Intraday Market Thoughts Archives

WHEN READING THE WEEKEND PAPERS, YOUD REFLECT ON A WEEK IN WHICH GOLD hit $1300, SILVER finally broke to new record highs $21.40, EURUSD FINALLY closed the WEEK above its 200-day MA for the first time since January, USDCHF hit new ALL TIME LOWS below 0.98 and the US central bank has taken a closer step to another historical round of brand new asset purchases. As a result, the USD INDEX is breaking below the triple bottom of 80, hitting 79.50, which well below the 200-week MA. Short of any tightening from China or political/debt upheaval in Ireland, USDX appears to extend the move towards 78. As a trader, it is sensible to worry about Eurozones debt troubles, but do NOT let it cloud your judgement with stubborn positioning, while ignoring the important technicals unravelling in the market (EURUSD close above 200day) and the better than exp Ezone debt auctions and decent IFO surveys. This already happened in June when the euro bottom and subsequent recovery was triggered by robust Spain auctions and an onslaught of poor US data. Today, the bad US data has been replaced by the Feds dipping its feet into QE2. Shorts in EURCHF and USDCHF are worth exploring, as 0.95 and 1.29 for the medium term. GBPUSD breaks above key retracement level of $1.5740 for a possible $1.5980 next week, but swing traders may find opportunities from 1.5800 to 1.5750.

SILVER FINALLY HITS A NEW RECORD HIGH, taking ion its March 2008 record of $21.35 per ounce as it attains $21.35, while gold touches $1298. The Gold/Silver Ratio pulls back to $61.15, falling below its 200-week MA. On Sep 3rd, Ive argued the case for Silver outweighing Gold in this article http://bit.ly/bpPRgg I continue to see any Chinese tightening (especially in the form of hiking interest rates and not raising the reserve rate requirements) as the only fundamental news likely causing a pullback in precious metals. If that would be the case, traders could see this as an opportunity for fresh metals buying onto $1355-60 and $24.00. EURUSD regains $1.34 after further gains in the IFO surveys Climate and Situation Indices, which rose to 106.8 and 109.7 respectively (highest level in over 3 years), but the Expectations index did decline to 103.9 from 105.2. IFOs economists said the demand is largely demand-driven. US durable orders and new home sales are due today, with the latter the more important mover, exp +6.9% from -12.4%. EURUSD extends further above its 200-day MA of $1.3210 and is set to end the week above the MA for the 1st time since January, which is an important technical development, bolstering the case for $1.35 and even for the possibility of $1.38, which could be the medium target for the REVERSE H&S formation.

GBPUSD HITS 5-WEEK HIGHS at $1.5741, coinciding with the 61.8% retracement of the 1.6002-1.5296 decline. Daily sochastics show the possibility of further gains to $1.5900. Note that the $1.57 was a major LOW in Oct 2009 and a HIGH on December 2008. Medium term resistance stands at the $1.5990 trendline resistance extending from the $1.6877 high in Nov 2009. When I said BoE QE will most likely follow in the footsteps of the Fed, the time lag could take anywhere between 1-3 months. Downside risks for GBPUSD remain, but particularly in GBPJPY and GBPCAD. (See this Video for more detail http://bit.ly/bD3cta ) The rally in EURGBP is a manifestation of the lingering doubts and weakness in sterling. The rally in stocks has certainly helped GBP. Keep an eye on 1130 level in SP500 & wjether we see a close above $1.5700 in NY.

GBP RALLIES across the board, but is barely up above the USD. Disappointing flash PMI figures from the Eurozone and Germany have dragged down EUR, including EURGBP, which indirectly lifted GBP against all currencies. Europe and US equity futures are down across the board -0.6%-0.8%. Weaker than expected Irish Q2 GDP -1.8% y/y vs. exp -0.4% is also weighing on the euro, which means that any worsening in risk appetitesuch as a rebound in US weekly jobless claims and disappointing US existing home sales, could call up EURUSD down to $1.3260. LEARN FROM THE PAST and realize that all pullbacks in EURUSD over the past 6 weeks have not broken below any key support levels. +800 pips rebound from 10 Sep lows does require a pullback. A break below $1.3270, seen supported at $1.3225, which is the previous 200-day MA and trendline extending from Sep 10 lows. Any deterioration in risk appetite is likely to deepen losses in NZD following disappointing GDP figures. NZDJPY breaks below 61.77 trendline support, eyeing 60.90.

ARABIC SPEAKERS; Here are Ashrafs latest interviews with CNBC Arabia (today) http://bit.ly/ajytwE and Al Arabiya TV (today) http://bit.ly/aZw7Pi discussing FOMC, Quantitative Easing, USD, Euro, Gold, Silver

WHERE THE FED WENT, BOE FOLLOWED: Sterling is the 2nd weakest currency today behind the USD after the BoEs minutes revealed chances for FURTHER BOE EASING. Although Andrew Sentence remained the lone hawk, calling for a rate hike. Some members allowed for the possibility of more easing/ One member mentioned the risk of supply overcapacity and firms laying off more workers. BoE Chief Ecnomist Spenser Dale to speak today at 17:30 GMT (18:30 BST). MPC member Andrew Posen said last week BoE could engage in heavy duty credit easing if the need arose. GBPUSD once again proved unable to break $1.57, but more downside seen ahead in GBPJPY with preliminary support at 130.80. CAD loses ground after unexpected decline in Canadian retail sales, thereby supporting USDCAD at 1.0190, but 1.03 remains a resistance for now. DO WATCH OUT WHETHER today's USDCAD is a bullish hammer. I will assess this further and shed more light.

AS USD EXTENDS DAMAGE, USDCAD approaches 5-month trendline support at 1.0190 (target called on twitter post-FOMC), a break of which is increasingly viable calling for 1.0125-30. Daily stochastics for this trade as well as GBPCAD remains negative, with the latter (See HOTCHART) eyeing 1.5930 and 1.5780. My followers of twitter witnessed a constant stream of FX calls & analysis in the 90 mins after the FOMC decision. $1.3510-15 remains the latest target for EURUSD, while followers who were flooded with bearish USDCHF calls (especially at the Fri-Sat Paris expo) are now seeing 0.9880 in USDCHF. At this point, CHF longs are likely to develop against GBP. Going back to USDCAD, watch todays leading indicators and retail sales data from Canada,

FOLLOW ME ON TWITTER at http://twitter.com/alaidi and see what 7160 followers have been witnessing

THE SUSPENSE IS GONE; The Fed did what the market expected it to do and the US dollar did not breathe. FOMC did NOT implement new asset purchases but opened the door for such action by saying it is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation over time. The FOMC added: Employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract Such a remarks are considered as a DOWNGRADE of economic conditions. Hence, FX traders did NOT BOTHER buying the USDX because additional QE is a question of When and not if. EURO FINALLY breaks above its 200-day MA against USD, joining the other major currencies, which have already done so to their respective 200-day MA against the USD. With strong Irish bond auctions today and one foot of the Fed in QE territory, hedge funds and momentum traders will have incentive to drive up EURUSD back to $1.3330 just as SILVER TRADERS will seek to retest the $21.30 high from March 2008 as GOLD HITS NEW HIGH at $1288.60/oz.. The FRUSTRATIONS OF THE JAPANESE GOVT must be especially rising as the Feds downgrade of its outlook drags down USDJPY to 84.99, but yet cannot intervene because the Japanese currency is in fact FALLING against all other currencies. USDCHF plunges back below parity as warned last week when I reiterated that 1.0170s remain a ceiling and sub parity is inevitable. USDCAD seen supported at 1.0220,, whike EURNZD seen retesting 1.8120. ARABIC SPEAKERS here is MY ARABIYA INTERVIEW earlier today on FOMC, USD, Commodities http://youtu.be/QQKFf_uRavs

Ashrafs take on CNBC about the likely outcome from the FOMC, the resulting forex reaction & the 2 major dynamics which could boost USD in the medium term http://bit.ly/aMX5r0

Ashraf's Video Analysis for ReutersThomson on SCANDINAVIAN CURRENCIES ; NOK SEK Interest Rate Cycles, USDNOK USDSEK EURNOK NOKSEK weekly & monthly stochastics / MAs http://bit.ly/9UW1VP

EURUSD RALLIES ON LUCK OF THE IRISH as Irelands bond auctions were well subscribed with 5.1 & 2.9 bid-cover ratios for 4-year and 8-year bonds respectively, which weighed on bond yields and lifted the euro. As Ive said on twitter earlier this morning, the ONLY disappointing bond auction from any Eurozone nations over the past 3 months has been last weeks Portuguese bond auctions. EURUSD proves once again to successfully hold well above that $1.2950 support. The solid auctions mean that the euro will remain relatively shielded against any knee-jerk selling once the FOMC announces NO implementation of new QE. I think the Fed will further downgrade the language for the outlook without implementing any new QE, which will in effect mean OPENING THE DOOR for QE2 implementation later this year. EURUSD faces Aug 6 trendline resistance at 1.3133, with the potential of breaking out to $1.3220. CAD awaits CPI figures. USDCAD facing resistance at 1.0340s, GBPCAD still eyeing prelim target of 1.5920, before 1.5780 for medium term.

S&P500 RUNS AWAY WITH IT, breaking well above the previous resistance of 1131-2 while pushing farther away from its 200-day MA of 1120. So what next? 1140 is the 61.8% retracement of the decline from the 1220 high (Apr 26) to the 1012 low (Jul 1st). But is this enough? WEEKLY OSCILLATORS are firmly pointing towards upcoming advances, which makes 1140 a temporary barrier before moving onto the 1155-58. How could such a positive scenario for stocks be interpreted alongside the Feds actions? Perhaps a decision to not announce any QE2 tomorrow would be interpreted as the central bank is not in panic mode. With a little help from the US data and say acceptable bond auctions, all of these could trigger fresh rallies in equities as well as EUR. On the auction front, Greece & Irelands auctions are on Tuesday (Greek 13-week T-bills and Irish 4-year & 8-year IGB), while Portugals auctions are on Wednesday (4-year& 10-year OT). So for equity bears expecting stocsk to have topped out at 1130s, be careful for a run-up to higher levels based on the aforementioned scenarios. The forex implications could well likely be lower USD (mainly against CHF, CAD and AUD), while EUR would have to retest 13240s to convince us of any tangible comeback. Yet, support seen standing at 12920s. Today's GBPCAD is already 90 pips in the money w/ more details found here http://bit.ly/95nkBC

GBPCAD Daily & Weekly HotChart is now up

http://bit.ly/95nkBC

QE2 UNLIKELY TOMORRROW? Although a second round of quantitative easing from the Fed is inevitable, tomorrow is a little bit too early. Not only are financial markets relatively stable, but also any decision to engage in QE2 will weigh on USD against all currencies, including JPY. Thus, it is unlikely for the Fed to want to trigger fresh selloff in USDJPY less than 1 week after Japan intervened to halt the selloff in USDJPY. Does this mean the Fed will wait for 2 months until the QE2? (Next FOMC is not until Nov 3rd). Not necessarily. We could well see outright purchases of treasuries in October, as markets fret ahead of the mid term elections. And so the question for tomorrow is: to what extent will the FOMC signal a step towards fresh QE?. As a result, the general prediction would be a knee-jerk rally in USD on the revelation that no new QE is announced, likely to be followed by a gradual decline. EUR traders will also watch Tuesdays auctions of 4 and 8-year Irish bonds , which will be influential in setting the tone for EURUSD. $1.3030 acts as the 23.6% retracement of the rally from the 1.2636-1.3152 rally, but the more important foundation stands at $1.2955. USD weakness remains the impulsive move and it will take substantially negative European news for EURUSD to show a close below $1.2920.

HOW TO FOLLOW ASHRAF ON TWITTER?

1. If you're not yet on Twitter, go to http://twitter.com/ and create a free account (username)

2. Ashraf's Twitter username is alaidi. Ashraf's twitter page is found on http://twitter.com/alaidi Once you're there, click on "follow" to start following Ashraf's updates.

3. BEST WAY to follow Ashraf's tweets is to download TWEETDECK this way you get a pop-up alert at the upper corner of your screen each time Ashraf makes a tweet (update) in case you have another thing on your monitor.

4. Twitter can be useful to the extent of the "quality" of people you follow. News agencies, newspapers, market experts, strategists can have some very useful tweets to keep you in touch with the market and breaking newsheadlines.

Timely insights on the market and the economy as well as technical positioning is what alaidi offers on Twitter. Ashraf's IMTs are posted on Twitter the moment they're created. Sometimes it takes about 30 mins for subscribers to receive Ashraf's email alerts and Twitter is the fastest way to be alerted when a new IMT/article is written.