Intraday Market Thoughts Archives

The week began the same way it ended with a report that the ECB is considering capping peripheral yields. On Friday, the Canadian dollar was the best performer and the EUR lagged, reversing the trend from earlier in the week. The latest CFTC data showed growing negative USD sentiment. Thursday's Premium Intermarket Insights include EURUSD, AUDUSD, silver and oil.

The euro fell as low as 1.2481 early in US trading but began to trend higher after a weak durable goods orders report. Excluding volatile aviation and defense components, orders fell 3.4% compared to a rise of 0.7% expected. Orders have fallen to the lowest levels of the year and point to weak growth later in the year. The euro began to slip following the data, boosting the euro.

Larger euro gains came after a Reuters source reported that the ECB is still considering a cap on periphery yields. The story first surfaced in a German report at the start of the week but soft denials lowered expectations. The renewed chatter, and Reuters credibility, boosted the euro back to 1.2562. Late in the day, it drifted down to 1.2512.

The S&P 500 gained 0.6% but posted its first losing week in nearly two months.

Weekly data from the CFTC showed a strong preference for commodity currencies. The USD lost ground against all currencies except the yen.

EUR -124K vs -138K prior

JPY +11K vs +31K prior

CAD +51K vs +29K prior

AUD +87K vs +67K prior

GBP +8K vs 0K prior

NZD +16K vs +15K prior

Thuradays Premium Intermarket Insights on EURUSD, USDJPY, GBPUSD, AUDUSD, silver and oil Direct Access to these Insights are found here: http://ashraflaidi.com/products/sub01/access/?a=677 Nonsubscribers can have a 1-week trial here: http://ashraflaidi.com/products/sub01/

-AB

German and France unite on Greece; UK GDP contracted less than initially expected; Gold ignores Bullard's comments. Focus turns to durable goods orders. Thursday's Premium Intermarket Insights include EURUSD, AUDUSD, silver and oil.

The greenback is stronger in the ongoing session against all majors except JPY. European equities are losing about 0.25%.

Germany and France agreed on a united front towards Greece telling Athens that it should not expect any leeway on its bailout terms unless it sticks to tough reform targets, Reuters reports. German chancellor Merkel can prove her stance as she meets Greek PM Samaras in Berlin today.

Sterling was under pressure after MPC member Martin Weale said that he would prefer a rate cut over more QE. Nevertheless, he does not think monetary stimulus is needed at present and that it must be clear that a rate cut is the right thing to do.

UK Q2 GDP growth was revised higher as expected to -0.5% from initial -0.7% q/q and to -0.5% from -0.8% y/y. In case of the annual print the improvement was bigger than anticipated. Despite the revision, the outlook is still highly uncertain as household consumption expenditures, industrial production and service sector all contracted. GBPUSD fell to 1.5821 but quickly erased a portion of its losses and trades around 1.5840.

Gold trades slightly lower today but the reaction to yesterday's comments made by St. Louis FED president James Bullard has been minimal. He pointed out that the US economic outlook had brightened and the data has been somewhat stronger since the FOMC policy meeting, MNI reports.

American reports are limited to durable goods orders at 8:30 am ET that are expected to grow 2.5% in July from previous 1.3%. Core orders should rise 0.5% after 1.4% decline seen in June.

Thuradays Premium Intermarket Insights on EURUSD, USDJPY, GBPUSD, AUDUSD, silver and oil Direct Access to these Insights are found here: http://ashraflaidi.com/products/sub01/access/?a=677 Nonsubscribers can have a 1-week trial here: http://ashraflaidi.com/products/sub01/

The near-daily rumours that Spain was poised to ask for EFSF aid can be put to rest for a few weeks after a report that no decision will be made until at least Sept 12. The euro was the top performer on the day while the Australian dollar lagged. Comments from RBA Gov Stevens are the highlight of the session. Thursday's Premium Intermarket Insights include EURUSD, AUDUSD, silver and oil.

The euro squeeze continued higher on Thursday, hitting 1.2590. Reuters cited a source saying discussions are ongoing at the technical level but no decision will be taken before Sept. 12, ahead of EU FinMin meetings on Sept 14/15.

The takeaway was that an aid plan is moving along slowly but coming together. It adds another element to a jam-packed schedule in the first two weeks of September.

The market was reluctant to give back the QE3-induced moves on Wednesday, even after St. Louis Fed President Bullard said markets are overpricing the chance of QE3 in September.

US initial jobless claims were slightly disappointing, rising to 372K from 365K expected. The S&P 500 fell 0.8%.

The calendar in Asia is busier than usual for a Friday. NZ trade balance will be released early in the session but the highlight will be comments from Stevens, who is testifying before the House economics committee.

Australias resource minister declared the mining boom over yesterday in reaction to BHP cancelling a A$20B project. Comments from Stevens on the sustainability of investment will be closely followed. He begins speaking at 2330 GMT.

At 2350 GMT, the Japanese corporate service price index is expected to fall 0.2%. At 0135 GMT, the China flash business sentiment indicator will be released.

Thuradays Premium Intermarket Insights on EURUSD, USDJPY, GBPUSD, AUDUSD, silver and oil Direct Access to these Insights are found here: http://ashraflaidi.com/products/sub01/access/?a=677 Nonsubscribers can have a 1-week trial here: http://ashraflaidi.com/products/sub01/

-AB

ECB not revealing yield cap; German GDP unrevised; Manufacturing PMIs from Germany, Eurozone and France improve; UK mortgage approvals rose and CBI sales fell. Market turns to jobless claims, markit manufacturing PMI and new home sales. Thursday's Premium Intermarket Insights include EURUSD, AUDUSD, silver and oil.

The post FOMC minutes EUR rally continued as the common currency pushed to 1.2560. However, other major currencies are trading slightly lower against the USD. European equities are in the green but gaining only about 0.1%.

German magazine Die Welt reported that the ECB could decide to cap yields on Eurozone's countries but not reveal what exact level they target. This approach would be more flexible as the ECB could accept short term deviations without risking its credibility.

German GDP for Q2 was unrevised and remained at initial estimates of 0.3% q/q and 0.5% y/y. German manufacturing PMI rose in August to 45.1 from previous 43 and the Eurozone counterpart improved to 45.3 from previous 44. French PMI also surprised to the upside as it rose to 46.2 from 43.4. Stronger PMIs from core countries lowers the need for an aggressive decision by the ECB on September 6th.

In other news, UK mortgage approvals rose in July to 28.4K from June's 25.9K, CBI realized sales dropped to -3 in August from previous 11 and Swiss trade surplus exceeded expectations in July and rose compared to June to CHF 2.92 bln from 2.19 bln. GBPUSD trades slightly lower around 1.5873, EURGBP pushed to 0.7910 and USDCHF fell to 0.9560.

Spanish and Italian 10 year yields are pushing higher today, trading around 6.42% and 5.70% respectively. Periphery spreads are also widening.

The US session starts at 8:30 am ET with jobless claims that are seen marginally lower at 365K from previous 366K followed by Markit manufacturing PMI at 9:00 am. A slight rise to 51.5 in August from July's 51.4 is expected.

July new home sales are due at 10:00 am ET and an increase to 0.36M from 0.35M is anticipated. Eurozone consumer confidence is due at the same time and a steady print of -22 is seen.

Focus will also be on chancellor Merkel that meets president Hollande in Berlin at 1 pm ET.

Thuradays Premium Intermarket Insights on EURUSD, USDJPY, GBPUSD, AUDUSD, silver and oil Direct Access to these Insights are found here: http://ashraflaidi.com/products/sub01/access/?a=677 Nonsubscribers can have a 1-week trial here: http://ashraflaidi.com/products/sub01/

Chinas HSBC manufacturing PMI hit a 9-month low of 47.8 in August, leading to a brief pullback in AUDUSD to 1.0500. Wednesdays burst in risk appetite was widely attributed to the mostly dovish FOMC minutes and the positive remarks from Greek & EU members, dampening the prospects for any Greek exit. This means that a blow-out number in the September release of the US jobs report would serve in delaying QE3 but not necessarily eliminate it. Here are the latest Premium Intermarket Insights on EURUSD, USDJPY, GBPUSD, AUDUSD, silver and oil

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The US dollar fell hard after the FOMC minutes showed many members ready to pull the trigger on QE3. The Canadian dollar lagged on the day while the yen surged. Chinas HSBC flash manufacturing index will be the highlight of Asia-Pacific trading. The Latest Premium Insights will be released in a few hours.

The market was expecting a slight tilt toward more easing in the FOMC statement because the meeting took place before recent, somewhat upbeat reports on US retail sales and employment but the minutes were overwhelmingly dovish. Many members saw a need for further stimulus fairly soon unless data pointed to a substantial and sustainable strengthening in the economy.

Another portion seemed to indicate that a majority of members were already in favor of extending Fed guidance further out but that they deferred the decision until the September meeting.

The US dollar fell hard after the decision, with USD/JPY falling nearly a cent to 78.28 and gold hitting $1650 for the first time since May. The euro broke above 1.25 and cable extended the previous days strong gains.

The minutes ratchet up expectations for the Aug 31 Bernanke speech from Jackson Hall with the probability of September QE3 now likely above 50%.

The minutes overshadowed other news on the day that included weak Canadian retail sales and comments from European leaders that there will be no decisions on Greece until at least October as they await reports from the Troika.

China will be the focus of the upcoming session with the HSBC flash PMI at 0230 GMT. The prior reading was 49.3 and another sub-50 reading would weigh on AUD and risk assets. The Feds Evans also speaks in Beijing at 0330 GMT. He is a dove and will likely add to the chorus on QE3.

-AB

Juncker Samaras meeting; German auction. Focus turns to Canadian retail sales, existing home sales and later in the session to FOMC minutes. Less than 12 hours after Ashrafs Premium Insights titled Exploiting Summer Doldrums suggested new 4-year highs in equities and prolonged consolidation in the VIX, risked appetite pushed the envelope to new highs.

Main currencies traded in narrow ranges throughout the London session, consolidating yesterday's relatively large moves. EURUSD continues to trade around 1.2475 and GBPUSD pushed to above 1.58. European equity indices are losing around 0.5%.

Eurogroup head Jean Claude Juncker arrived to Athens for one day visit today. The meeting with Greek PM Antonis Samaras will start at 12:00 pm ET and requests for more "breathing space" in order to get the economy going are expected.

Germany allotted EUR 4.08 bln of 2 year bond vs. EUR 5 bln target with average yield 0% from previous -0.06%. Bid to cover fell to 1.5 from 2.0.

There were no European reports released during the London session today.

The US session will begin at 8:30 am ET with Canadian retail sales that are expected to slow in June to 0.2% from previous 0.3%. Core sales are seen at 0.3% from 0.5%.

Existing home sales are due at 10:00 am and they are anticipated to rise to 4.52M in July from 4.37M in June.

The key event of the session will be the minutes from the FOMC meeting on July 31st/August 1st at 2:00 pm. Traders will look for cost-benefit analysis of further QE but bearing in mind that the meeting ended with no changes there is likely to be little in the minutes to digest, especially considering the upcoming symposium in Jackson Hole.

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The euro surged on Tuesday on a round of short covering that nearly reached 1.25. The single currency was the best performer on the day while USD lagged. The top item in Asia-Pacific trading is Japanese trade balance. Less than 12 hours after Ashrafs Premium Insights titled Exploiting Summer Doldrums suggested new 4-year highs in equities and prolonged consolidation in the VIX, risked appetite pushed the envelope to new highs.

The euro continued to rally in US trading, hitting 1.2488 before edging back to 1.2464. Cable followed along, hitting a three-month high of 1.5805.

A rally to a four-year high in the S&P 500 sparked the moves. The index rose as high as 1426 but was unable to hold the gains and slipped back to 1413.

It was difficult to find a fundamental driver for the euro rally. Some attributed it to a better tone from Germany ahead of meeting with Greece later this week. Senior lawmakers said concessions are possible if the Greek government puts in a plan to meet the main targets. Spain also sold one-year debt at 3.07%, 85 basis points lower than a month ago.

The euro rally appeared overdone and more-likely a result of short covering in EUR/USD and EUR/AUD than optimism. Further evidence of short covering comes from the inability of CAD to rally or JPY to sell off.

Gold reached a pivotal level at $1641. The high coincides with the June 3-month high and the 200-day moving average at $1643. Expectations for QE3 were given a slight set-back after the Feds Lockhart says disinflation and deflation are not concerns.

At 2350 GMT, Japan will release trade balance data for July. The report will underline oil price rises, which are a key headwind. Japan is importing oil in vast quantities to make up for nuclear shutdowns and the result is an expected 272 billion yen deficit in July. At the same time, exports are forecast down 2.9% in the month.

The Australian leading index (0030 GMT) and DEWR skilled vacancies (0130 GMT) are also on the docket but unlikely to drive trading.

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-AB

AUD rose after RBA minutes; UK public sector borrowing rose; Spanish auction. Markets await the FOMC member Lockhart's speech and Canadian wholesale sales. Last weeks 1.2420 EURUSD target got hit today. See last nights Premium Insights on equities, VIX, FX & yen pairs below.

The common currency rose to a two week high today along with most other majors that also gained against the buck. European equities are gaining over 0.5%.

The Aussie pushed slightly higher after the minutes from the latest RBA meeting were released. Nothing surprising was revealed but remarks about stabilizing China, inflation within a target and domestic growth that outweighs global slump helped to underpin the currency. When AUDUSD broke above 1.0500 rumors of the possibility of RBA intervention circulated but the fact that the minutes did not mention disadvantages associated with strong currency make chances of an intervention smaller. AUDUSD trades around 1.0510.

UK public sector net borrowing excluding financial interventions was GBP 0.557 bln which is about GBP 3.4 bln more than in July 2011 when borrowing was -2.2837 bln. The treasury blamed lower tax receipts which are usually good in July. The surprised deficit had minimal impact and GBPUSD trades higher around 1.5760.

Spain sold EUR 4.51 bln of 12 and 18 month bills today. Both average yields declined and bid to cover rose in case of the 18 month bill but declined on the 12 month bill. 10 year yield continues to decline, currently at 6.24%.

The NY session will start a bit earlier today at 8:00 am ET when the Atlanta FED president and the FOMC member Dennis Lockhart delivers a speech on economic outlook in Atlanta.

Reports are limited to Canadian wholesale sales at 8:30 am and they are anticipated to slow to 0.3% in June from previous 0.9%.

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Neither the VIX nor equities show any sign of an impending selloff in risk appetite this week or the next that is beyond 2.5%. If anything, S&P500 will have another attempt at this years highs and so does the Dow-30. The latest US data on jobs and retail sales presented no real urgency for the Fed to force out QE3 in this months Jackson Hole conference. Find out the tactical implications for EURUSD, USDJPY, GBPUSD, CADJPY, AUDJPY gold and oil in our latest Premium Insights with new charts on DAX-W & EURUSD-W. Direct access to the latest Premium Insights is found here: ashraflaidi.com/p New Subscribers can click here: http://www.ashraflaidi.com/products/sub01/

The ECB denied it was considering a yield-cap on periphery bonds but the euro was able to hang on to a small gain. On the day, the Australian dollar was the best performer while USD lagged. The RBA minutes are the chief event risk in Asia. Latest Premium Insights are due in 60 mins from now.

The euro fell below 1.23 after an ECB spokesman denied the weekend Der Spiegel report that said the ECB was considering a cap on periphery yields. Optimism remained, however, with Spanish 10-year yields falling 15 basis points to a six-week low of 6.28%. The euro rebounded close to 1.2350 but the close of European trading and then moved sideways for the remainder of US trading.

Greece was in focus after the foreign minister said leaders will propose 11.7B euros in cost-savings to the Troika in early September. German re-iterated its opposition to softening the Greek bailout program.

There was no US economic data so the market had very little direction. The S&P 500 closed unchanged at 1418.

Gold climbed back above $1620. Its the sixth attempt to break out of the top side of the range in place since May. A large move is unlikely until the Fed offers some guidance on QE3 at the end of the month.

The top item on the Asia-Pacific schedule is the 0130 GMT release of the August RBA minutes. Some market watchers have begun to price in rate hikes for next year. They will be looking for a more hawkish stance and confidence about growth among Asian neighbours.

In Japan, at 0430 GMT, the all-industry index is expected to increase 0.2% after a 0.3% fall in May. At 0530 GMT, department store sales will be released.

- AB

ECB could limit periphery yields; Bundesbank confirms its opposition to ECB bond purchases; Eurozone construction output falls. US session will bring only Chicago FED national activity index. See the latest on those Premium Insights. A new version is due later today.

The greenback trades within narrow ranges but with a firmer tone. European equities are mixed between -0.1% and +0.5%. CAD leads while EUR lags. EURUSD fell back to 1.2320s

Reuters reports that the ECB may be considering an interest rate cap on Eurozone country's bonds. It would buy those bonds that would reach certain premium over German bonds. This step would, at least in theory, discourage speculators from pushing yields above the level that the ECB considers appropriate and it would ensure that interest rates in the euro area would not diverge significantly. Sources said that it is to be decided during the September meeting. The ECB declined to comment on the story. Spanish and Italian 10 year yields continue to decline, currently trading around 6.21% and 5.74%.

In its monthly report, the Bundesbank said that the Eurozone crisis has notably increased the risks to German outlook and reiterated its oppositions to new ECB bond purchases. It further noted that the new role for the ECB as a bank supervisor could conflict with its price stability mandate.

There was only one European release today. Eurozone construction output declined additional 0.5% in June after a 0.2% fall in May m/m and on annual basis output declined 2.8%. Construction contracted for the third month in a row with largest declines seen in Germany and Netherlands.

US data is limited to Chicago FED national activity index at 8:30 am that reached -0.15 in June. No forecasts are provided for this index and market impact is usually limited.

6 of last weeks Premium Insights remain in progress, including the change of bias in 2 gold ideas. More below. Direct Access to these Insights is found here: http://ashraflaidi.com/products/sub01/ access/?a=675 Non subscribers can click here: http://ashraflaidi.com/products/sub01

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Trading grinded to a close on Friday, ending one of the quietest weeks of the year. On the day, the US dollar led and the Australian dollar lagged. The weekly CFTC positioning data showed overall US dollar positions at the most negative in 10 months. 6 of last weeks Premium Insights remain in progress, including the change of bias in 2 gold ideas. More below.

Economic news was light on Friday. The euro found some life after a lawmaker from Merkels party said they were considering easing Greek bailout terms but that the government was torn. The euro climbed to 1.2360 on the report but then faded below 1.23 on position squaring ahead of the weekend, even as Spanish borrowing costs continued to fall.

The US dollar was slightly stronger after the University of Michigan consumer sentiment survey rose to 73.6 from 72.3.

The Canadian dollar lagged after CPI rose just 1.3% year-over-year, less than the 1.5% expected and re-kindling talk of BOC rate cuts if the US economy stumbles.

The US stock market edged higher and the DJIA closed at the highest since 2007. The S&P 500 is near the same mark and the VIX also fell to the lowest since 2007. The overall market seems complacent relative to the abundance of risks in September.

The weekly CFTC position data showed a general move away from US dollar longs with commodity currencies making a strong move.

EUR shorts 137K vs 132K prior

JPY longs 31K vs 28K

GBP flat vs short 8K prior

AUD longs 67K vs 53K prior

CAD longs 29K vs 19K prior

6 of last weeks Premium Insights remain in progress, including the change of bias in 2 gold ideas. 1 of 2 EURUSD Premium longs hit their final and so did oil and AUDJPY, while USDJPY. 1 GBPUSD, EURUSD, both gold and CADJPY are all in progress, while the other GBPUSD was stopped out Direct Access to these Insights is found here: http://ashraflaidi.com/products/sub01/ access/?a=675 Non subscribers can click here: http://ashraflaidi.com/products/sub01