Intraday Market Thoughts Archives

Keep close watch on prolonged USD strength vs GBP, CAD and NZD in the event that stocks do turn lower and USD gains further ground on renewed risk aversion. With commodities struggling due to USD strength, could we see a marked recovery in emerging markets? In the event that say, Chinese stocks continue their pullback, this could be the case. This chart bears close watch http://twitpic.com/d0uw6 New HotChart on USDCAD updated.

But BEWARE of TEMPORARY PEAKS in unemployment rates. In the last recession (as in all others), the unemployment rate showed its first decline in May 2002 (14 months after the recession officially began, before rebounding into most of the ensuing 12 months). See Chart http://twitpic.com/d1aq4 This time, the unemp rate has risen for 17 months. Thus, even if July may not be the first decline in the unemployment rate, +10% unemployment is consistent with previous trends. It is too early to announce the end of the negative relationship between USD and stocks, or the negative relation between USD and bond yields, but todays market action certainly has not been seen since last year. The fact that the unemployment rate showed the first DECLINE since April 2008 and US payrolls fell by the LEAST since August 2008 did away with the traditional risk trade and simply triggered USD bids on the hopes that the US recovery is here to stay. For now, both GBP and CAD ar expected to head lower vs USD.

The first decline in the US unemployment rate since April 2008 and the smallest loss in payrolls since August 2009 are broadening the rally in the US dollar, to the extent of breaking down the intraday inverse relation between equities and the greenback. This is also breaking down the inverse relation between bond yields and the USD, as both rally on improved economic prospects. Yen loses across the board as equities rally and risk appetite improves. Will commodities remain pressured due to USD rebound?

STERLING's POST-QE DAMAGE intensifies across the board after RBS posted 1 billion loss, triggering back woes on UK banking sector and validating the BoEs decision to expand its easing. GBPUSD weekly chart shows a gravestone doji, which is an extremely bearish price pattern, suggesting prolonged losses into next week. $1.6550 is a realistic target for today, especially in the event of deteriorating risk appetite in US equities. With rumors pointing towards a drop in US payrolls of only 250K from Junes -467K, this implies much possibility for a disappointment. Unemployment rate expected at 9.6% from 9.5%. ALL JPY crosses are down as per the charts in yesterday's IMT, which stipulated the resistance for each of EURJPY, AUDJPY and USDJPY. http://twitpic.com/cyurx

Oil prices may not be cooperating with the risk aversion trade in FX and equities, but USDCAD and USDJPY have both complied with our stated 1.0780 target and 95.80 resistance. The USDCAD chart in todays article eyes the 1.0910 target, as Canadian currency jawboning and bearish divergence in equities are doing their job in weighing on CAD, more than offsetting any effect from rising oil prices. JPY strength has been gradually emerging as per the tweetpic in the last IMT. USDJPY is on its way towards the 94.60. Playing sterling weakness on any eenring risk aversion wave is resulting from today's BoE decision to expand QE by $50 bln.

JPY weakness is resurfacing modestly, albeit with caution, as the price action in USDJPY, EURJPY and even AUDJPY has yet to breach above the following key technical level; 95.80, 139.00 and 80.50 respectively http://twitpic.com/cyurx US stocks shrug the better than expected jobless claims, the BoEs decision to expand QE and pay more attention to concerns with Ciscos weaker than expected earnings and guidance. FTSE-100s gravestone doji candle on the HOURLY chart was followed by a long dark candle into the last hour of trading, a pattern last seen on Monday before the index fell 70 pts. USDCAD still proves it holds above 1.07, seeking to rest the 1.0780. Oil drops below $70.70, USDJPY once again fails at 95.80, which is the interim resistance below 96.20.

US Jobless claims fell to 550K from 588K, 4 week average fell to 555.3K from 560K. Dow futures extend gains to +54 pts. GBP stabilizes as risk appetite improves. Canada June building permits +1.0% better than exp -3.5% from June's +17.5% (revised from +15%), capping USDCAD's gains at 1.0740, but support stands at 1.0690. Here are the weekly Charts on $EURJPY, $AUDJPY, $USDJPY. http://twitpic.com/cyurx WATCH OIL CAREFULLY as it tests 72.60 resistance and 73.20 triple top.

Sterling plunges after the Bank of England expands its QE program by adding an extra 50 billion of asset purchases for the next 3 months. GBPUSD eyes its next downside target at $1.6740, a break of which could extend to $1.63. EURGBP once again cements the 0.84 support and augmenting chances of a breach above 0.8750. USDCAD gains to 1.0737, eyeing 1.0780. ECB press conference at 12:30 GMT, widely expected to retain current asset purchases.

STILL NEGATIVE ON CAD. Those interventionist remarks by Canadian Finance Minister Flaherty hinting that steps could be taken to stem the currencys strengthening continue to weigh on CAD, as seen in USDCADs regaining 1.0740s and CADJPY slipping topping out at 89. The USDCAD chart shows http://twitpic.com/cx6nj still held at the 1.0690 trend line, and is now looking to regain the 50% retracement at 1.0780. Oils rebound today in the face of declining stocks and higher than expected oil inventories notably to prop the heavy CAD. And with USDJPY under increasingly negative pressure, CADJPY remains clearly toppish as yesterday's chart showed and remained valid 24 hrs later. http://twitpic.com/cx6i6

AUSSIE FACT: Since July 9th, The Average daily downmove in AUDJPY amounted to +200 pips. So far today, AUDJPY is down 120 pips from its 80.55 session high. So it is fair to expect a breach below 79 and onto 78.80s. In the only day where the daily decline was less than 200 pips, further losses ensued in the following day of at least 150 pips.

Risk aversion trades accelerate on disappointing ISM and bigger than expected build in oil inventories as these intensify selling in CAD. Not only July ISM fell to 46.4 but also the employment index slipped to 41.5 from 43.4. The unexpectedly large builds of US Crude oil inventories by 1.67 mln vs expectations of +0.6 mln drag slam down crude prices to 69.74 from 71.82 session high. USDCAD reaches 1.0780, but pressure stands at 1.0820. USDJPY hits 94.88, and set to test 94.50. USDNOK eyes 6.09.

Markets await US July Services ISM expected at 48 from Junes 47. Watch the employment component, which rose over the last 2 months to 39 and 43.4. June factory orders (also due at 14:00 GMT) seen -0.8% after two consecutive monthly gains. CAD WEAKNESS remains after those remarks from Canadian Finance Minsiter Flaherty. USDCAD is supported at the 1.07 trend line support, looking to garner fresh gains towards the key resistance of 1.0780. Similarly, CADJPY has shown more signs of failing at 89.30, paving the way for 88.10.

Kiwi soaring after stronger auction for NZ milk powder maker

fonterra auction. Fonterras Global Dairy Trade arm was due to test global markets for whole milkpowder at its scheduled August internet auction. NZDUSD eyes the 0.6785. NZDJPY broke the key triple top of 63.60 to hit 10-mnonth high at 64.24, targeting 0.6520. USDJPY struggles below 95.40s, with subsequent resistance at 95.80s and initial target at 94.80. http://twitpic.com/cs3dd

The Aussie's stellar ascent was given a fresh a fillip overnight by the Reserve Bank of Australias confirming a bottom in rates when it switched from a loose policy bias to a neutral bias. While this means rates to remain unchanged into most of 2010, it should imply the RBA would be first to raise rates. The RBA removed the part of the July statement, which said stated: The boards current view is that the outlook for inflation allows some scope for further easing of monetary policy, and substituting it by: the present accommodative setting of monetary policy is appropriate given the economys circumstances. AUDJPY is scrutinized as to whether double top resistance will be breached above 80.50-60. AUDUSD breaks above 0.8388 (61.8%) retracement of 0.9855-0.6015 move.

Despite the protracted push in risk appetite in early Tuesday Asian trade, oil prices have yet to attain and close above 72.60, which is the trend line resistance extending from the June 11th high. A breach above 72.60 would be the next shoe in the escalation of risk appetite and potentially prolonged damage in the USD. Better than expected US pending home sales are helping to keep US equity indices in neutral territory. Despite the protracted push in risk appetite in early Tuesday Asian trade, oil prices have yet to attain and close above 72.60, which is the trend line resistance extending from the June 11th high. A breach above 72.60 would be the next shoe in the escalation of risk appetite and potentially prolonged damage in the USD. Better than expected US pending home sales are helping to keep US equity indices in neutral territory. Consequently, USDCAD is little changed from 1.0650s, while CADJPY eyes 90 yen as the new target.

It is days like these that further reiterate our long term bullishness for EURUSD, AUDUSD and NZDUSD. We stick with our $1.57 and $1,100 year-end forecast for EURUSD and. The pullbacks in EUR, AUD and NZD during risk aversion plays have been increasingly short-lived as well as quickly retracable. This also supports our long term optimism for EURGBP targeting 0.91 by quarter end and the successful hold of EURGBP at 0.84. More frequent traders and updates on http://twitter.com/alaidi

The breadth of the dollar decline emerged to the extent that USDJPY has failed to breach the 95.80 resistance. Although subsequent target stands at 96.20, weve yet to break (close above 95.80). Oils sustained gains above 71.80s continue to help running the dollar damage, but caution from oil testing showing a triple top at 72.60 and a very flat 200-day MA at 75.00. Sterlingclose above $1.6835 woul d be a successful breach of the 50% retrcmt from the 2.013 high.

Broad increases in Chinese and European PMI surveys are boosting the global recovery story and the related dollar damage as the USDX breaks the 78 double- bottom, eyeing the 76 low from September. Sterling leads the list of rallying currencies against USD and JPY after UK manufacturing PMI regained the 50 mark for the first time since March, boosting speculation that the BoE may not continue its guilt purchases. Oils continued rally above 70 and the anticipated 1,000 mark in the S&P500 are damaging the Japanese currency across the board.