Intraday Market Thoughts Archives

Signs that Greece is pushing bondholders for a harsher haircut point to the likelihood that credit default swaps will eventually be triggered. The euro continued falling on Friday while USD was the top performer. We take a look at the weekly charts, as well links to our Premium USDX & EURUSD charts.

Some positive sentiment crept into a holiday-curbed US trading session on a report that European leaders are likely to abandon plans to have the private sector participate in the permanent bailout fund. The same report, which cited anonymous sources, also said Germany was softening on Eurobonds. The news sent the euro to nearly 1.33 from a seven-week low of 1.3212.

The sentiment was washed away by: 1) Finland continuing to rail against Eurobonds 2) S&P downgrading Belgium to AA from AA+ 3) the ECBs Mersch saying ECB not ready to take action on bank liquidity problems and 4) a report saying Greece is looking for a better haircut.

Point 4 threatens to undermine EUR for the remainder of the year. The agreement on a 50% haircut appears to have remained in place but the coupon and duration of the new debt is a major stumbling block.

Its also increasingly likely that the bondholders who do not like the terms of the deal will be forced to accept them anyway because the bonds are written under Greek law. This will trigger the roughly $5 billion in credit default swaps. It is a relatively small sum but a $5 billion ripple through the crippled European financial system could spark a liquidity crisis.

Friday's PREMIUM TRADES include an important charting developments in the MONTHLY EURUSD & USDX charts, with 3 new trades in EURUSD, USDCAD & EURJPY. For direct access to those trades , click here http://ashraflaidi.com/products/sub01/access/?a=556 Non subscribers can get a 1-week trial here: http://ashraflaidi.com/products/sub01/

The S&P 500 fell 0.2% to 1159, ending the week 4.7% lower. Weekly CFTC positioning data was delayed until Monday due to the US holiday.

Weekly Charts

It was the fourth consecutive week of losses for EUR/USD and the lowest weekly close since Jan 2. The Oct low of 1.3144 will be a major focus of the week ahead. We said last week that the path lower is clear but short-squeezes are a threat and that remains the trade. A bounce to 1.34 will be hit by aggressive selling.

Other weekly charts are mirroring EUR/USD as market correlations tighten, a classic sign of risk aversion. An interesting exception is USD/CHF, which edged to an eight-month high of Friday. We made a bullish warning about this pair a month ago and a daily close above 0.9315 will clear the way for further gains.

French consumer confidence fell and Italian retail sales dropped; Italian short and long term yields rise; Italian Bill auction results in higher yield; USDX at 7 week high, breaking out of the 100 & 200 week moving averages. Poor liquidity and erratic movements likely during the NY session. LATEST PREMIUM TRADES include an important development in the MONTHLY EURUSD chart, with 3 new trades in EURUSD, USDCAD & EURJPY.

USD is soaring today as risk aversion heightens further due to sharp rise in European yields. GBP is also relatively strong while EUR and NZD are the biggest losers. Major European equities are losing about 0.5%.

Long series of disappointing European data continued today as French consumer confidence declined in November to 79 from 82 and September Italian retail sales fell -1.6% from -0.3% on annual basis. Eagerly awaited Italian short term debt auction did not provide a reason for optimism either as Italy sold EUR 8 bln of six months Bills with average yield of 6.5%, significantly higher from previous 3.53% with bid to cover at 1.47, lower from previous 1.57. EURUSD fell to 1.3236, the lowest level since the beginning of October.

LATEST PREMIUM INTERMARKET INSIGHTS include an important development in the MONTHLY EURUSD chart, with 2 new charts on USD INDEX and 3 new trades in EURUSD, 2 in USDCAD & 2 in EURJPY. ========== Click here for direct access todays trades http://ashraflaidi.com/products/sub01/access/?a=556 Nonsubscribers can join here: http://ashraflaidi.com/products/sub01/

Despite ECB buying, the 10 year Italian yield is firmly above the critical 7% level at 7.27% and another reason for concern is sharp rise in 2 year yield which jumped nearly to 8%. Spanish 10 year yields 6.74% but the German-Spanish remains below 5% as even German yields rise.

USD index reached 7 week high today, eyeing the psychologically important 80 level which roughly coincided with October high at 79.84. Should the resistance be broken, next target is January high at 81.31 followed by 8/2010 high at 83.56. USDX is currently trading around 79.54.

US stock markets close at 1 pm EST, while US bond markets are all closed, liquidity will be poor and erratic movements are likely. There are no fundamental data releases due today.

Risk aversion damaging all risk assets and commodities, & EURUSD at 1.3250s. Italian auction a key test for yields after Merkel rules out ECB and Eurobonds, Moodys downgrades Hungary to junk status, Italy retail sales drop for 4th straight month, ratings pressure increases on France as yields push higher, Sterling damaged by BoEs Miles and Broadbent warn on economy. Friday Premium trades to follow ahead of the US session.

Yesterdays failure to get an agreement on either a Eurobond solution or greater ECB involvement in the European sovereign debt crisis, throws the focus back onto bond yields this morning as the Italian treasury seeks to auction 8bn worth of 6 month t-bills.

With Italian yields above 7% on 2, 5 and 10 year bonds and this weeks earlier failed German auction it is hard to imagine a more significant auction with respect to not only bid to cover but also the yield. Italian retail sales for September are expected to slip 0.2% month on month.

Italy Sep retail sales fell 0.4%, posting their 5th straight monthly decline, while down 1.6% y/y. Italy 10 yr yields post their 4th straight daily gain, hitting 7.23% (high was 7.48%), pushing the Italy-German 10 yr spread to 5.06% (high was 5.54%).

One day after Fitch downgraded Portugal, Moodys downgrades Hungary to Junk status to to Ba1, with a negative outlook, hours after rival Standard & Poor's held its rating unchanged.

GBP started to come under renewed pressure after yesterdays UK Q3 GDP revision showed that business investment dropped sharply, and BOE policymaker David Miles warned that the UK economy was facing the worst downturn in 100 years. MPC new boy Ben Broadbent also warned of a new recession after warning on Q4 growth figures, while Martin Weale is due to speak later on the economy.

Our Wednesday Premium trades hit their targets in one of the EURUSD & EURJPY trades, while another remained unfilled. Oil hit all targets on the 1st short, while the other remains working. Here is direct access to those trades http://ashraflaidi.com/products/sub01/access/?a=555

The forex market wasnt as sleepy as might be expected with the US closed for holiday. Asia is modestly in the red. Japan Core CPI posted 1st annual drop in 4 months, falling 0.1%,.

A mild risk-on trade was wiped out in early US trading after Merkel said Eurobonds are not needed and not appropriate at a press conference with Monti and Sarkozy. Her comments suggested Germany will press for more austerity.

Local press are starting to raise more concern after yesterdays failed bund auction. Yields on German 10-year notes rose as much as 12 basis points but still yield just 2.26%. It may take a rise above 3% or 3.5% to convince German leaders that new ideas are warranted.

The euro fell after the Merkel comments but sterling was the larger laggard, falling below 1.55 for the first time since Oct 6.

MNIs China November Business Conditions Survey

Japan Core CPI posted 1st annual drop in 4 months, falling 0.1%. This pushing USDJY back to 77.40s, while EURJPY recovers 50 pips from its 102.70s lows.

Our Wednesday Premium trades hit their targets in one of the EURUSD & EURJPY trades, while another remained unfilled. Oil hit all targets on the 1st short, while the other remains working. Here is direct access to those trades http://ashraflaidi.com/products/sub01/access/?a=555

Tomorrows key events include Italy 6-month T bill auction 8.0 bln. 10- yr BTPs trades at 7.1%; pushing ITA-GER 10- yr spread to 4.9%. Italian retail sales are also due.

Turning to Germanys IFO seen down for 5th straight month, UK Q3 GDP seen remaining +0.5%, but CBI industrial orders may disappoint.

Closed US markets in observance of Thanksgiving will not prevent the European timetable from issuing a flurry of data and events, especially after yesterdays disappointing bond auction, which saw Germany fail to get away about one third of the funds to external buyers. As a shot across the bows that the Eurozone crisis has entered a dangerous new phase it was pretty effective and extremely concerning.

German Q3 GDP was unrevised at 0.5% Q/Q; 2.6% y/y

Latest Premium Trades include EURUSD (2), EURJPY (2), GBPCAD (2), Gold (2), Silver (2), Oil (2) Direct access to the latest PREMIUM INTERMARKET INSIGHTS of the day: http://ashraflaidi.com/products/sub01/access/?a=555 Click here for 1-week free trial http://ashraflaidi.com/products/

Yesterdays disappointing manufacturing PMI seems to suggest the German economy is stagnating at best while todays key data point will be the IFO readings for November which are expected to fall for the fifth month in a row. German IFO expectations for November are expected to slip back further from the last reading of 97 to 96, while the business climate index is expected to drop from 106.4 to 105.5 and the lowest levels since March 2010.

Todays release of preliminary UK Q3 GDP is expected to remain at 0.5%, but it will be business investment which will bear most scrutiny, with traders looking for evidence that companies are not scaling back. The most current data will be the industrial orders data for November and this is not likely to offer much comfort with expectations of a figure of -19, down from the previous -18.

Its growing more difficult to harbor any optimism about Europe after the euro plunged again Wednesday falling below 1.3350 The carry trade was battered while USD and JPY outperformed. Japan returns from holiday but hopes in Europe will be for a quiet end to the week as Americans celebrate Thanksgiving. Latest Premium trades include EURUSD (2), Gold (2), oil (2), silver (2).

Until today, Germany was the rock that the rest of the eurozone could rely on but a failed 10-year bund auction has crushed the illusion of infallibility. The sale failed to attract bids for 35% of the bonds offered, pushing benchmark yields 15 basis points higher. But even with German yields rising, spreads continued to widen, especially in Belgium on speculation the Dexia bailout could flop.

A late session report that Germany is no longer categorically ruling out eurobonds stabilized sentiment but the euro bounce was minimal.

Aside from domestic bonds and financial shares, the eurozone crisis hasnt destroyed risk appetite in the way the US crisis did but that can no longer be ruled out. If the crisis spreads from the periphery to the core it will go global. French yields are nearing 4% and Fitch warned that a further shock will jeopardize its AAA-rating.

It should be no surprise for anyone to wake up some time in the next several weeks and see the euro down 5 cents, stocks down 5% and oil down $15. In a crisis, there are panics and liquidation and the odds of such a day are now nearing 50%.

At the same time, the economic picture in the US remains cloudy. Factoring in revisions, the October durable goods orders report was softer than expected. Excluding air and defense it was the weakest in six months. The PCE report was mixed. Consumption rose just 0.1% (vs +0.3% exp) but income increased 0.4% (vs +0.3% exp).

The S&P 500 fell 2.2% to 1161 in the sixth consecutive day of selling.

In early Asia-Pac trading New Zealand posted a NZ$282m trade deficit compared to the $454m expected, leading to a small bump in NZD. There is no other data scheduled until Germany GDP in early European trade.

Latest Premium Trades include EURUSD (2), EURJPY (2), GBPCAD (2), Gold (2), Silver (2), Oil (2) Direct access to the latest PREMIUM INTERMARKET INSIGHTS of the day: http://ashraflaidi.com/products/sub01/access/?a=555 Click here for 1-week free trial http://ashraflaidi.com/products/

EURUSD enters its 4th straight WEEKLY decline - the longest losing streak since May 2010 -- right before it bottomed at that cycle.

Deepening German contraction, uncovered German bond auction and rumblings over France credit rating exemplify the creeping contagion from the shores of the Mediterranean to the core of the Eurozone. Direct access to the latest PREMIUM INTERMARKET INSIGHTS of the day: http://ashraflaidi.com/products/sub01/access/?a=555 Click here for 1-week free trial http://ashraflaidi.com/products/

Ashraf Laidi

Weak demand resulted in a poor German bond auction; Eurozone industrial new orders plunged; MPM minutes show no votes for more QE. Market turns to durable goods orders, jobless claims, core PCE price index and UoM consumer confidence.

The greenback is the relative strength winner in the ongoing session as risk aversion heightens. EUR and NZD are the biggest losers. Major European equities recovered most of their losses but remain in negative territory.

A combination of disappointing German bond auction with weak data sent Euro lower today. Germany sold only EUR 3.64 bln worth of 10 year bund today while it targeted EUR 6 bln. The Bundesbank retained EUR 2.35 bln that it will attempt to sell over the next few days. The average yield was 1.98% compared to previous 2.09% with weak bid to cover of 1.07.

September Eurozone industrial new orders were significantly below expectations as they plunged -6.4% from previous +1.4% which translates to a mere 1.6% growth y/y (down from Augusts' 5.9%). This is the biggest decline in three years and confirms bleak outlook for Eurozone manufacturing sector. EURUSD fell on the news from 1.3450 to 1.3374.

The Minutes from November MPC meeting showed that all members voted to keep rates steady and there were no votes for more QE. However, some members noted that more bond purchases may be needed in the future. Current QE will continue for additional three months.

Trading during the NY session will be influenced by a large number of data releases. At 8:30 am ET October durable goods orders are due and are seen lower at -1.1% from -0.6% (core orders are expected to grow only 0.1% from previous 1.8%)

Due to tomorrow's Thanksgiving holidays, jobless claims are due today and are seen at 389K from 388K. For the past three weeks, claims have been below the 400k mark.

FED's preferred inflation gauge, the core PCE price index is seen higher in October at 0.1% from previous 0.0%.

Final revision of November UoM consumer confidence is due at 9:55 am and is anticipated to increase to 64.5 from initial estimate of 64.2.

Bank of England minutes could indicate further easing intentions, German services PMI contracts further, Chinese HSBC Manufacturing PMI contracts to 38-month lows, US weekly jobless and durable goods orders also due.

The latest release of the Bank of England minutes could well give clues about the likelihood of further monetary easing between now and the end of this year. There could well have been discussion about adding further to the 75bn worth of asset purchases announced in October. Adam Posen is likely to be keen to go down that route given his recent remarks about the Fed and the ECB. His mantra appears to be if it moves print it. He could find an ally in deputy governor Charles Bean, and maybe some others, like Martin Weale.

Nov flash Nov manufacturing PMI further contracted to 47.9 from 49.1, Flash services PMI edged up to 51.4 from Oct 50.6. Eurozone industrial orders for September are also expected to slip back 2.7%.

Chinese HSBC manufacturing PMI data for November slid back sharply into contraction territory down from the previous 51.1 to 48 renewing fears of a slowdown in China. The surveys manufacturing output Index was also weaker, coming in at 46.7, a 32-month low. With investors already nervous about the situation in Europe this setback sent Asia markets lower.

Yesterday's FOMC minutes didnt add much to the QE debate, while the downward revision in Q3 GDP from 2.5% to 2% could well make some policymakers more nervous than usual.

In economic data out today US durable goods orders for October are expected to slip back further, while weekly jobless claims are expected to continue to come in under 400k, in line with last weeks better than expected 388k.

The IMF unveiled a program to let countries borrow for up to 2 years but it barely dented the negative market sentiment. CHF and CAD were the top performers while AUD and USD lagged but the overall moves were less than 50 pips. Japan is on holiday and the lone economic indicators are Australian Q3 construction, followed by HSBCs China Nov PMI.

The IMF unveiled a lending facility to help countries protect themselves from contagion in a financial crisis. The plan would allow countries to borrow 5 times their IMF quota for a period from 6-24 months. The euro initially jumped on expectations it would free up approx 45B for Italy and 23B for Spain.

It appears the next item on the agenda for Eurozone leaders will be altering treaties. The decisions to institutionalize budget discipline could come as soon as Dec 9 but the ratifications will surely set off a series of political firestorms.

Economic data weighed on sentiment as US Q3 GDP was revised to 2.0% from 2.5%. No change was expected. Downward revisions were slight and broadbased but the biggest single source came from inventory investment. Trade was a net positive. The market interpreted the report negatively but much of the lost growth will be simply shifted to Q4. The Canadian dollar outperformed with retail sales rising 1.0% in Sept versus the 0.5% expected. The strength in the report was broad based.

The S&P 500 fell 0.4% to 1188

Asia-Pacific Preview

At 0030 GMT, Australia releases data on construction work done in Q3. Spending is expected up 2.0% compared to a 0.7% rise in the previous quarter. This release is highly unlikely to get things moving and the Japanese labour Thanksgiving day will add to the malaise.

China's Nov PMI as prepared by HSBC is due out at 2:30 am GMT. The Oct figure was at 51.1. The days are ticking for the next rate cut.

The PBOC said yesterday it cut the reserve requirements on 5 rural banks by 50 bps to 15% as part of long-standing efforts to support the rural economy,.

Here is Ashraf's article on Futures magazine (originally written in mid October) on the strengths and dynamics of NOK vs other oil currencies

http://www.futuresmag.com/Issues/2011/November-2011/Pages/Going-with-the-Nokkie-in-times-of-good--bad-.aspx?k=Laidi

Spanish short term auction sees soaring yields; IMF&EU confirmed Hungarian request for financial assistance; UK public sector borrowing lower. Market turns to Q3 GDP revision, Canadian retail sales and FOMC minutes are due. EURUSD & EURGBP longs hit targets.

USD is slightly weaker in the ongoing session as EURUSD trades above 1.3550. CHF and EUR are the relative strength winners today. Major European equities are higher by about 0.5%.

Despite the new Spanish government that promised to cut deficit and promote growth, Spanish treasury had to pay higher yield today to sell almost EUR 3 bln in short term bills. The average yield on 3 month bill was 5.11% up from previous 2.29% and on 6 month bills the average yield was 5.22% from 3.3% both thus reached the highest points since euro inception. However, 10 year yields (IT, SP, FR) have declined today slightly.

A confirmation that the current crisis is not confined to the Eurozone came as IMF and the European commission confirmed that they had received a request for "precautionary" financial assistance from Hungary which is a member of the European Union. This assistance is meant to secure Hungarian ability to obtain funding in the markets. Hungarian Forint belonged to the worst performing currencies over the past three months but surprisingly, it has been strengthening since Thursday last week.

UK public sector net borrowing was lower than expected when it printed GBP 3.4 bln in October from GBP 10.2 bln in September. Public borrowing continues to be on target for this fiscal year but additional deficit reduction might be more difficult given the weak growth projections. GBPUSD has been on a rollercoaster today as it first dropped from 1.5691 to 1.5622 only to quickly recover back to 1.5680.

The NY session will kick off at 8:30 am with the second estimate for the annualized Q3 GDP that is seen at 2.5%, unchanged from the initial estimate. As this is the second estimate, the impact is likely to be limited.

Canadian September retail sales are also due at 8:30 am and are expected to keep the same pace of growth and print 0.5%. Core retail sales are seen at 0.4%.

Eurozone consumer confidence is due at 10:00 am and should remain unchanged at -20 in November. Readings below 0 continue to express pessimism among consumers.

EURUSD hits our intermediate long target, EURGBP hits all targets, 2 gold trades are triggered, while EURJPY finally gets filled. See the rest of our trades EURUSD. Click here for direct access http://ashraflaidi.com/products/sub01/access/?a=554 Click here to subscribe http://ashraflaidi.com/products/sub01/

Minutes from November FOMC meeting are due at 2:00 pm but considering the press conference after the actual FOMC decision, the chance of any surprising insights that could notably impact the markets is slim.

Italian and Greece PMs start key meetings, UK public finances under for scrutiny as fears mount that austerity is biting too hard, French yields will be watched after yesterdays Moodys warning. EURUSD regains 1.35, nearing the targets in the latest Premium Trades.

Markets are starting to worry about the prospects for a 2012 rating downgrade of the after failure of the Super Committee to reach agreement on $1.2 trillion in automatic cuts due to be implemented in 2013. The Super Committee was supposed to finish work by Monday so that the Congressional Budget Office can finish the package before there is a vote on recommendations Wednesday.

Moodys added to risk aversion when it issued a note warning about a French rating downgrade indicating: "Elevated borrowing costs persisting for an extended period would amplify the fiscal challenges the French government faces amid a deteriorating growth outlook, with negative credit implications".

EURUSD nears our intermediate long target, 2 gold trades are triggered, while EURJPY finally gets filled. See the rest of our trades EURUSD. Click here for direct access http://ashraflaidi.com/products/sub01/access/?a=554 Click here to subscribe http://ashraflaidi.com/products/sub01/

Markets will watch French 10 yr yields, currently at 3.47%, off last weeks 3.80% high (highest since July 2009). 3.47% corresponds to 1.56% in the France-Germany 10- yr spread, which hit a Eurozone-era of 1.90% last week.

Italy PM Mario Monti will meet EU President Van Rompuy and new Greek PM Lucas Papademos is set to meet Eurogroup chief Jean-Claude Juncker. In Greece, the debate remains over next Greek aid tranche.

Spanish auctions of 3 and 6 month bills this morning will be closely watched 2 days after the new conservative government has taken over.

UKs public finances due at 9:30 GMT expected to show a deficit of -GBP 900 mln eyed from GBP 19.88 bln. UK public finances data for Oct, seen improving to GBP 3.8bn from . .

Later in the US, Q3 GDP seen unchanged at 2.5%, followed by the minutes release of the FOMCs latest expected to highlight the three way split on the committee with respect to monetary policy.

Risk aversion dominated on continued European concerns and the likely failure of US deficit-cutting efforts. JPY, USD and EUR were generally unchanged against each other but handily outperformed the rest of the pack, with AUD as a notable laggard. The lone event on the calendar is RBNZ inflation expectations. 2 new trades on Gold & EURUSD.

Sentiment was dragged lower as it appears the US deficit supercommittee is well on its way to failure. The 12-member panel hoped to find cuts of $1.2 trillion over 10 years and its failure will trigger across-the-board cuts of the same amount beginning in 2013.

The question now is whether politicians will rescind the automatic budget cuts, something Moodys said would probably cause a downgrade. If not, the automatic cuts (71% tied to discretionary spending) would be a hard hit to the economy.

To us, the market reaction to this news seems overdone. The hopes for a grand bargain were always fanciful and all a failure means is that the dealing will drag on for another year and the stakes in the 2012 election will be higher.

The Treasury market remains unconcerned; long-term yields fell 5 basis points on the day.

Risk aversion peaked at the European close but improvements afterward were minimal. At the same time, EUR shot higher for no clear reason. The euro outperformance could be a sign of an involuntary unwind or a pressing need for euro liquidity.

NEW PREMIUM INTERMARKET INSIGHTS include 2 new trades in gold and 1 new on EURUSD. Click here for direct access http://ashraflaidi.com/products/sub01/access/?a=554 CLick here to subscribe http://ashraflaidi.com/products/sub01/

The S&P 500 bounced late in US trading but still closed below the 55dma for the first time since early Oct losing 1.9% to 1193.

Economic data was low-tier as US existing home sales for Oct climbed to 4.97m compared to the 4.80m expected. Sept Canadian wholesale sales disappointed at +0.3% versus the +0.6% consensus.

The Feds Lockhart said Q4 GDP could exceed 3% and that there is a very high bar for QE3, which shouldnt be implemented unless the US is in recession.

The MF Global trustee announced that the client account shortfall may reach $1.2, double the previous estimate and raising the possibility that clients may never recover 100% of their funds.

Asia-Pacific Preview

At 0200 GMT, the RBNZ will release the fourth quarter survey of inflation expectations. Japanese fin min Azumi will also hold a news conference after a cabinet meeting. The yen is likely on the agenda.

Ashraf will speak on the "Latest FX Ideas & Intermarket Set-ups" in London tomorrow at the Traders & Investors Club in Covent Garden. Free Admission - No registration required. For more details: http://www.tradersandinvestorsclub.co.uk/event/traders-investors-club-meeting-22nd-november-2011

Ashraf

Gold fell below 1700, Conservative party in Spain wins election but Spanish yields continue to rise; Eurozone current account shows surplus; BoE calls for more QE; Moody's warns France. Market turns to existing home sales and Canadian wholesale sales.6 trades hit all targets, 6 unfilled, 5 in progress, 2 stopped out.

Euro fell fails to gain traction after Mariano Rajoy's Conservative People's party won in a landslide in Spanish election. The People's party promises to cut the budget deficit while reducing the unemployment and stimulating growth. Despite these pledges, the 10 year yield continues to rise and trades around 6.54%.

USD Index at 6-week highs, nearing both 100 and 200 WEEK moving averages. Gold, touches below both the 55 & 100 DAY MAs

2 of 3 EURUSD Intermarket Indights hit all targets, none of the 2 EURJPY were filled, EURGBP & GBPCAD trades are in progress, 1 USDCAD stopped out, 1 ES stopped out, 1 ES unfilled, 1 Gold short all done, 1 other unfilled, both silver shorts all done, 1 oil short all done, 1 unfilled. See here for more detail: http://ashraflaidi.com/products/sub01/access/?a=553, For a 1-week Subscription, click here: http://ashraflaidi.com/products/sub01/

Even solid fundamental data was not enough to change the bearish market sentiment as the Eurozone current account balance positively surprised when it showed a EUR 0.5 bln surplus in September after EUR -5.9 bln deficit in August. The market expected a EUR -3.2 bln deficit.

BoE Adam Posen reiterated today his view that the ECB and the FED should engage in "large scale bond purchases" in order to stimulate their economies by lowering interest rates and encouraging investment. Mr. Posen is known for his fear that monetary stimulus would be removed too early before recovery is secured.

French 10 year yield rose today after Moody's warned that French higher yields would cause fiscal challenges and lead to deteriorating growth outlook with negative credit implications. The German-French 10 year spread widened and reached a high of 1.72%.

The US session starts with Canadian wholesale sales at 8:30 am ET that are expected to grow 0.6% in September from 0.2% in August.

Existing home sales are due at 10:00 am and are seen lower at 4.8M in October from previous 4.91M.

Traders gauging the impact of the US SuperCommittee's announcement that it has failed to agreement for savings measures ahead of Wednesday's deadline. Conservatives trounce

the Socialists in Spain Elections. Added silver and oil to Friday's trades, which include ES. AT 9 am GMT, Eurozone Sept current account is exp after Augusts EUR 6.3 bln.

Moodys reiterated its negative outlook on Ireland's banking system, placed since 2008, based on continued weakness in banks' funding and liquidity profiles; persistent weakness in profitability and that the improved capital positions of Irish banks only partly mitigate these fundamental weaknesses.

Intermarket Insights have just added SILVER & US CRUDE to Fridays trades, as well as commentary accompanying those charts on S&P500 and US crude oil. One of the gold shorts has hit all targets, while one of the DUAL ES trades is has been triggered. See here for more detail: http://ashraflaidi.com/products/sub01/access/?a=553, For a 1-week Subscription, click here: http://ashraflaidi.com/products/sub01/

CFTC COT report

Speculators at the CME are holding a $10.1B net long position in USD, up from $6.2 a week earlier. The change was almost entirely due to a climb in EUR shorts to -76.1K from -54.3K. Sterling shorts increased to -32.8K from -29.1K. CAD shorts increased to -17K from -15K. AUD remains in a net long position but it was trimmed to 24.3K from 27.0K.

The long currency to make headway against the USD was the yen as the net long expanded to 33.7K from 28.0K. Surely the BOJ is keeping an eye on these numbers, they last intervened with net yen longs at 45K. The numbers cover through the close on Tuesday.