Intraday Market Thoughts Archives

The US dollar edged lower in US trading but the big story in the week was the rebound in the Japanese yen. On Friday, the commodity currencies led and USD lagged. The CFTC positioning report showed a hefty cut in USD longs. Premium gold short of 1670 remains unfilled & silver in progress. All EURUSD & GBPUSD premium shorts hit targets.1 of 2 AUDUSD shorts in done, the other unfilled.

There was no strong driver in Fridays trading but theme was to sell the buck. USD/JPY briefly fell below 82.00 for the first time of the week, EUR/USD flirted with 1.33 and the Australian dollar rebounded after several days of declines.

The only notable data point was new home sales, which fell short of the 325K consensus with a reading of 325K. Comments from the Feds Bullard and Lockhart continued to suggest optimism about US economic growth and minimal worries about inflation.

The CFTC Commitment of Traders report showed the USD net long position scaled back by 37%. The euro remains the most heavily shorted currency but positioning fell to -83K from -99K. The move away from GBP shorts was dramatic to -16K from -42K. Similarly, JPY shorts declined to -26K from -44K. The US dollar made up ground against AUD (to +45K from 67K) and NZD (+4K from +13K) but lost ground against CAD, where longs increased to +42K from +27K. All the data is as of the close on Tuesday.

In our latest PREMIUM INTERMARKET TRADES, all EURUSD. GBPUSD & AUDCAD trades were done. 1 of 2 AUDCAD & and 1 of AUDUSD shorts were done and the others 2 unfilled. EURGBP & silver are in progress, while gold short of 1670 remains unfilled. For more detail, see http://www.ashraflaidi.com/products/sub01/access/?a=619 Non Subscribers can click here: http://www.ashraflaidi.com/products/sub01/

French business confidence and production outlook rose; Italian retail sale increased. UK mortgage approvals declined and Canadian CPI was higher. New home sales will be next. All of Wednesdays EURUSD. GBPUSD & AUDCAD shorts were done. Those remaining unfilled or in progress are below.

The greenback is mixed today. It is weaker against the EUR, GBP, CHF and JPY and unchanged against commodity dollars. European equities are in the red by about 0.5%. The relative strength winner is CHF.

Market sentiment improved considerably at the beginning of the London session on reoccurring rumor of looming Chinese RRR cut. French and Italian data that followed helped to push EURUSD a bit higher but the pair gave up some of its gains.

French business confidence rose in March to 96 from 93 and the production outlook indicator improved to -15 from -27. Italian retail sales also surprised to the upside as they rose 0.7% from -0.8% m/m and improved to -0.8% from -3.7% y/y.

Another disappointing report from the UK was released today. After yesterday's weak retail sales and Wednesday's terrible budget deficit figures, the BBA mortgage approvals declined to 33.1K in February from previous 38.1K which is the lowest print since June 2011. However, MPC member Martin Weale was quoted saying that Q1 was better than anticipated and that the growth will be positive. GBPUSD rose to 1.5907 but quickly retraced lower to around 1.5860.

There are were no sovereign bond auctions today and the issuance for next week should reach EUR 11 bln compared to EUR 7.58 bln this week.

Canadian CPI remained in February at 0.4% (core CPI rose to 0.4% from 0.2%) m/m. The annual figures rose 2.6% from 2.5% (core 2.3% from 2.1%). Notable increase of electricity price contributed to the raise.

The only US report due today is new home sales which is expected to rise in February to 326K from previous 321K. The report will be published at 10:00 am.

FED chairman Bernanke talks on central banking in Washington DC at 1:45 pm.

In Wednesdays PREMIUM INTERMARKET TRADES all EURUSD. GBPUSD & AUDCAD trades were done. 1 of 2 AUDCAD & and 1 of AUDUSD shorts were done the others unfilled. EURGBP & silver are in progress, while gold is unfilled. For more detail, see http://www.ashraflaidi.com/products/sub01/access/?a=619 Non Subscribers can click here: http://www.ashraflaidi.com/products/sub01/

US initial jobless claims fell to the lowest since 2008, helping to ease some concerns about global growth. The yen rally continued with commodity currencies on the defensive. The Asia-Pacific calendar is light with no major data or events. All of Wednesdays EURUSD. GBPUSD & AUDCAD shorts were done. Those remaining unfilled or in progress are below.

Soft European and Chinese PMIs placed markets firmly in a risk-off mood coming into US trading but after a brief spike to session extremes, trading was generally sideways. Initial jobless were at 348K compared to 355K expected.

USD/CAD climbed above parity for the first time in two weeks after Canadian retail sales climbed just 0.5% in February compared to 1.7% expected. AUD/USD fell below the 100-day moving average to a low of 1.0336.

Fed policymakers continue to maintain their distance from QE3. Fisher said he will not support more measures, Bullard warned on inflation and even Fed dove Evans said that guidance on when the Fed will tighten could control inflation. Bernanke delivered his second academic lecture on the history of the Fed but refrained from comments about the current state of the economy.

GBPUSD remains pressured. The pair failed to get over its 200 DMA in 6 occasions since October. Its H&S formation remains intact, as does that of EURUSD charted in Monday & Wednesday's Premium Intermarket Insights.

The Asia-Pacific session will be low-key barring any revelations about the true state of the Chinese economy. Its clear from yesterdays PMI reaction that this market is on edge about a potential slowdown there. Normally the Conference Boards leading index for China has zero effect on markets but this could be an exception. The data will be released at 0200 GMT. MNI also releases its flash Chinese business sentiment survey at 0135 GMT.

In Wednesdays PREMIUM INTERMARKET TRADES all EURUSD. GBPUSD & AUDCAD trades were done. 1 of 2 AUDCAD & and 1 of AUDUSD shorts were done the others unfilled. EURGBP & silver are in progress, while gold is unfilled. For more detail, see http://www.ashraflaidi.com/products/sub01/access/?a=619 Non Subscribers can click here: http://www.ashraflaidi.com/products/sub01/

Only nine days after Germanys ZEW . . . expectations index shot up to a 21-month high in March, German manufacturing PMI fell back below 50 for the same month, dipping to its lowest level since November at 48.1. Here is our latest HOTCHART on these German dynamics http://ashraflaidi.com/hot-chart/?a=3192

German and Eurozone PMIs decline; Eurozone industrial orders drop; UK retail sales fell; Swiss trade surplus rose. Market turns to jobless claims, Canadian retail sales, leading indicators, EZ consumer confidence and Draghi press conference. All of our Premium shorts in EURUSD, GBPUSD, AUDUSD & AUDCAD are on track.

The USD is stronger against all majors except the JPY. European equities are losing around 1.3%. JPY is the strongest and NZD the weakest currency today.

The common currency came under heavy pressure after all European March PMIs disappointed. Not only that all readings were below expectations, they were also worse than February results. German manufacturing PMI printed 48.1 from 50.2 and services PMI declined to 51.8 from 52.8. Even though the service sector expanded, new service orders contracted sharply suggesting bleak outlook.

Eurozone manufacturing PMI fell to 47.7 from 49 and services PMI worsened to 48.7 from 48.8. Continued contraction of both sectors hint that the Eurozone will in fact enter a technical recession. Eurozone industrial orders that fell 2.3% in February from 3.5% m/m (-3.3% from -0.4% y/y) cement these fears.

EURUSD dropped from 1.3252 to 1.3132.

The slew of disappointing data continued as UK retail sales declined in February 0.8% from 0.3% m/m which is the sharpest decline since 5/2011. The annual figure fell to 1% from 1.4% y/y. To make things worse, both monthly and yearly January results were revised down. GBPSD fell from 1.5884 to 1.5770

The only positive news today came from Switzerland as the Swiss trade surplus rose in February to CHF2.68 bln from CHF 1.5 bln. Exports soared 9.2% while imports dropped 12.3%.

The NY session kicks off today at 8:30 am ET with jobless claims that are seen marginally higher this week at 353K from previous 351K and with Canadian retail sales for January that are expected to rise 1.8% from previous -0.2% (core sales are seen at 0.5% from 0%).

Other reports will include US leading indicators that are due at 10:00 am and are anticipated higher in February at 0.6% from 0.4% and Eurozone's consumer confidence due at 11:00 am which is expected to slow the pace of a decline to -19.8 from previous -20.3.

Market volatility is likely to increase when the ECB president Mario Draghi holds a press conference at 12:00 pm at the European Systemic Risk Board Meeting.

WEDNESDAY's PREMIUM INTERMARKET TRADES on GBPUSD, EURUSD, AUDUSD, AUDCAD, and silver are found here: http://www.ashraflaidi.com/products/sub01/access/?a=619 Non Subscribers can click here: http://www.ashraflaidi.com/products/sub01/

The British government delivered a budget that balanced austerity and tax cuts, as expected. The New Zealand dollar is lagging after soft GDP data and the yen is the top performer. In China today, HSBC will deliver its March PMI flash estimate. Wednesday's Premium trades include AUDUSD, AUDCAD, EURUSD and silver. See below for detail.

Early US trading was once again characterized by choppiness and rapid news not overly tied to fundamentals. EUR/USD tumbled to 1.3179 from an opening level of 1.3230. Concerns about the Spanish economy and rumors that Germany is looking to pull the plug on ECB liquidity hampered periphery debt.

The focus was on the UK budget but Osborne delivered essentially what was expected after numerous leaks. One positive surprise was a lower-than-expected borrowing forecast for the year ahead. The gilt market rallied in approval but cable was unmoved. Measures in the budget will cut tax rates while hiking taxes on real estate transactions and cigarettes. Fitch responded to the budget, saying its credit neutral.

Testimony from Bernanke and Geithner was leaked yesterday so there were no surprises. In the Q&A, both harped on the need to reign in deficits. The lone US economic existing homes sales which paced at 4.59m compared to the 4.62m expected.

Early in Asia-Pacific trading, New Zealand revealed that the economy grew just 0.3% in Q4, short of the +0.6% consensus. Third quarter growth was also revised lower to +0.7% from +0.8%.The kiwi fell to a one-week low at 0.8100 after the release, dropping a half cent.

The focus will be on the HSBC flash China manufacturing PMI at 02:30 EST. The data point has not been a great predictor of official numbers recently but it still holds sway in the markets, especially due to heightened concerns raised earlier this week by BHP Billiton.

WEDNESDAY's PREMIUM INTERMARKET TRADES on GBPUSD, EURUSD, AUDUSD, AUDCAD, and silver are found here: http://www.ashraflaidi.com/products/sub01/access/?a=619 Non Subscribers can click here: http://www.ashraflaidi.com/products/sub01/

The UK Budget has the basic requirements to keep credit agencies at bay, planning to enact a 7% stamp duty on property worth more than 2m, slashing the main corporate tax to 24%, lifting the personal allowance by GBP 1,100 to GBP 9205, and announcing the much-telegraphed reduction in the top tax rate from 50% to 45%. With the Treasury estimating it would lose GBP 2.4 bn in tax avoidance this year, the combined effect of returning tax avoiders may well give an inflow boost, or a mini-stimulus ahead of election year. SEE LATEST PREMIUM INTERMARKET TRADES on GBPUSD, EURUSD, AUDUSD, AUDCAD, and silver are found here: http://www.ashraflaidi.com/products/sub01/access/?a=619 Non Subscribers can click here: http://www.ashraflaidi.com/products/sub01/

Ashraf will speak at this week's Traders Expo in London Fri & Sat (Mar 23-24). Forex trading tips and tools on Friday, March 23 (11:45 am - 12:30 pm) and Forex and intermarket view for H1 Saturday, March 24 (1:45 pm - 2:15 pm) Click here for more detail: http://www.moneyshow.com/tradeshow/london/traders_expo/speakers/speaker_details/?speakerid=129874OTE

UK government borrowing significantly higher in February; 2 MPC members voted for more QE; Portuguese auction. Market turns to existing home sales, Bernanke's testimony, Canadian leading indicators and later in the session to NZ GDP.

The greenback is slightly higher against all majors in the ongoing session. European equities are mixed in -0.3% to 0.2% range and NZD with AUD are the weakest again.

GBPUSD sold of sharply after the UK government borrowing rose significantly more than expected. Public sector net borrowing excluding interventions, which is the preferred measure, rose in February to GBP 15.2 bln from previous nearly GBP 8 bln surplus. This was the highest level of borrowing during February since the records began and nearly twice as much as analysts expected.

MPC minutes from 3/7 and 8 meeting revealed that all members voted to keep rates unchanged but two members, Adam Posen and David Miles, voted to expand QE by GBP 25 bln. GBPUSD sold off from 1.5920 to 1.5842 but has since regained some of its losses.

Portugal which has been in focus recently due to a worrying comments by PIMCO chief El-Erian sold EUR 1.992 bln worth of 4 and 12 month bills today (EUR 2 bln target). Both average yields declined and bid to cover improved.

FED chairman Bernanke's testimony on the European debt crisis before the House Committee will start at 9:30 am but impact is expected to be limited as the text of the speech was already released. Higher volatility could come from the Q&A session that follows afterwards.

US data is limited today to existing home sales due at 10:00 am that are expected to rise in February to 4.61M from previous 4.57M.

By the end of the session at 5:45 pm New Zealand will release its Q4 GDP figures that are anticipated to decline to 0.6% from 0.8% q/q but rise to 2.2% from 1.9% y/y.

One EURUSD trade is in progress, the other is unfilled, while AUDCAD & AUDUSD were both done. Rest of last night's Pemium Intermarket trades are found here: http://www.ashraflaidi.com/products/sub01/access/?a=618 Nonsubscribers click here: http://www.ashraflaidi.com/products/sub01/

US yields rose for a record tenth consecutive day, underpinning the US dollar, but the rally may be due for a break. The Australian dollar lagged Tuesday on worries about a China slowdown. Asia-Pacific trading is quiet but the Feds Kocherlakota hinted at an exit strategy.

The ten-session rise in US yields is the most since at least 1985 and underlines sentiment about the US recovery but the climb fell short of the late-October high of 3.42%. At the same time, USD/JPY has been unable to definitively break above 84.00. Japanese fiscal year-end is often a negative for the pair and a small move down is likely before a further rally, unless yields break out.

News flow was light in US trading. Housing starts were a minor disappointment at -1.1% compared to the +0.1% expected but building permits were strong. The theme of worries about a China slowdown carried over from Asia and percolated, especially in early trading. Comments from Bernanke were academic.

The lone indicator in the Asia-Pacific region was New Zealands current account and it was virtually in-line with estimates at -$2.76B. The Feds Kocherlakota said that if necessary, the Fed could contain inflation by hiking interest paid on reserves, in a hint at the FOMCs exit strategy. He said officials could move away from zero interest rate policy as soon as 2012 or 2013 if conditions permit.

One EURUSD trade is in progress, the other is unfilled, while AUDCAD & AUDUSD were both done. Rest of last night's Pemium Intermarket trades are found here: http://www.ashraflaidi.com/products/sub01/access/?a=618 Nonsubscribers click here: http://www.ashraflaidi.com/products/sub01/

RBA meeting minutes; German PPI declined; Swiss industrial production rose; UK CPI declined less than expected; Spanish and Greek auctions. Housing starts and building permits are next. Last nights Pemium Intermarket Insights focused on shorts in Aussie vs CAD & USD as well as fresh trades on EURUSD, EURGB and gold.

The USD is higher across the board, especially against commodity currencies. European equities are lower by more than 1.2% and the relative strength losers are AUD and NZD.

RBA meeting minutes that said that the economy faces less danger from the Eurozone crises and that downside risks are somewhat smaller were not able to stop the AUD decline caused by earlier comments from the largest mining company BHP that Chinese iron ore demand was slowing. The AUD has been declining since the beginning of the Asian session and trades around 1.05.

European data showed that despite higher energy prices, German PPI declined in February to 0.4% from 0.6% m/m which translates to 3.2% from 3.4% y/y and that Swiss industrial production in Q4 soared 7.9% q/q from previous -2%. The annual print improved to -1.4% from previous -1.9%.

UK CPI declined slightly less than expected in February to 3.4% from 3.6% y/y which is the lowest print since November 2010 (core CPI declined to 2.4% from 2.6%). Even thought the consumer inflation has been declining for 5 months in a row, it declined less than economists expected (3.3%) which could lower chances for additional QE. BOE projects CPI at 3.35% by Q1 end.

Spain sold EUR 5.05 bln worth of bonds today (target EUR 4.5 5.5 bln) with lower average yields and Greece sold EUR 1.3 bln worth of T bill (EUR 1 bln target) with lower yield and marginally better cover. This was the first post debt swap auction.

In other news, the senate banking committee will start confirmation hearings for two new FED governors Jerome Powell and Jeremy Stein and the government in Cyprus, which is a member of the Eurozone, allegedly asked the ECB for SMP support.

The US session kicks off at 8:30 am ET with building permits that are seen higher in February at 0.69M from January's 0.68M and also with housing starts that are expected to remain steady at 0.7M.

Market volatility could increase at 10:00 am when treasury secretary Geithner testifies before the Financial Services committee in Washington DC and also at 12:45 pm when FED chairman Bernanke delivers the first out of four lectures at the George Washington University.

Last nights Pemium Intermarket trades focused on AUDCAD, AUDUSD as well as fresh trades on EURUSD, EURGB and gold. Click here for direct access: http://www.ashraflaidi.com/products/sub01/access/?a=618 Nonsubscribers click here: http://www.ashraflaidi.com/products/sub01/

Ashraf tells CNBCARABIA that one week after the biggest US banks announced a hike in dividend payouts and share purchases, technology blue chip Apple announces a $10 bn stock buyback and the first dividend in 17 years. The news boosted US equities, lifting the NASDAQ by 18% YTD, more than double the DJIA's 8.5%. S&P500 is up 12% YTD. Ashraf adds that the stock-specific news from Apple and JP Morgan are providing a positive response to concerns from the bearish camp pointing to the lack of outright QE3 from the Fed as reason for worry FULL INTERVIEW here: http://www.youtube.com/watch?v=7sYHMbe5evw&list=UUvXdnxqWDSUrYekzFOyzEHg&index=1&feature=plcp

The Australian dollar slumped in Asia after officials at BHP Biliton lowered expectations for Chinese steel and said they are reconsidering Australian investment plans. The US dollar is outperforming after a decent-sized fall in NY trading. UK inflation data is the highlight of European trading. The latest Premium trades are below.

Officials from BHP, the worlds largest mining company, appeared in two separate stories. The first was the company chairman telling the Australian Financial Review that its reassign capital spending plans in light of uncertainty about China. The second was the CEO saying Chinese steel growth has flattened and that the big infrastructure build has come to an end.

Given the uncertainty about the accuracy of Chinese statistical data, the market is much more apt to believe comments from corporate executives about the health of Chinas economy than officials. AUD/USD was trading at 1.0625 when the story broke and fell to a weekly low of 1.0552 as it circulated. Low liquidity due to a Japanese holiday may have exaggerated the move.

The RBA minutes earlier helped AUD as officials said downside risks were less likely than before. The overall tone was upbeat, in line with commentary from other global central bankers. There was minimal concern about inflation so the policy bias remains toward cuts, even if the market is beginning to lean in the other direction.

European Preview

The top event comes at 0930 GMT when the UK releases CPI figures for February. The year-over-year rate of inflation is expected to slide to 3.3% from 3.6%, with core at 2.3% compared to 2.6% in January. The trend in UK inflation has been downward since peaking at 5.2% in September and a small setback is unlikely to rile markets. Data on the UK RPI and German producer prices (at 0700 GMT) are unlikely to move the market.

Tonight's Pemium Intermarket trades focus on EURUSD, EURGBP, AUDCAD & gold. Click here for direct access: http://www.ashraflaidi.com/products/sub01/access/?a=618 Nonsubscribers click here: http://www.ashraflaidi.com/products/sub01/

USD had added to Friday's losses, which were triggered by lower than expected inflation figures. EURUSD is staging a 3rd consecutive daily rebound, breaching above the key 100-DMA. Meanwhile, all GBP traders will watch Tuesday's release of UK Feb CPI. Tonight's Pemium Intermarket trades focus on EURUSD, EURGBP, AUDCAD & gold. Click here for direct access: www.ashraflaidi.com/products/sub01/access/?a=618 Nonsubscribers click here: www.ashraflaidi.com/products/sub01/

JPY crosses decline; Eurozone current account in surplus sa but deficit nsa; Eurozone construction output declined; Greek CDS auction; ECB deposits. Market turns to Canadian wholesale sales and NY FED president Dudley's speeches. A flurry of US housing data is due later in the week as well as Bernanke's appearance.

USD consolidates Friday's losses and continues to trade within narrow ranges during the London session. The exception are JPY crosses that are lower, perhaps because of repatriation of Japanese earnings due to fiscal year that ends on 31st of March. European equities are losing about 0.5% and the relative strength winner is JPY.

With little to influence the market today, traders are looking ahead to tomorrow's UK CPI and FED chairman Bernanke's speech, Wednesday's MPC minutes and NZ GDP, Thursday's European PMIs and Friday's Canadian inflation data.

Second tier data showed that Eurozone current account grew to EUR 4.5 bln in January from December's EUR 3.4 bln which is the biggest surplus since the beginning of 2008. However, nsa figures showed a sharp decline to EUR -12.3 bln from EUR 18.3 bln. Eurozone construction output declined 0.8% from previous -1.9% m/m and -1.4% from 9.8% y/y. EURUSD continues to hover around 1.3160.

Focus turns to Greek CDS auction with payout around USD 3.2 bln expected. Final results should be announced around 3:30 pm GMT.

ECB deposits continue to be elevated at EUR 758.75 bln which is over EUR 30 bln more than on Thursday.

The NY session starts at 8:30 am ET with Canadian wholesale sales that are expected to decline in January to 0.4% from previous 0.9% followed by US NAHB housing market index that is seen higher in March at 30 from 29.

Market volatility could increase at 8:35 am and also at 1:40 pm when NY FED president, vice chairman and FOMC member William Dudley delivers speeches in NY. Earlier there was a chatter that his speech could be dovish and given the fact that there are no hard data releases today, the impact could be strong.

One EURUSD short is stopped out, one is in progress and so is cable shorts. Aussie shorts & gold longs remain unfilled. For details see here: http://ashraflaidi.com/products/sub01/access/?a=616

A wave of selling washed over the US dollar Friday after the CPI report. The pound made large gains while the US dollar slumped. CFTC showed euro shorts retreating.

Trading was quiet on Friday until US February CPI figures were released. The report showed inflation at 2.9% y/y, as expected but the US dollar fell hard after the data and continued to slump. Either a strong hand in the market was expecting signs of accelerating inflation or large orders to sell dollars were attempting to use the post-release liquidity.

The euro immediately jumped a half-cent to 1.3130 with other dollar trades moving in a similar large fashion. The selling accelerated after slightly disappointing industrial production figures and then again later after U Mich consumer sentiment at 74.3 compared to the 76.0 expected. EUR/USD touched a high of 1.3187 before stalling out and moving sideways into the close.

Some market talk suggested trepidation about comments from NY Fed President Dudley early on Monday. The chatter was that he could be dovish, which would send US yields lower and hurt USD/JPY.

Stocks were bening on Friday, with the S&P 500 gaining just 0.1% but closing out a 2.4% weekly gain. In forex, the top gainer on the week was GBP while JPY lagged.

Commitments of Traders

The CFTC positioning report showed EUR shorts pared to the lowest level since early December, falling to 99K from 116K. The market is rapidly moving to short the yen as positioning fell to -42K from -19K. Despite recent GBP gains, it remains heavily shorted at -42K compared to -37K a week ago. CAD longs expanded slightly while AUD and NZD longs were scaled back.