Intraday Market Thoughts Archives
Displaying results for week of Dec 02, 2012Sandy Falls off a Cliff as Jobs Surprise
The impact of Hurricane Sandy on US Nov jobs was surprisingly small (NFP +146K from 138k & Unemp rate at 7.7% from 7.9%) but the extent to which business shutdowns continue into December remains to be seen. The 305K decline in the labour force and the 49K in downward revisions over prior 2 NFP months may temper the level of optimism. Charting Sandy vs Katrina & EURUSD Analysis: http://www.cityindex.co.uk/market-analysis/market-news/3334262012/nov-nfp-sandy-hits-a-cliff/ #forex #NFP
Onto US & CAN Jobs, Latest Premium Insights
Earthquake in Japan; Bundesbank downgrades outlook; German industrial production falls; UK manufacturing and industrial production disappoint. Focus is on US and Canadian labor market data and UoM consumer sentiment. 2 EURUSD Trades were added to the Premium Insights ahead of NFP. See below for more detail.
The London session was relatively quiet ahead of the US labor market data. The exception was JPY that rose sharply after news of a 7.3 magnitude earthquake in northeast Japan hit the wires. Tsunami warning was issued and later called off after the pacific coast was hit by waves over three feet high. USDJPY regained losses and trades only marginally weaker around 82.35.
The common currency was under pressure at the beginning of the London session after German Bundesbank downgraded the outlook for 2013. GDP growth was downgraded dramatically to 0.4% from 1.6%, unemployment is seen rising to 7.2% from previous projection of 6.5% and inflation should slow to 1.5% from 1.6%. The pressure also increased after German industrial production fell 2.6% from previous -1.3%. This is the third back to back decline. EURUSD trades lower around 1.2930.
UK industrial production disappointed as it declined 0.8% in October while analysts expected a 0.8% growth. Manufacturing production fell 1.3% from a prior flat reading. Industrial production has been contracting over the past three months and the weak beginning of Q4 could prove to have a negative impact on Q4 GDP. GBPUSD is weaker around 1.6030.
November NFP at 8:30 am ET is projected to decline substantially to 85K from previous 171K and the unemployment is seen steady at 7.9%. The UoM consumer sentiment at 9:55 am is expected to decline in December to 82.4 from 82.7.
Canadian employment at 8:30 am is seen rising in November by 11.3K from previous 1.8K and the unemployment rate is anticipated to remain unchanged at 7.4%. The market
2 EURUSD Premium Trades were added to the Insights alongside 3 charts ahead of the US Jobs report. Click here for Direct Access http://ashraflaidi.com/products/sub01/access/?a=699
Non subscribers can click here to get a free trial http://ashraflaidi.com/products/sub01/access/?a=699
Draghi Torpedoes Euro
ECB President Draghi forecast lower growth and hinted at rate cuts after the ECB decision. The euro was the worst performer on the day, falling more than a full cent after his comments; the Aussie was the best performer. Australian trade balance is on the Asia-Pacific calendar. Aussie hit the 1.05 target but 1 of 2 EURUSD was stopped out at 1.2960. See more below.
The ECB cut 2013 growth forecasts and Draghi said growth will not begin to recover until the second half of next year. There was no sign of an imminent rate cut but Draghi clearly placed more easing on the table.
The euro tumbled to 1.2950 from 1.3075 after his press conference. Worries that Italys government may collapse added to the decline as Monti narrowly survived a confidence vote.
The pound slumped in sympathy, sinking to 1.6040 from 1.6110, taking out the 55-day moving average on the way down.
US economic data featured jobless claims which improved to 370K compared to 380K. Risk trades were apprehensive ahead of Fridays non-farm payrolls report. The consensus is for 86K new jobs but Hurricane Sandy, holiday hiring and the 15K layoffs at Hostess could mean a big miss.
Guessing NFP is a fools errand. The better information will come from analysing how the market responds to a weaker or stronger number. The market reaction following the initial knee jerk is often telling in regards to the medium-term direction.
Another event to watch out for on Friday is the Canadian decision on the Nexen takeover. The deadline for the deal is Monday but the government may decide to announce if it will approve the giant takeover before the weekend. The result will likely steer CAD direction for the remainder of the year.
In the upcoming session, a busy week of Australian data wraps up with trade balance data at 0030 GMT. The consensus is for a A$2B deficit. The result is unlikely to have a lasting effect as the market begins to hunker down ahead of NFP.
The 1.05 target on AUDUSD from 2 weeks ago has finally hit. GBPUSD (1), EURJPY (1), CADJPY (1), EURGBP (2), Gold (1), Silver (1) remain in progress. US Crude CL_F (2) were stopped out. DIRECT ACCESS here http://www.ashraflaidi.com/products/sub01/access/?a=697 Non subscribers can click here: http://www.ashraflaidi.com/products/
-AB
Dax Shrugs ECB, up 27% this Year, Beating Everything In Sight
Euro sells off on a combination of downward revisions in growth and inflation as well as Draghis indication that discussions over interest rates remained ongoing. But why has the Dax rallied today, hitting fresh 19-month highs , to gain 27% YTD? http://www.cityindex.co.uk/market-analysis/market-news/3288872012/27-dax-shrugs-ecb/
Ashraf's 2 Webinars Today
Ashraf is doing 2 webinars today. (1) Focusing on FX w/ James Chen at 1 pm ET 6 pm London http://seminars.cityindex.co.uk/cgi-bin/seminars.cgi?rm=show_event_details&se_id=1031&interaction_id=2 (2) FX, Stocks & Bonds With G. Cavaligos & F. Hamzei at 5 pm ET 10 pm London https://www1.gotomeeting.com/pjoin/382389080/105186578
BOE Unchanged; Onto Final ECB Conference
Solid AUD labor market data; no change from BOE; German factory order soar; Swiss deflation intensifies. Market awaits ECB decision and press conference and Canadian PMI. Yen crosses from latest premium Insights remain in progress and so are both EURUSD trades. Aussie is 3 pips away from finally hitting that final 1.05 target.
AUDUSD pushed higher during Asia on solid labor market data. The employment rose 13.9K in November from previous 10.2K and the unemployment rate unexpectedly declined to 5.2% from 5.4%. AUDUSD trades right below 1.05.
The BOE kept the bank rate steady at 0.5% and kept he asset purchase facility unchanged at GBP 375 bln as anticipated. Earlier data showed that the trade deficit widened in October to GBP 9.5 bln from previous 8.4 bln. Nevertheless, GBPUSD is trading higher around 1.6115.
EURUSD did not benefit from German factory orders that rose sharply in October 3.9% from previous upward revised -2.4% and the pair continues to trade around 1.3080. Eurozone Q3 GDP was unrevised at -0.1% q/q and -0.6% y/y.
In other news, Swiss deflation intensified as CPI declined 0.4% in November from previous -0.2% y/y while the unemployment rate remained steady at 3.0%. Greek banks' officials are meeting today to approve bond buy back participation
At 7:45 am ET the ECB will announce its rate decision. It is widely expected that the minimum bid rate will remain at 0.75% and that there will be no new easing measures announced during the press conference that follows.
The US session begins at 8:30 am ET with the ECB press conference and jobless claims that are seen lower at 378K from previous 393K. Canadian Ivey PMI is due at 10:00 am and it is expected marginally stronger at 58.8 from previous 58.3.
Still awaiting the 1.05 target on AUDUSD from 2 weeks ago. Other calls on EURUSD (2), GBPUSD (2), EURJPY (2), CADJPY (1), EURGBP (2), Gold (2), Silver (2), US Crude CL_F (2). DIRECT ACCESS here http://www.ashraflaidi.com/products/sub01/access/?a=697 Non subscribers can click here: http://www.ashraflaidi.com/products/
ISM Beats, RBNZ Holds
The ISM non-manufacturing survey beat estimates and the RBNZ left rates unchanged. The kiwi was the best performer while the yen resumed its decline. The Australian employment report is the highlight of the upcoming session. Yen crosses from latest premium Insights remain in progress and so are both EURUSD trades
The ISM services index climbed to 54.7 in November compared to 53.5. New orders at 58.1 compared to 54.8 contributed to the surprise but employment was nearly in contractionary territory.
The soft ISM reading on jobs suggests tomorrows non-farm payrolls could be weak but the ADP report showed 118K jobs in the month compared to 125K expected.
The New Zealand dollar rallied after the RBNZ held rates at 2.50%. The neutral decision was no surprise but the commentary was upbeat and diminished the chance that officials will cut rates within the next 12 months.
Yen crosses moved higher after two days of declines. The rise came after a Nikkei story that suggested the LDP could win a strong mandate that would allow it to dictate new easing measures to the BOJ.
The focus on Australia continues this week with the November employment report at 0030 GMT. The consensus is for a flat reading after a 10.7K rise last month. The Aussie has been resilient to negative news this week while easily climbing higher when its fortunes are better.
Latest Premium Insights await the 1.05 target on AUDUSD, with other calls on EURUSD (2), GBPUSD (2), EURJPY (2), CADJPY (1), EURGBP (2), Gold (2), Silver (2), US Crude CL_F (2). DIRECT ACCESS here http://www.ashraflaidi.com/products/sub01/access/?a=697 Non subscribers can click here: http://www.ashraflaidi.com/products/
-AB
Latest on Gold's Sell-off
So many fundamental technical explanations for gold's latest sell-off http://www.cityindex.co.uk/market-analysis/market-news/3239642012/gold-sells-off-despite-weak-usd/
GBP Hit by PMI & GDP Revisions, Onto ISM Services
GBP Hit by Treasurys downward revision to 2012 GDP & by weaker PMI, German and EZ services PMI revised higher; EZ retail sales decline; UK services PMI weaker. Nov ADP slowed to 118K, ISM services, factory orders and RBNZ rate decision. Yen crosses from latest premium Insights remain in progress and so are both EURUSD trades.
USD is mixed in the ongoing session. It is weaker against NZD and JPY, stronger against EUR, CHF and CAD and unchanged against AUD and GBP. European equities are gaining around 0.2%
European data was mixed today. German services PMI was revised substantially higher to 49.7 from the initial estimate 48.0 and Eurozone services PMI was revised to 46.7 from 45.7. However, Eurozone October retail sales declined 1.2% from prior -0.6%. EURUSD trades near session lows around 1.3080.
The service sector in the UK expanded but less than analysts anticipated. The PMI index declined in November to 50.2 from previous 50.6 which is the slowest growth in 23 months. New business volumes declined for the first time in nearly two years and the level of confidence fell to 11 month low. GBP traders also await the Autumn forecast statement at 7:30 am ET. GBPUSD is little changed around 1.6110 and EUR/GBP fell to 0.8116.
The UK office for Budget Responsibility downgraded its 2012 GDP fcst to -0.1% from the initial 0.8% reading.
Spain sold EUR 4.25 bln worth of 2015, 2019 and 2022 bonds vs. EUR 3.5-4.5 bln target. Average yields declined. Nevertheless, Spanish 10 year yield rose to 5.375%.
US Nov ADP employment slowed to 118K from Octobers revised 157K. Mkts expected 125K. The negative effect of Hurricane Sandy was estimated about 86K jobs.
ISM non manufacturing at 10:00 am is seen slightly lower at 53.6 from 54.2 but the decline could be larger because of hurricane Sandy. Factory orders are anticipated flat in October after growing 4.8% during the prior month.
NZD traders await the RBNZ rate decision and a statement that is due at 3:00 pm. Most market participants see rates unchanged at 2.5%.
Latest Premium Insights await the 1.05 target on AUDUSD, with other calls on EURUSD (2), GBPUSD (2), EURJPY (2), CADJPY (1), EURGBP (2), Gold (2), Silver (2), US Crude CL_F (2). DIRECT ACCESS here http://www.ashraflaidi.com/products/sub01/access/?a=697 Non subscribers can click here: http://www.ashraflaidi.com/products/
Parts 1 & 2 of Ashraf's CNBC Appearance
Parts 1 and 2 of Ashrafs CNBC appearance. Are US companies being faulted for overspending dividends to beat upcoming changes in taxes laws, or do they have sufficient cash to raise distributions? Could the focus on dividends stem from the shift away from bonds? And how can the FTSE maintain its 9-year streak of positive Decembers and what's the impact from the BoE decision as well as the changing dynamics in UK jobs. Part 1 http://youtu.be/w9iT9fHN88k Part 2 http://youtu.be/Bf14lsh6Z_U
BOC Holds, Aussie GDP Up Next
The Canadian dollar gained after the Bank of Canada held rates. The yen continues to retrace and it was the best performer on Tuesday while CHF suffers as Swiss banks begin charging negative rates. Australian GDP is the highlight of Asia-Pacific trading. See rest of last nights Premium Insights below. GBPUSD hits 1.6120, making 2/2 in GBPUSD for 4 consecutive weeks.
The Bank of Canada left rates unchanged at 1.00% for the 18th consecutive month, as expected. Officials retailed a slight easing bias but expectations for a hike within the next 12 months are nil. CAD strengthened after the release but it was more likely because it was playing catch-up with the commodity currencies rather than anything in the release.
CAD has been deep in the low-volatility doldrums for months but that may change this week. The government is contemplating whether to allow a Chinese-government-backed firm to takeover Canadian oil company Nexen. A decision is due by December 10 and it will have major implications for foreign investment and CAD.
Yen crosses continue to pare back this week after more than a month of strong gains. USD/JPY is in danger of breaking support at 81.70 and that may lead to a deeper correction. We warned about excessive bets against the yen.
US traders will get a relief from fiscal cliff-dominated trading for the remainder of the week due to higher profile economic data, beginning Wednesday with ADP employment.
AUD traders will be focused on todays GDP release. The consensus is for a 0.6% q/q increase (3.1% annualized). The spike after the rate cut announcement showed a deep underlying demand for the Aussie that is likely to persist.
Last nights NEW PREMIUM INSIGHTS edition went long AUDUSD despite anticipating the RBA cut, eyeing 1.05. Latest Insights also have new calls on EURUSD (2), GBPUSD (2), EURJPY (2), CADJPY (1), EURGBP (2), Gold (2), Silver (2), US Crude CL_F (2). DIRECT ACCESS here http://www.ashraflaidi.com/products/sub01/access/?a=697 Non subscribers can click here: http://www.ashraflaidi.com/products/
-AB
GBP Preview of Treasury Autumn Statement
The breakout in GBP/USD has taken place as anticipated in last weeks piece. Wednesdays Autumn Treasury Statement will be closely by GBP traders. See more here on the Fund & Charts.
BoC Stays Hawkish, EUR at 1.31
RBA cuts to 3.0%; UK construction PMI falls; negative interest on CHF deposits; EZ PPI slowed. BOC maintained hawkish indication. NY ISM rises by 6 pts. See rest of last nights Premium Insights below. GBPUSD hits 1.6120, making 2/2 in GBPUSD for 4 consecutive weeks.
USD gives up earlier gains in the ongoing session. AUDUSD initially moved lower to 1.0408 after the RBA cut the cash rate by 25 bp to 3.0% which is the level last seen during 2009. However, the pair bounced sharply higher to 1.0470 on a hawkish statement that followed. Economists forecasts that further cuts are unlikely until Q2 2013.
In the UK, construction PMI dipped back below the 50 level to 49.3 in November from October's 50.9. Confidence in business outlook is the lowest in nearly four years and new orders fell at the sharpest pace since 4/2009. GBPUSD trades around 1.6120.
EURCHF continues to push higher on yesterday's announcement from Credit Suisse that it will impose negative interest on CHF holdings above 100M from December 10th, WSJ reports. EURCHF session high is 1.2142 and the rate eased a bit after clarification was provided that the negative rate will be set on individual basis.
In other news, Eurozone PPI slowed to 2.6% in October from previous 2.7% and Spanish unemployment rose 74.3K in November from prior 128.2K
The Bank of Canadas decision to hold rates at 1.0% maintained the bias towards higher rates in the future. It indicated :Over time, some modest withdrawal of monetary policy stimulus will likely be required, consistent with achieving the 2 percent inflation target.
Nov ISM-NY Business Conditions rose to 52.5 from 45.9 in Oct. The future
optimism index showed the largest 1-month gain on record.
Last nights NEW PREMIUM INSIGHTS edition went long AUDUSD despite anticipating the RBA cut, eyeing 1.05. Latest Insights also have new calls on EURUSD (2), GBPUSD (2), EURJPY (2), CADJPY (1), EURGBP (2), Gold (2), Silver (2), US Crude CL_F (2). DIRECT ACCESS here http://www.ashraflaidi.com/products/sub01/access/?a=697 Non subscribers can click here: http://www.ashraflaidi.com/products/
About that RBA Cut & Latest Premium Insights
Todays RBA decision to cut rates by 25 bps to 3.0% had STRONG AUSSIE written all over it. The RBA has been increasingly uncomfortable with Aussie strength. And with Chinese figures improving by the week, the upward pressure would have been further magnified by RBA inaction, especially following the recent IMF decision to include Aussie in its FX reserves. A rate hold would have made task of the RBA harder in containing any unwanted. We expect AUDUSD to regain 1.06 vs USD and 89.0 vs JPY. Last nights NEW PEMIUM INSIGHTS edition went long AUDUSD despite anticipating the RBA cut. The latest Premium Insights also have new calls on EURUSD (2), GBPUSD (2), EURJPY (2), CADJPY (1), EURGBP (2), Gold (2), Silver (2), US Crude CL_F (2). Existing trades include USDJPY, GBPUSD and AUDUSD. DIRECT ACCESS here http://www.ashraflaidi.com/products/sub01/access/?a=697 Non subscribers can click here: http://www.ashraflaidi.com/products/
EURJPY & Latest Premium Insights
Here are the latest Premium Inisghts ahead of tonoghts RBA decision. Also included are fresh 2 Insights on EURUSD, GBPUSD, EURJPY and EURGBP. EURJPY resting around the 100-WMA after an impressive 5-month rally, with the road remains open for the next medium term upside target at 110. Daily trendline support suggest a stop near 106.50s. Dailies are joining the weekly chart into a similarly positive stochastics picture as in EURUSD. Also new trades on gold, silver and oil. DIRECT ACCESS here http://www.ashraflaidi.com/products/sub01/access/?a=697 Non subscribers can click here: http://www.ashraflaidi.com/products/
RBA Slated to Cut, US Manufacturing Stalls
The ISM manufacturing index fell to a 3-year low on Monday as Fed members prepared the market for further easing. The euro was the top performer while the Australian dollar lagged. The AUD weakness comes with the market growing increasingly confident the RBA will lower rates at todays meeting. A new edition of the Premium Insights is due at approximately 18:30 EST, 23:30 GMT. All 2 EURUSD and all 3 EURJPY from the prior edition hit all targets, in addition to GBPUSD. See below on how to join.
The ISM manufacturing index fell into contractionary territory at 49.5 compared to 51.3 expected. It was the lowest reading since July 2009. Recent manufacturing data has been inconsistent so it may be premature to draw conclusions but the forward-looking new orders component also fell sharply to 50.3 from 54.2. Survey officials said Hurricane Sandy was a minimal factor, if anything.
Comments from the Feds Dudley, Bullard and Rosengren all suggested the Fed will add to its Treasury purchase program at the FOMC meeting next week. Rosengren indicated as much as $45B/month in additional Treasury and MBS buys while Bullard suggested closer to $25B/month.
The euro spiked in early US trading on a pair of headlines. 1) Credit Suisse told clients it would begin charging negative interest rates on CHF deposits, a move that was later followed by UBS. The euro quickly rallied 40 pips against the franc. 2) Headlines that Spain made a formal request for bank aid were misinterpreted as an ESM request.
EURUSD climbed as high as 1.3076 but sank back to 1.3050.
The market now turns to the RBA decision at 330 GMT. There has been a strong shift in sentiment toward a 25 bps cut with the OIS market pricing a 92% chance. Economists are less decisive with 9 of 28 in the Bloomberg survey calling for a hold at 3.25%.
Given the overwhelming implied probability, AUD traders may see better value in longs.
To join the Premium Insights trades, please click here: http://ashraflaidi.com/products/ If you are already Premium member, please click here to see last weeks trades: http://ashraflaidi.com/products/sub01/access/?a=696
-AB
US ISM Manufacturing Ahead
EFSF/ESM downgrade; Merkel suggest Greek debt write off but government denies; EZ and German PMI unrevised; Swiss retail sales slow and PMI rises; UK manufacturing PMI rose. Market awaits ISM manufacturing and Eurogroup meeting. Both EURUSD trades hit all targets. See more below.
The common currency ignored the EFSF/ESM downgrade by Moody's to Aa1 from Aaa and pushed to fresh recent highs 1.3048. The greenback is weaker across the board and European equities are gaining around 0.8%
Bloomberg reports that chancellor Merkel opened the possibility of a write off on Greek debt. She supposedly said yesterday that euro leaders might considerate it once Greece has a budget surplus. Germany ruled out such scenario until now. However, German government official denied today that a write off was signaled.
European data showed that Spanish manufacturing PMI rose to 45.3 from 43.5 while Eurozone and German final manufacturing PMI's were unrevised at 46.2 and 46.8 respectively.
The manufacturing sector in the UK contracted for the 7th time in a row but the rate of contraction slowed as the PMI index rose to 49.1 in November from previous 47.5. GBPUSD trades around 1.6060.
In other news, Swiss retail sales slowed in October to 2.7% from 5.0% y/y while November SVME PMI rose to 48.5 from 46.1. Greek Public Debt Management Agency announced that it would buy back EUR 10 bln in bonds with bids due on 12/07 and the settlement on 12/17.
The sole item on the US data calendar is the ISM manufacturing index at 10:00 am ET that is expected to decline slightly in November to 51.5 from previous 51.7. The manufacturing sector expanded twice in a row after three months of contraction. The next risk event is Eurogroup meeting that begins at 16:00 GMT (11:00 am ET).
Both EURUSD trades hit all targets. For DIRECT ACCESS to these trades and the relevant charts, click here: http://ashraflaidi.com/products/sub01/access/?a=696 NonSubscribers Can click here to join: http://ashraflaidi.com/products/
Chinese PMI Higher, Yen Shorts at 5 Year High
The official Chinese PMI rose to the highest level in 7 months. The euro was the best performer last week while the yen lagged. Weekly positioning data showed yen shorts at the most extreme since 2007.
The Chinese manufacturing sentiment index rose to 50.6 in November from 50.2 the previous month. It was slightly below the 50.8 consensus but the second month of expansion after a trough in the middle part of the year.
The pickup in manufacturing suggests the global economy has some momentum so long as US politicians can put the fiscal cliff behind them.
The potential for tax hikes in the US will remain main trading theme in December. Treasury Secretary Geithner warned that negotiations have hit a stalemate and Obama warned of prolonged negotiations.
The focus on US politicians has led to an abundance of headline risk during US hours. The daily press conferences and unscheduled interviews of a multitude of lawmakers can spark turnarounds in sentiment in moments.
Also on the weekend, Germanys Merkel did not rule out the chance of a haircut on Greek debt in 2014 or later, if Greece keeps its austerity programs on track.
Commitments of Traders
Weekly futures positioning data from the CFTC showed a sharp rise in yen shorts and a swift paring of bets against the euro. The yen positions are a warning sign that the trade is growing overcrowded already.
EUR net short 67K compared to 91K last week
JPY net short 79K compared to 51K last week
GBP net long 10K compared to 1K last week
CHF net short 3K compared to 12K last week
AUD net long 77K compared to 65K last week
CAD net long 62K compared to 61K last week
NZD net long 19K compared to 91K last week
1 of 2 EURUSD trades hit all targets, the other was 3 pips away. For DIRECT ACCESS to these trades and the relevant charts, click here: http://ashraflaidi.com/products/sub01/access/?a=696 NonSubscribers Can click here to join: http://ashraflaidi.com/products/
-AB
