Intraday Market Thoughts Archives

This week may have unveiled a major turning point in currencies, commodities and bond markets as the onslaught of dollar was weakness triggered by widespread expectations of renewed treasury buying by the Fed. Key technical levels were breached in EURUSD, USDCAD, while USDJPY and AUDUSD see no reversal in their current trends. Sterling may offer shorting opportunities against commodity currencies as traders seek to correct the major moves of last fall. My interviews earlier today http://www.cnbc.com/id/15840232?video=1130669912&play=1

Markets in the US and UK wind down into the long weekend, with dollar weakness intensified by a rebound in US equities. Gold surged to $961, while oil adrift below $61. AUDNZD extends losses off the triple top of 1.29, nearing the 1.2550 bottom. Both EURJPY and GBPJPY broke above 132.30 and 150.30 respectively as the yen is dragged by the improvement in equities. S&P5attempts to regain 900 while 10 year yield hover at the latest 6-mth high of 3.4%. Ashraf's interview on BNN (bnn.ca) earlier today. http://watch.bnn.ca/#clip175015

Dollar selling intensifies as EURUSD hits $1.40, GBPUSD tests $1.60, gold is $40/oz away from $1,000, silver breaks to 9-month highs and oil above $61.60. Trend-following currency markets normally pursue the paths of least resistance for the goal of profit-maximization. And so as long as global equities remain in consolidation, economic optimism is guarded and fear is curbed, traders have plenty of lost ground to catch up and lift EUR back to $1.45, GBP to $1.65 and AUD to 0.80. CANADIAN VIEWERS catch Ashraf live on BNN at 10:40 am EST

Watch Ashraf's CNBC interview earlier today discussing the UK credit outlook, the Fed & Treasury bond interplay and the potentially game-changing dynamics between the US dollar and global equities.

http://www.cnbc.com/id/15840232?video=1130669912&play=1

My warning on March 10 about the US dollar and bond prices falling in tandem.

http://www.ashraflaidi.com/articles/fx-implications-of-supply-driven-rally-in-yields.asp

Meanwhile, the rising 2-month cycle in stocks has come and gone as warned on March 13 and here we are in a fresh downtrend.

When youre a Forex trader and your job is to maximize profits and minimize risks for your employer, you are faced with several options: Buying JPY against the USD due to yens prolonged and recurring strength of past few weeks and the USDs ongoing damage despite struggling equities. The dollars woes are highlighted by a further upside in the yields of US treasuries (tumbling prices) which place a big hole in the argument of those who have long relied on the kindness of foreign investors remaining attracted to US treasuries. S&Ps decision to downgrade its UK outlook raises a vocal question as to when the US will be next. And the fact that the US can issue debt in the currency it is able to print only highlights the ongoing debasement of the US dollar (via excessive monetary printing. CATCH ASHRAF ON CNBC EUROPE SQUAWK BOX Friday from 6 to 7 am British Standard Time (5-6 am GMT).

Metals push higher, led by silvers 3-month high, looking to test the February high of $14.60. A break of which, would call the highest level since Aug and could extend gains towards the 14-month trend line resistance of $14.80. Support climbs to $13.6, while upside seen capped at $16 for now. GOLD looks to test $960 as the next key target. S&P500 set up for a close of 880, followed by 835. FTSE-100 nearing a double bottom at 4,300 after failing at the double top of 4,500. Hot-Chart on EURJPY updated.

Dollar bounces off session lows as Dow futures -94 pts on the S&P downgrade of UK outlook. FTSE-100 and DAX -119 and -117. YEN STRENGTH remains the NAME OF THE GAME, dragging EURJPY below 130 and USDJPY towards 94.50, eyeing 93.80. Gold stands at $939 while oil retreats to $60.48. GBJPY once again failed to break above 150 and is set to target 145.70.

Sterling drops across the board, down 2 cents to $1.56 after S&P downgrades UK credit ratings to negative from stable, adding that UK public finances are "deteriorating rapidly". Sterling shrugs the stronger than expected UK retail sales. EURGBP at 0.8840 from 0.8724.

For every One USD the Fed buys, the Treasury borrows 3 times as much in the building just 6 blocks away. And the dollar is spaying the cost of this arrangement. Stocks remain consistent with our view for a topping out pattern. But the dollar is showing some serious signs of corrosion, gradually breaking down from its usual inverse relation with equities. This could be a long complex summer.

Fed's purchase of $7.7 bln in 10-year treasuries has accelerated the dollar decline and the resulting rally in commodities as was the case on march 18 when the Fed first announced treasury purchases. Recalling attention to the short AUDNZD trade as the 1.2850-70s resistance fails anew. In the event of further retreat in US equities, AUDNZD risks further selling towards 1.2650. But do keep an eye on yen bouncing off its lows in the event that stocks weakness extends into Asia. GBPJPY and EURJPY increasingly pressured at 150 and 132.

HEAVY DOLLAR SELLING as with the dollar index hitting fresh 5-month lows at 81.26. Even GBP managed to break above its 200-day MA vs USD (1.5570) something that all majors currencies had achieved in previous weeks. EURUSD knives above $1.3740 resist, next level stands at $1.3860. Cable faces $1.5700. On CNBC Arabia in 15 minutes

CAD shrugs CPI weakness as renewed oil strength above $60.50 and positive Dow futures at +50 pts support the currency. USDCAD now eyes the 1.1475 low from May 2008. USD weakness remains a key topic in FX, while USDJPY retests seeks to retest the 95.40s. Yen pairs also under pressure but yen weakness pales compared to that of USD. GBPUSD stopped at the session high of $1.5543, which is 10 pips below the latest 200-day MA. IMF just stated UK economy is susceptible to potential shocks given high borrowing. EURGBP again finds support at 0.8750 before regaining a full cent.

The expected 0.6% in Canada CPI (due at 11:00 GMT, 12:00 London) from 1.2% is the headline CPI y/y, which would be a substantial drop for a y/y basis (lowest since Nov 2001). Core CPI is expected to slow to 1.8% y/y from 2.0%. If we do get anyting lower than 0.8% in the annual headline, expect renewed losses for CAD, hence USDCAD could jump towards 1.1645-50s. Rising oil prices may come in the way of falling CAD.

Much talk about the VIX breaking below 30 for the first time since the week of Lehmans downfall. Although the inverse relation between the VIX and equities is well documented, it is worth noting a few changes. The VIX rose to only 52 when stocks tumbled to 12-year lows in the first week of March, compared to a record high of 90 (some measures at 93) in late October, when stocks were at a 5-year lows. This means that despite deeper lows in equities 2.5 months ago, the element of fear and volatility was less pronounced than it was in October-November. Thus, selling can be present without panic, as it undertakes the form of speculative shorts (March) rather than panic redemptions (October).

Stocks struggle to retain positive territory after fresh record lows in US housing starts, prompting stability back in JPY and to lesser extent USD. JPY strength may remain cautious ahead of this evening's Japanese GDP figures. Oil drops back below $59, targeting $58, while gold regains upper hand towards $926. CADJPY unable to break above 83.70 resistance (61.8% retracmnt of 85.88-80.08 decline.

Yen retreat joins dollar weakness as global equities are further boosted by the emerging market-driven rally from Indias election results. GBPUSD targets the 200-day MA at $1.5570, but the $1.5720 high from Dec 17 remains a key barrier. Oil went as far as $60.48 and appears set to claw additional gains towards $61.30. USDJPY resistance remains solid at 97.40, while USDCAD support appears held at $1.151838% retracement of the 0.9070-1.3031 move. 12:30- GMT release of US housing starts and building permits will be key in adding to risk trades. But douts arise over macro implications of US autos. NEW POLL on GOLD added.

China and Brazil planning to use their own currencies in trading with one another instead of resorting to the US dollar. Recall, Brazilian president Lula showed no reservations in blaming the current crisis on the "Western world", while China has gradually expressed disappointment with its investment in US banks and its worry over the fate of the US dollar. As the media picks up this story in the coming days, we should expect renewed upside pressure on US bond yields, gold and silver. Closely watch the oil impact. Stay tuned.

EURUSD continues to lead US crude oil by about 2-3 days. We first raised this relationship on March 26. Today, the time lead has shrank to about 1-2 days, with oil following behind. http://www.ashraflaidi.com/hot-chart/?a=502

The 1.8% rally in equities may be accompanied by thin volume, but currencies are doing their bit in further dragging JPY and USD. Oil prices dropped back below $58, gold virtually unmoved at $922, while USDJPY regains 96.00. USDCAD technicals risk testing the 1.16 support on improved risk appetite but the resulting retreat in oil may not shows no support. Latest HotChart on Oil prices and Yen pairs updated.

Yen and USD take a breather as Dow futures gain 62 pts. No major US data releases for the day or the week, which will test the bulls resolve to add on to USD weakness. GBPUSD requires a breach above $1.5380, while EURUSD faces pressure at $1.3570. NZD seeks to exploit the rally in equities by testing the 57.60 yen and 59.60 vs USD. Note that the preferred play on risk is to sell USD than sell JPY.

The short Kiwi trade that keeps giving. Today’s Q1 PPI figures showed a worse than exp 1.4% decline q/q. NZDUSD and NZDJPY drop 300 pips in 4 days to 0.58.38 and 55.47 respectively. And with risk appetite set to shed more ground this week, more Kiwi losses. Do not forget the double top in NZDJPY mentioned in recent Hot-Chart. Major target stands at 54.00.