Intraday Market Thoughts Archives

The US May jobs report surprised on the upside with 175k NFP but disappointed on the unemp rate by rising to 7.6% from 7.5%, suggesting little reason to alter the notion that no reduction of asset purchases will take part before year-end. If EURUSD rallies on Monday then it would complete the 6th straight daily gain, which is the longest winning streak in over 2 years. 3 new trades in EURUSD were issued ahead of the jobs report,  2 of which are filled and in progress.  CAD strengthens across the board on 95.7k net new jobs, beating the 2002 recors. More access in the Latest Premium Insights.

The US dollar crumbled as traders raced to exit a crowded long trade. At one point, USD/JPY fell as much as 360 pips, touching 95.91 before rebounding more than a cent. Newsflow is quiet in Asia which will give markets a moment to digest the moves ahead of non-farm payrolls.

Coming into Thursday's session all the focus was on the ECB decision. Draghi backed away from talk about cutting rates and that helped the euro to the highest in a month. The ECB also left 2014 growth and inflation forecasts unchanged, suggesting ideas about further stimulus are on the shelf.

The euro strengthened during Draghi's press conference, hitting a one month high at 1.3160. The big moves came after Draghi exited the stage. The EUR/USD gains left dollar longs vulnerable and they began to race to the exits.

The dollar selling spread to USD/JPY and then turned into a rout. EUR/USD climbed above 1.33, breaking out to the highest since late February. USD/JPY  crumbled from 99.00 to as low as 95.91.

Traders were searching for headlines to explain the fall but the news was benign. Initial jobless claims were at 346K compared to 345K expected.

Instead, a buildup in US dollar longs over the past month was quickly unwound. Disappointing US economic data has slowly been chipping away at the trade and the market suddenly got cold feet ahead of non-farm payrolls.

The consensus for NFP is 165K but the market is positioned for something less. The latest estimates are around 150K and the market might be braced for 130K or lower. At this point, the risk of bounce is much higher than a further USD slump on a soft number.

Sterling's rare superiority in the “fundamentals is seen in the charts of the global PMIs for manufacturing and services. For the first time in over 5 years, UK PMIs in both services and manufacturing have surpassed those of the US, China, Eurozone and Germany. Full Charts & ANalysis here

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This was supposed to be the year the US economy led a strong recovery but as the data rolls in the growth isn't materializing. On Wednesday, the yen was the best performer while the Aussie lagged to the lowest since 2011 ahead of trade numbers. 2 new trades on AUDJPY alongside weekly and monthly stochastics charts were issued in the Latest Premium Insights.

US economic indicators continue to point to growth around 2%, not the near-3% level Bernanke wants before tapering QE. The latest was ADP employment at 135K compared to 165K expected. The private jobs report hasn't touched above 200K this year.

The ISM non-manufacturing main index was at 53.7, which was slightly above the 53.5 expected but the details were mixed. New orders were at the highest since February but employment was at 50.1, the lowest since July and pointing to a soft non-farm payrolls report on Friday.

Even the Fed seemed to acknowledge slower growth in the Beige Book as the overall growth assessment was slightly downgraded to 'modest to moderate' from 'moderate'.

The US stock market was unimpressed with the data, falling 1.4% to 1608. In the FX market, the initial reaction was to sell the dollar across the board but those moves quickly retraced, especially against the commodity currencies.

The Australian dollar rose above 0.9600 on the ADP report then sank as low as 0.9512, breaking last week's low.

The lone indicator on the docket is at 0130 GMT with April Australian trade balance. The RBA has lamented soft exports so this could be a downside surprise. The consensus is for a A$180 million surplus. Be wary of the market overreacting to this number because it came from a month where the high AUD would have had a detrimental effect. It will be interesting to see the June numbers to see if activity begins to pick up thanks to the 7% AUD drop.

Ashraf tells CNBC Arabia he continues to expect the Fed will not reduce purchases this year, but the US dollar will likely retain its relative firmness. While the Fed is locked into the pendulum of market expectations of tapering/maintaining purchases, the ECB remains linked to the rate cut/rate hold pendulum.Ashraf also explains the 2 main structural changes lining up in favour of the Nikkei despite recent losses. Full 15 mins interview here

 All the gains commodity currencies gave on Monday were taken away on Tuesday.  The euro was the best performer while AUD lagged. Later, we might find out why the RBA was dovish when first quarter GDP numbers are released.1 of 3 AUDUSD trades is in progress, 1 GBPUSD short hit all targets, both of today's new EURUSD trades were filled, both EURJPY, both USDJPY,  2 USDCAD and the lone silver short remain in progress. All of the trades and rationale are shown in the latest Premium Insights.

The US dollar halted a three-day slide on Tuesday, rebounding strongly against the commodity currencies. The bloc fell almost constantly through Asian, European and US trading for cumulative losses exceeding 100 pips.

USD/JPY also climbed back above 100, reaching 100.42 before settling close to the big figure. The overall risk trade was negative with the S&P 500 falling 0.6% to break a streak of winning Tuesdays that dated back to the second week of the year.

Interestingly, the euro was able to resist the wave of dollar buying. Part of the reason was an MNI story that suggested that the ECB wasn't serious about negative rates, that it was simply a show of firepower. Euro resilience has been a consistent theme and could be pointing toward further gains, especially on the crosses.

At 2130 GMT, Australia releases the first reading on Q1 GDP. The consensus is 0.7% quarterly growth, about the same pace as Q42012. That pace of growth, which is about 2.8% per year, is expected to continue through 2014. Perhaps the RBA got an early look at GDP and that's why they were dovish yesterday?

Another number to watch is the May HSBC China PMI at 2145 GMT. This indicator carries much less weight than the manufacturing survey but traders are jittery about Chinese growth. The prior reading was 51.1.

Other events to monitor are the Australian AiG performance of services index and a speech from Fed hawk Fisher at 0000 GMT.