 5. After the close, Apple earned $6.40 per share, crushing the $5.36 consensus. AAPL, we warn, is seen as a phenomenon rather than a bellwether for the broader market.

EUR/USD hit 1.4548 in European trading but leveled off afterwards. There were rumours of a Greek default this weekend and also talk of creative bank-led bailouts. The rumours are 99% likely to be untrue. What appears to be true is that new options are being put on the table and that the confusion and uncertainty will weigh on euro crosses in the coming weeks.

USD/CAD fell to a fresh three-year low of 0.9497 but was unable to hold below the key psychological 0.95 level.

Cable bulls are sweating after 1.6427 held for the third time today following the BOE minutes. GBP/USD closed above 1.6400 and the triple-top will eventually give way but we question whether the market wants to go higher ahead of the long weekend.

Gold hit a record $1506 and silver hit the highest since the $49.45 Hunt Brothers high. Commodity wise man Jim Rogers said yesterday that If silver continues to go up like it has been over the past 2 or 3 weeks then, yes, it would get to triple digits this year. He also warned that holding dollars is growing riskier. The $5 rally in silver since last Tuesday is not a sustainable short-term pace. Gold poses fewer short-term downside risks.

ASIA PACIFIC PREVIEW

Australian hawks grew excited yesterday after a surprise 1.4% rise in Q1 import prices (exp: 0.6%). The data point alone wont faze the RBA but if the 0130 GMT release of the Q1 producer price index paints a similar picture, we may start to see a shift in rhetoric. The economist consensus is for a 1.0% q/q rise but given yesterdays high figures, the market consensus has likely shifted closer to 1.2%. If we see a consensus 1.0% reading, the Australian dollar may tick lower. Ultimately, next Wednesdays CPI data will dictate what the RBA does next.

AUD was the best performer Wednesday and AUD/USD is trading at a record high, just a smidge below $1.07. Australian and New Zealand markets are closed on Friday so expect to see some profit taking on AUD longs ahead of the long weekend. NZD may also be sensitive to a pre-weekend slide with NZD/USD stumbling at 80.00 today for the second time.

Euro hits fresh 2011 highs on strong demand for Spains 10 yr auction, volatile sterling reacts to the status quo in BoE minutes, US existing home sales to echo modest uptick in starts/permits data overnight, while earnings from heavy industrials and Wells Fargo look to maintain tech-driven surge in equities.

Early London session remains action-packed following a broad-based rebound in risk-on trade throughout Asia. USD and JPY in particular have given up gains to the benefit of AUD, NZD, EUR, GBP and CAD - JPY damage is particularly notable, as cross-rates hit multi-session highs and the USD/JPY pair closes its first bullish daily candle in 9 trading days. An upward breach of week-long downtrend at Y82.70 paves the way to former support at Y83.50.

EURO HIT A FRESH 2011 HIGH at $1.4545. Worries over the bailout slamming on the shores of Spain that permeated in the local bond market are now on the backburner after a successful sale of 10 and 13 year debt. Both issues saw impressive bid-cover demand, with EUR3.38B sold well above the expected range. Portugal also helped its bailout cause with a EUR1B backstop issue, as private market demand is bound to boost Lisbon's position on talks with IMF/EC officials. In other economic data on the continent, German PPI was below consensus at 6.2% y/y but hardly spoiled the single currency party.

CABLE MATCHED ITS Apr 14th high at $1.6380 but fell back to $1.6310 after the Bank of England's latest minutes revealed a lack of any meaningful progress toward a rate hike. Once again, arch-hawk Sentance voted for a 50bp increase, while Weale and Dale supported a more modest 25bp move. Posen stuck to his dovish guns with a call to expand assets buys. His recent remarks indicate that only an upgrade to consumption potential would sway his opinion - last month Posen deftly called the lagging wage inflation as the "dog that doesn't bark."

US EXISTING HOME SALES at 10 EST head off todays US macro calendar, expected to rise back above the 5M mark. Note that this is the least price-sensitive of the US housing data points - in other words, distressed homeowners are far less willing to take a loss than the homebuilders are inclined to move inventory through discounting. Last month's median sale price component - a 9-year low $156K - suggested more and more sellers are waving the white flag.

PRE-MARKET OPEN US EARNINGS session will see Q1 results from cloud stalwart EMC as well as Altria. ATT will post its quarterly results and likely defend the hefty pricetag it offered to DT for T-Mobile USA. Rail giant Union Pacific is likely to benefit from rising fuel costs, while Wells Fargo will round out the earnings from banking heavyweights. Note that this perennial Buffett favorite saw the Omaha oracle boost his holdings even further during the most recent reported quarter.

US earnings boost risk with Apple on the way, Aussie hits new highs, Japanese surplus shrinks, euro buoyed by ECB rate expectations but may be undermined by Spanish 10 yr bond auction, BoE minutes and UK public finances data may weaken sterling, Gold and silver surge.

Risk has returned in a big way in the last 24 hours after positive earnings out of the US saw Wall Street finish higher, while after the bell Intel and IBM beat expectations, paving the way for Apple later today where expectations for Q2 earnings expected to have grown to $5.36c a share.

The Australian dollar rose to its highest post float levels overnight after import and export prices came in above expectations (which were previewed in the orior IMT) increasing the likelihood of firmer rates to combat inflation in the coming months. The weak US dollar and surging gold prices also didnt hurt it either.

Unsurprisingly Japanese exports slipped back after last months earthquake, Nonetheless, the fall was double expectations, coming in at 2.2%, with further declines likely, as the countrys trade as the surplus shrank from 327.5bn yen to 96.3bn yen, pushing the yen lower overnight. Key support remains near this weeks lows and the post intervention highs at 82.10.

The euro continues to remain largely immune to sovereign debt concerns paring Mondays losses on future rate rise expectations in the face of positive German PMI data yesterday and factory gate prices due this morning.

Todays Spain 10-yr bond auction could well see upside limited however as Spain looks to auction EUR 6bn of ten and fourteen year paper in the face of 10 year yields near record highs above 5.5%, and these fears of a Greek default have brought Spains fiscal problems back into play. EURUSD resistance around 1.4380 re-targets the highs around 1.4520 as well as 2010 highs at 1.4580.

Today's Bank of England minutes arent expected to contain any surprises with the same trio of Sentance, Weale and Dale, voting for a rate increase. UK public finances for March are also expected and due to it being the last month of the tax year Public Sector Net Borrowing is expected to have increased from February's 10.3bn to 18.7bn, however the figures are expected to come in under the Chancellors annual borrowing forecast of 146bn.

EURGBP has resistance around 0.8810/20, with a break above targeting 0.8870, while a failure above 0.8810 retargets this weeks lows at 0.8740.

US existing home sales for March are expected to have risen 2.5% improving from Februarys decline of 9.6%.

Gold broke $1,500 on US debt concerns, targeting a break of $1,550, while silver hits $44 another 31 year high, as it looks to retest its 1980 peaks just shy of $50.

By KM AshrafLaidi.com Staff

Monday's dramatic moves faded and CAD and EUR were the best Tuesday performers as risk appetite rebounded on decent corporate earnings. The low-yielding USD, CHF and JPY were the underperformers. The Asia-Pacific session features Japanese trade data and key Australian import/export prices seen as a hint to external inflation.

Tuesdays fx trade was primarily consolidation from Monday's larger moves. U.S. stocks recovered about half of Mondays losses while commodities inched higher with gold falling just short of $1500.

It was, by and large, a relatively rosy news day (when comparing sentiment ot Mondays S&P US downgrade) with U.S. housing starts rising to 549K compared to the 520K consensus. Corporate earnings supported sentiment with J&J and Goldman Sachs beating before the bell. After the NA close, IBM announced earnings $2.41 compared to the $2.30 expected and raised guidance (new business signings were weak, however). Intel also beat handily with earnings of 56 cents and revenue of $12.85 billion compared to the consensus of 46-cents at $11.6 billion.

The euro closed at 1.4334; narrowly above support in the 1.4320-1.4330 range. The bounce is just above the 50% retracement of the two-day fall from 1.4502 to 1.4157. Such a close warrants the road towards $1.49 as long as a weekly close below $1.43 is avoided.

The only POTENTIALLY GAME-CHANGING NEWS news on the day came from Canada where March CPI jumped to 3.3% y/y from 2.2% (exp: 2.8%). The rise was not only from energy but also food, transportation and health. USD/CAD quickly dropped to 100 pips to 0.9550 then consolidated in a 30 pip range from 0.9550-0.9580. The April 7 low of 0.9526 (a three year low) remains key support. The inflation figures renewed speculation of a rate hike but remember that the BOC warned earlier this month that a number of temporary factors will boost total CPI inflation to around 3 per cent in the second quarter of 2011. Also note that core inflation is rebounding from a 26-year low of +0.9% y/y in February. There is also talk that the Winter Olympics last February could have skewed the data.

ASIA PACIFIC PREVIEW

At 2350 GMT, Japans trade surplus is expected at 645.4B for March, slightly lower than the 654.1B in February. Remember that in January Japan reported a 471 billion deficit -- the first in nearly two years. Given the impact of the disaster, we expect to see many months of distortions in this data point and expect that to take away straightforward trading opportunities. At the same time, Japans tertiary industry index is expected to rise 0.2% in Feb after a 2.1% rise in Jan.

At 0130 GMT Q1 Australian import/export figures are expected to rebound from large FX driven declines in Q4 2010. The consensus is for a 4.5% quarterly rise in export prices and a 0.6% rise in import prices. Given the wait and see rhetoric from the RBA evident in Tuesdays minutes, this report is likely to have only a minimal impact. The import figures will typically have the strongest impact and would need to exceed 1.5% to alert policymakers while a flat reading will emphasize that the RBA is on the sidelines for several months. There is still talk that the RBA could hike to 5.50% in Q4 from the 4.75% current rate but this talk appears overdone and there is an equal chance we get no hikes at all.

By AB - AshrafLaidi.com Staff

Improved German PMI helps euro recover some lost ground. Canadian inflation data expected to show higher prices, but CAD gains may not be sustained. US building permits and housing starts set to rebound from multi-year lows in February. Goldman Sachs, J&J first on deck for Q1 results ahead of US market open.

Euro traded firm in the opening hours of the London session after a better than expected Manufacturing PMI data from Germany. Advanced April figure of 61.7 was well above consensus 60.0 and represents the 2nd best monthly print in at least 3 years. Strong results helped EUR/USD rise above $1.4260 from session-low $1.42 handle, paving the way for a test of $1.43. European bourses also opened higher despite the selloff in Asia, while US equity futures pared some of the earlier weakness.

Turning to the release of CANADA MARCH CPI (7:00 EST, 11:00 GMT), consensus estimates indicate moderate acceleration in price pressures. On a headline basis, 0.7% expectations would mark the highest level since May of 2009, while core CPI is seen rising to a more modest 0.3% m/m - a 5-month high. We should point out that any CAD strength from hotter than expected inflation numbers amid the recent resurgence of risk aversion should be temporary, especially considering the most recent BoC statement allowing for a temporary spike in inflation through the second quarter. 0.9580 in USD/CAD presents formidable support that has withstood two prior attempts with the next key level of resistance at the late-March base / 50% retracement of the pair's month-long decline at 0.9750.

US housing data at 12:30 GMTis expected to offer only a modest reprieve from woeful February data that saw building permits and housing starts both at multi-year lows of 517K and 479K respectively. Estimates call for a slight improvement in both, potentially paving the way for a rebound in Existing home sales on tap for Wednesday. Note that while the more hawkish Fed officials have indicated they will not await a more meaningful turnaround in US housing, the apparent double dip has lasted well beyond the policymakers' most bearish scenarios.

Breaking down the busy US earnings session, Goldman Sachs and J&J will report results in the morning session while tech heavyweights IBM, Intel, and Yahoo will report after close. The EX-FACTOR FOR GOLDMAN COULD BE for Goldman could be outside the actual numbers but with the POSSIBILITY OF A LEADERSSHIP CHANGE - a NY Times article over the weekend speculated CEO Blankfein may be close to stepping down. J&J disappointed last time on the top line and also guided full-year below consensus at $4.80-4.90 - look for an update on recently confirmed JNJ interest in a Swiss-listed Synthes that would value the company at $20 billion. In afterhours tech, Intel is particularly notable following its hiccup in releasing the new SandyBridge chip. As we saw with disappointing Texas Instruments results overnight, Japan earthquake may also weigh on Q1 earnings.

by GG - AshrafLaidi.com Staff

US and Europe battle with budget and sovereign debt issues, RBA minutes show interest rates are appropriate, while Eurozone preliminary PMIs are expected to continue to show growth. Canada CPI expected to rise as Goldman Sachs earnings, amongst others await.

Yesterdays decision by Standard and Poors to downgrade the USs sovereign debt outlook for the first time since 1941 sent shockwaves through the markets and could well be the catalyst needed to concentrate the minds of complacent US politicians into restoring some semblance of order to US government spending and fiscal policy. The only surprise was that it took the agencies so long to act, though Moodys later re-affirmed its positive outlook, just to confuse matters further.

Ordinarily such a downgrade would have probably sent the already sickly US dollar lower, however investors had their minds on a much more immediate problem with the markets fearful of an imminent Greek restructuring.

Indeed German government officials dont expect Greece to last the summer as 2 year bond yield push above 20%, while a poor Spanish T-bill auction saw yields surge amid fears of a possible contagion towards Spain, ahead of a much longer term bond auction on Wednesday.

There are other concerns with respect to a wider sentiment building across Europe on the back of the success of the anti-euro party at the weekend Finland election, as nationalist resentment builds on both sides of the fiscal argument, with austerity fatigue on one side in the peripheral countries, and a public backlash against squanderers on the other.

THE BREAK OF $1.4250s IN EURUSD now opens up the risk of further euro losses towards 1.4020/30, while below 1.4380. Eurozone flast PMIs (preliminary figures) for April are expected to show continued resilience though expectations are for a slip back from the March figures.

The release of RBA minutes for April showed that the bank felt that interest rates remained appropriate given the medium term outlook on inflation. The RBA no longer used the phrase mildly restrictive in its statement. Combined with weakening equities and an erosion of risk appetite the Aussie weakened and a break of trend line support at 1.0450 could well test support at the 1.0380 level.

The weakening oil price saw the Canadian dollar slip back yesterday triggering stops above 0.9700 before slipping back. Todays March CPI figures are expected to show rising inflationary pressures within the Canadian economy with expectations of a rise from Februarys 2.2% to 2.8% in March, largely as a result of higher energy costs. It is thought unlikely that the increase in inflation will prompt the Bank of Canada to consider a fiscal tightening at the next rate meeting.

BIG DAY FOR US EARNINGS with reports from S&P 500 giants like IBM, INTEL, JOHNSON & JOHNSON, STATE STREET and GOLDMAN SACHS, investors will be hoping for some good news after yesterdays declines and disappointment from Citigroup where earnings came in line, but revenue fell short. Expectations for Goldman Sachs Q1 earnings are for $0.82c a share.

By KM - AshrafLaidi.com Staff

Here is Ashraf's CNBC panel discussion on the dynamics and implications surrounding S&P Decision on the US Credit Rating http://bit.ly/hz5l65

S&P sent shudders through the market as it put a negative outlook on the AAA-rating of the United States. The euro lagged badly on the threat of default in Greece, while the yen further broadened in strength as the unwinding of the carry trade escalated to the next phase. We also prepare for an Asia-Pacific session that features the RBA meeting minutes.

The S&P outlook revision pushed the yen to an 8th consecutive gain and it was easily the best G10 performer. The S&P 500 fell as low as 1294 but rebounded to close at 1305, down about 1%. The U.S. dollar initially made gains against AUD, CAD and GBP on risk aversion but that trade slowly eroded.

EUR was the big loser, after a Greek newspaper reported that officials have asked the IMF and EU with help for a restructuring. An election in Finland also showed building anti-euro sentiment and a Moodys downgrade of Irish banks deepened the wound. EUR/USD took a beating, falling below support at 1.4250 all the way to 1.4157 before rebounding to 1.4236.

At this point, with Greek 2-years yielding nearly 20% we have to believe that the market has got the message and that a Greek restructuring is priced in. The question is: 1) How much of a haircut will the market be asked to take? 2) Will Greek debt be structured in a way that appears credible and feasible? There is room for optimism but the market despises uncertainty. If an announcement of a restricting is made (likely in the next two months) expect the euro to bottom relatively quickly.

Given the two-year deadline issued by S&P and the likelihood of deadlock at least until the late 2012 election, its easy to envision a scenario where a downgrade is more likely than the one-in-three probability assigned by S&P. A downgrade would force pensions and insurance companies to cut Treasury allocations. The question is: where will that money go? We cant remember a day where we heard more talk about diversifying internationally from U.S. commentators. PIMCOs Bill Gross was touting Germany, Brazil and Canada. His sentiment was underscored by market participants as USD/CAD shot to 0.9721 on risk aversion but quickly fell back to 0.9643 a sign of strong demand for CAD at levels well above parity.

Some positive sentiment was generated by talk that the warning from S&P would kickstart a new era of co-operation and fiscal responsibility from the U.S. government. Given the scope of the cuts needed in the U.S., this is difficult to imagine

ASIA PACIFIC PREVIEW

The RBA meeting minutes from April 5 will be released at 0130 GMT. That meeting characterized policy as mildly restrictive but appropriate and the overall statement was barely changed from the previous meeting. The RBA last hiked in November and the market is not pricing in any chance of a hike at the May 3 meeting. Further RBA commentary on the Japanese disaster could be market-moving at the expense of the AUDUSD, AUDJPY and even AUDNZD. The RBA statement said they expected the broader impact to be limited but if the minutes highlight further risks, AUD could come under pressure. Commentary on AUD strength will also be key. If policymakers hint that a high AUD rate will do the work of rate hikes, we could see pressure on AUD. Hawkish talk or strong concerns from commodity inflation could boost AUD.

Other economic data in the session is minor. At 0500 GMT we get Japanese consumer confidence (prior 40.6). Japanese machine tool orders will be released at 0600 GMT with a prior y/y reading of 73.9%.

By AB - AshrafLaidi.com STaff

Risk Aversion or Credit Woes? Whats a trader to do after the S&P News? Just when the euro began a 180-pip decline on those Greece restructuring talks and Finnish vote against the Eurozone, Standard & Poor's becomes the first major credit rating agency to issue a negative outlook on the US debt rating, while affirming its AAA rating. The USD Impact was less straight forward but here is my take:

The news bore particular significance when S&P said there is a 1/3 chance of a credit downgrade in the US long term trading within 2 years. The news immediately triggered sell orders in the USDX, protecting those key support levels in EURUSD at 1.4250s & GBPUSD at 1.62 (55 dma). So the MAIN QUESTION BECOMES, will the USD extend last weeks selloff on the S&P news?, or, will it continue to stabilize following the accumulated selloff in US equities and US treasury bonds on the risk aversion play? The answer to that question depends on your outlook. Those with a 2-4 day horizon are likely to find further upside in USDX against NZD, GBP and CAD DESPITE THE SURGE IN GOLD. 09680s in USDCAD remains the targeted ceiling, while NZDUSD eyes 0.7750s after those weaker than exp CPI figures. Keeping an eye on US equity indices is key, as S&P500 nears the 100 dma at 1287. But even if we do see 1287, it would not be particularly severe for global risk appetite, unless we break below the 1250 low, which denotes a peak-to-trough pullback greater than the usual 6-7% declines seen over the last 7 months.

WE ARE IN THE FINAL STAGES OF TESTING the integration process of MNI FX Bullets into AshrafLaidi.com service as part of the Premium offering.We hope it should be up later this week before those free trials start going out. We appreciate your patience

AL

Greek restructuring speculation and Finland elections overshadow more hawkish rhetoric from ECB as EUR trades down to 1-week low $1.43. WSJ quoted IMF that Greece may seek debt restructuring early next year. Citigroup to post Q1 results at 11:00 GMT (07:00 ET). Fed's Fisher to discuss US economy at 12:30ET. It is a holiday shortened week, which could well be a chance for temporary pullback in the USD.

Sovereign debt crisis concerns pushed to the backburner by ECB tightening and US government budget crisis over the past couple of weeks have resurfaced loud and clear. Greece is back in the spotlight following press reports the finance minister has called for a restructuring of its 340B in loans toward a later date. And while the Greek Finance Minister Papaconstantinou vehemently DENIES RESTRUCTURING (as signalled by the IMF in todays WSJ), euro longs are not taking any chances. With Greek CDS swaps blowing out above 1,200 - new record highs - EUR/USD is testing 2-month-long channel support at $1.43. A breach here brings up the critical $1.4240-50 range, late March resistance turned April 7th support. As we indicated earlier, long positioning by hedgefunds has already appeared overstretched with multi-year high net exposure. Profit-taking on sovereign debt worries, along with a strong showing by the EUROSKEPTIC TRUE FINNS at Finland Parliamentary elections have indeed outweighed additional hawkish comments from ECB officials. Earlier today, ECB's Nowotny said expectations for another 50bps in rate hikes from the ECB are "well founded".

USDJPY IS SET TO FALL FOR THE 8th straight session after having risen 10 consecutive rising sessions in. The pair made new April lows below 82.95 tracking renewed appetite for US debt, as 10-year yields fell about 20bps over the course of last week to low 3.40s%.

CITIGROUP TAKES CENTER STAGE FOLLOWING disappointing results at financials sector leader JPMorgan and laggard Bank of America. A telling Heard on the Street column over the weekend profiling BAC earnings attributed to housing-related writeoffs. The column suggests that while Bank of America has priced in an additional 4% housing decline as a "shock" scenario, other forecasters have allowed for as much as a 10% additional decline. And while the toxic mortgage exposure for Citi is nowhere as potent as for BAC, it does have a tendency to disappoint, with shares falling over 7% the day after last reported results on Jan 18th.

TODAYs US ECONOMIC CALENDAR limited to remarks from Fed arch-hawk Richard Fisher, speaking about the US economy at the Rotary Club in Atlanta mid US afternoon. Dallas Fed President is expected to reiterate inflation risks are out of control and that the Fed has done all it can to boost the economy.

By GG - AshrafLaidi.com Staff

Rising inflation, tightening concerns from China, tumbling Kiwi, Finnish election fall-out, sovereign debt fears and more US earnings on tap all dominate sentiment at beginning of a new week.

The weekend decision by the Chinese central bank to raise bank reserve requirements ratio by 50 basis points, the fourth rise this year to 20.5% (record high) was no real surprise given Fridays economic data, though the rather more hawkish rhetoric was, and this more overt hawkish tone could well weigh on risk appetite and commodity currencies going forward in the coming days. It is becoming increasingly accepted by the market that RRR hikes are less offensive to risk appetite than are interest rate hikes (borrowing and lending rates).

KIWI WAS HIT BY NEW ZEALAND CPI came in slightly below expectations sending the Kiwi to its biggest fall in 4 weeks on speculation that the RBNZ will continue to hold rates in the wake of the Christchurch earthquake. The Kiwi dropped back from double and psychological resistance around the 0.8000 level (just above the 5-day MA), with upside seen capped at the immediate resistance of 0.8050top of the daily Bollinger band.

We learn from MNI FX Bullets (service to be made available to our Premium Service subscribers later this month) RBNZ will providing incentives to NZ businesses to settle transactions with Chinese businesses in RMB via a reciprocal RMB25 billion currency swap line with the People's Bank of China. The facility would in essence, give the RBNZ the capacity to borrow in RMB during financial market disruptions and low liquidity.

FINLAND GENERAL ELECTION could well cause a few problems for the single currency, as the True Finn party made significant gains at the expense of the pro bailout government. This result could well throw doubt as to whether Portugals bailout will get agreed, which in turn could well limit further upside in the single currency in the near term, with resistance remaining around the recent highs at 1.4530, as well as the 2010 highs at 1.4580. Below 1.4250 could well open up 1.4030.

USDX STRUGGLES near the 75.25 resistance area, and needs a break above this level to provoke some additional US dollar strength, after finding support at the 74.62 level two days in a row last week.

GOLD AND SILVER continue to push ever higher with silver pushing above $43 and new 31 year highs, as it closes in on its 1980 highs just shy of the $50 mark, and gold prices close in on the $1,500 mark. Oil prices look set to remain supported after Saudi Arabia cuts output in the face of oversupply according to the Saudi oil minister.

By KM - AshrafLaidi.com Staff

China raises RRR over the weekend, the 4th of the year. COT data shows multi-year high spec interest in euro longs, Yen remains under pressure. G20 sees global economic recovery as more sustained while pledging greater scrutiny on FX imbalances. New Zealand CPI data looms key in Monday Asia following a particularly strong week for NZD. Earnings season gets underway with more banking and tech heavyweights.

Washington DC summit of G20 finance officials and other dignitaries over the weekend struck a more optimistic tone. Official communique called the global recovery more sustained despite heightened Middle East uncertainty. However, member nations were also more willing to expand the organization's oversight umbrella. While declining to list nations under added scrutiny, G20 said they would give more focus to FX policy (ie, Fed's Quantitative Easing, China's FX regime, etc.) in the context of their fiscal imbalances. Having fired this "warning shot", G20 further noted specific recommendations for dealing with imbalances will be unveiled at the November summit.

CFTC commitment of traders report highlights include positioning changes in EUR, JPY, AUD, and Mexican Peso. Euro net long stood at nearly 65K contracts, 4th consecutive increase and the highest exposure since late 2007. JPY continues to generate carry-funding interest, as net short contracts fell to 52.9K from 43.2K prior - a 1-year high in overall short positioning. AUD finally saw a marginal decline from net long interest at 90.6K contracts vs prior 90.9K, as Mexican Peso attracted more attention with almost 125K net long contracts vs 119K prior - a new multi-year high.

Monday Asia session includes the release of quarterly New Zealand CPI data expected to fall to 1.0% q/q from last quarter's 2.3%. Kiwi dollar traded within a pip of the psychologically significant $0.80 handle, also outperforming the high-flying AUD last week with AUD/NZD cross falling over 300 pips toward NZ$1.32. NZD remains supported by RBNZ Gov Bollard comments on Apr 11th foreshadowing active policy respose to the threat of inflation, suggesting Kiwi central bank may soon reverse some of the 50bps of additional accommodation provided at the last policy meeting. Euro will also be in focus after a hawkish set of comments from ECB Pres Trichet late on Friday, pointing to inflation risks as being "on the upside." According to a Bank of America/Merrill Lynch report released on Friday, ECB rhetoric has turned notably more hawkish overall as evidenced by greater focus by a more neutral member Constancio, with the bias now shifting toward June as the next date for further tightening in the EU.

Looking ahead to the start of a busy earnings week in the US, Citi reports before market open on Monday followed by Texas Instruments afterhours. Goldman Sachs, IBM, Intel, and Yahoo are on tap for Tuesday.

By GG - AshrafLaidi.com Staff