Intraday Market Thoughts Archives

Will EURUSD, GBPUSD, AUDUSD and NZDUSD end NY trading at fresh session lows, or at least near the lows of Thursdays sessionas has been the case over the last few days? Stocks are off their session lows as NY goes to lunch. Thus any protracted selling in equities could accelerate the retreat in these pairs. Biggest decliner vs JPY remains GBP, which has fallen off 200 pips from its trend line resistance of 157. 154.75 stands as the next target. Oil and CAD remain the high profile gainers tests above the low from June 23 of 67.30, facing the 68.50s--61.8% retracement of the decline from the June 30 high.

Sterling deepens losses while oil curencies CAD and NOK surge across the board. See the daily's performance chart (performance of GBP against other currencies) http://twitpic.com/bfvxs . GBPJPY failure at 157 has now paved the way for 155.70s Charting Forex inability to hold the session highs http://twitpic.com/bfr2g

Asian and European markets shrugged the retreat the scare from Microsoft but US equity futures are paring their earlier gains ahead of Univ of Michigan Sentiment Survey (13:45 GMT) exp at 65 in July final from 64.6. EURUSD probed the $1.4250s before treating towards $1.4200 while Sterling is dragged down across on a combination of bigger than expected decline in Q2 GDP and retreating US equity futures. GBPJPY extends losses from 157 to 155.55, now looking for 154. USDJPY eyes 94.05, 93.80.

No major explanation to the dollars rebound against EUR, GBP, AUD, NZD despite stocks persistent gains. USDCAD is the exception after BoC Governor reiterated the central banks upward revision in GDP and inflation. Although Carney did say hes watching CAD closely, CAD accelerated its from the double shot in STOCKS and OIL. YEN WEAKNESS remains the name of the game. Broadening against all majors. http://twitter.com/alaidi

S&P/Gold ratio exceeds the 1.0 level, and pushing to levels not seen since early January. The chart illustrates the 1.0 level to have acted as a key resistance ttp://twitpic.com/bc3ra over the past 6 months. Any additional gains above the 1.1 level are unlikely as the gold side of the equation remains propped by the same macro dynamics propping equities. Although JPY is the biggest loser of the currency bunch, USDJPY, GBPJPY and EURJPY maintain their resistance levels at 95.00, 157.00 and 135.35 respectively. Meanwhile, AUDJPY and NZDJPY have each broken their trend lines at 77.30 and 62.50, but will they close above these levels?

US jobless claims rose to 554K from 524K but the 4-wk avg fell to 566K from 585K. Continuing claims also pushed lower, thus showing a neutral net effect on the market. US Jul existing home sales at 14:00 GMT expected +1.3% to 4.83 mln from 4.77 mln, which could further encourage equities. But FX players must bear in mind 2 key things: (1) major pairs still unable to close at their session highs EUR 1.4260s, AUD 0.82, NZD 0.6610s, USDJPY at 94.50s. (2) Equity indices starting to show signs of consolidation similar to those seen in the first 2 weeks of June before the resulting declines. Risk-seeking FX plays betting against USD and JPY must be careful.

FX players who usually keep an eye on stocks must bear in mind the Dow Theory, a key tenet of which states that in order for a buy signal to be validated, the Dow 30 average must be confirmed by the Transportation index. Thus, although the Dow 30 has hit a 6-month high of 8,949, the Transportation index has yet to retest its May high of 3,458. This also coincides with 3,432, which is the 38% retracement from the May 2008 high of 5,536 high to the March low of 2,128.

Slight improvement in appetite was accompanied a bounce in US crude oil (Sep contract) towards $64.80s but KEEP A VIGILANT EYE ON the 64.90 resistance in the 4-hour chart http://twitpic.com/b7szp , a break above which to induce fresh selling in USD and in JPY. A break below 63.80 to trigger prolonged JPY bullishness. For now, USDJPY resistance at 93.90 trend line from Jul 20 high, while EURUSD reached our $1.4150 target from yesterdays tweets but remains capped at $1.4220. 10 yr yields back below 3.49%, Dow -14 pts.

Looking for further broadening in JPY gains, as USDJPY reveals 93.10 low, supporting the case for 92.70, but more downside seen in NZDJPY and AUDJPY. Despite stronger than exp Canadian retail sales, USDCAD een supported at 1.0980 due to struggling equities. An oil break below 64 to help call 1.1080s, but resistance remains at 1.1130s. But shorting AUDCAD remains viable startegy as Aussie loses ground on risk aversion, looking for 0.8910. Dow futures -64.

As we warned today, stocks head lower, bond yields drop over 15 bps, and oil breaks below $64, prompting a broader unwinding of yen-carry trades. GBPJPY, AUDJPY and NZDJPY eye 151.90, 74.60 & 59.70 targets into Asian trade. USDCAD offers hope to the bulls as it's likely to close above the key 1.1030 support. Readers of last weeks article saw the trend line resistance of AUDJPY and NZDJPY hold up at 77 and 62. USDJPY is now fully resuming selling momentum after confirming the validity of the downtrend mentioned in the latest HotChart. Our Dojis on AAPL and YHOO warned on twitter site are now fully in play http://twitpic.com/b3zs3

USDCAD drops below 1.10, mainly part of an overall decline in USD and JPY resulting from rallying Dow futures (+70) on stronger than exp Caterpillar earnings. BoC decision was CAD-positive as lifts GDP outlook as it dropped its reference to unprecedentedly rapid rise in the currency. USDCAD now eyes the next support at 1.0930. Shorts in AUDCAD eye 0.8930. EURUSD touches June 5 high of $1.4262. Watch whether it can close above $1.4230 by end of NY.

EXPECT DOLLAR AND YEN STRENGTH to ensue in the aftermath of Bernankes Congressional testimony (12:00GMT) and to extend following earnings report from Yahoo! and Apple, both of which already show bearish set-ups in their daily charts. Since Bernanke will aim at preventing bond yields from regaining the 4% level he (as the FOMC did on June 24), he will tell Congress that economic growth is to remain in contraction mode into year-end so as not to provoke any expectations for concluding the Feds ultra-loose monetary policy. GBPUSD eyes 1.6360,1.6310. EURUSD eyes $1.4150.

Comparing markets Now and Then (June 24 FOMC meeting). Bernankes testimony will likely echo the FOMCs position on the economy remaining weak, financial system further stabilizing and prices remaining subdued. Comparing MARKET POSITIONING between today & the last FOMC statement , 10-year yields are almost identical at 3.65%, equity indices and gold are about 3-5% higher, US dollar index is 3% lower and crude is 7% lower. These prices indicate a clear improvement in intermarket conditions as far as risk appetite and market stability. But could the absence of major economic data be replaced by the onset of earnings and guidance from more macro-economic-relevant corporations (as opposed to less economically relevant earnings from banks? Here's Apple's chart with a potentially bearish doji star http://twitpic.com/b1tqx

S&P500 / GOLD Parity. Metals and equities rise in tandem, with both S&P500 and gold nearly identical at around 946 producing a strengthening S&P/Gold ratio of nearly 1.0. While the ratio nears its best levels since May, the 1.0 territory has proven to be a solid resistance since January, thereby reflecting the ongoing stabilization superiority of metals vs equity indices in the medium to long term. http://twitpic.com/b0nl9 The chart suggests further downside is yet to come, with the rational that any deepening retreat in equities may refuel the move from finance to metals as was the case in Feb-March. Owners of my Forex & Intermarket Dynamics Workbook recall the Equity/Gold ratio has bottomed at around 40 year intervals.

AUDJPY breaks its trend line resistance at 76.50s and may extend to as high as 77.20 and 77.70, while NZDJPY has not broken its 62.50 resistance. LEI better than expected at +0.7% from an upward revised 1.3%. AUDNZD falling below 1.24, thus more upside in NZDJPY towards 66.40s. EURUSD Daily & Weekly http://twitpic.com/azxn4 AND http://twitpic.com/azy4h

A strong Friday close in NY and holiday in Japan paves the way for broader losses in JPY, followed by USD to the benefit of commodity FX and high yielders. Last weeks disappointing earnings from Google may not augur well for this week's array of technology earnings (Apple, Yahoo! and Amazon). Tuesday's testimony from Fed Chairman Bernanke will be scrutinized for whether any plans will be communicated regarding the exit strategy. /$ breaks above $1.4220 now faces 1.4280-85 high. LATEST HOTCHART on USDJPY is out.