Intraday Market Thoughts Archives

Mixed Eurobonds comments from key EU figures; German GfK consumer climate unchanged; French consumer confidence improved. UoM consumer confidence revision is next. 2nd EURUSD short hit 1.2520 target while the other did not hit 1.25 & remains in progress. All AUDUSD shorts and USDCAD longs remain progress. 1 GBPUSD short closed at 1.5650, the other remains in progress. Both gold shorts stopped out. US crude short in progress

Short covering rally at the beginning of the London session sent the greenback lower across the board except JPY. EURUSD was able to touch 1.2600 but pulled back slightly lower. European equities are mixed between -0.5% and +0.3% and the relative strength winner is NZD followed by CHF.

Conflicting comments regarding Eurobonds were heard from key European leaders. Italian PM Mario Monti said that a majority of EU leaders backed Eurobonds issuance at Brussels summit while Luxembourg PM Jean-Claude Juncker contradicted by saying that the idea did not find much support.

However, Mario Monti remains optimistic and claims that Germany can be persuaded, MNI reports. The rally was halted when ECB council member Jens Weidmann said that it would be an illusion to think that Eurobonds would resolve the ongoing crises.

From today's data we learned that the GfK German consumer climate for June stayed unchanged from May at 5.7. However, the GfK group found that consumers were more optimistic than in previous months and that their willingness to buy slightly increased.

In other news, French consumer confidence was slightly better than expected as it improved in May to 90 from previous 89; Swiss employment level rose to 4.05M from 4.04M and Italian retail sales declined 0.2% in March from previous 0.9%.

The US data calendar is limited to the final result of May University of Michigan consumer confidence that is due at 9:55 am ET and it is expected to remain unrevised at 77.8.

The short covering rally could continue today as traders square positions ahead of the long Memorial Day weekend. Despite the USD selloff, USDX continues to hold above the 81.75 support.

Direct access to those remaining trades in EURUSD, USDCAD, AUDUSD, GBPUSD and US crude, please click here: http://ashraflaidi.com/products/sub01/access/?a=639 Non subscribers can click here: http://ashraflaidi.com/products/sub01/

EUR/CHF took a 70 pip roundtrip Thursday as a confused jumble of rumors sparked a quick rally that faded as traders couldnt find any evidence of truth in the rumors. The New Zealand dollar was the best performer while the franc lagged. Japanese CPI is the highlight of the Asia-Pacific session. All of Wednesday's Intermarket Insights are remain on track as EURUSD remains near its latest 2-year lows.

EUR/CHF shot higher early in US trading for no apparent reason and the market was abuzz with speculation about intervention. That quickly appeared less likely as the flows seemed to originate from the UK not the Dutch bank that has been bidding at 1.2000 for the SNB.

The next reports pointed to a think tank report that forecast the SNB was preparing to take further action. That was replaced by a rumour that Switzerland was preparing to tax bank deposits. That left market participants scratching their heads about the feasibility of taxing non-resident, non-citizens. In the end, there was no answer and the market was left mulling over the possibility that it was fooled by a fat finger.

The EUR/CHF action spilled over into broad euro buying which sent EUR/USD above 1.2600. Sentiment later to slipped reports suggesting soft Chinese loan demand and a poll that put Syriza at 30% support, a new high for the anti-bailout party.

Later comments from Monti saying more than half of European leaders support Eurobonds stalled the fall at 1.2520.

Economic data was neutral. Initial jobless claims were in-line with the 370K consensus; durable goods orders rose 0.2% compared to +0.5% but the miss was due to prior revisions. Comments from the Feds Dudley were slightly less dovish but he indicated that QE3 would be on the table if the jobs market deteriorated.

The focus now shifts to Japanese CPI. The national CPI for April is expected up 0.4% y/y but down 0.4% ex-food and energy. The Tokyo May CPI is expected down 0.3% y/y. The figures will be released at 2330 in an otherwise quiet Asia-Pacific session.

Latest Intermarket Insights include trades on EURUSD, AUDUSD, USDCAD, gold and US crude oil . DIRECT access to today's Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=639 Non subscribers can click here: http://ashraflaidi.com/products/sub01/

-AB

German IFO and manufacturing PMI declines; Eurozone PMI disappoint; UK GDP revised lower. Market turns to durable goods orders and jobless claims. Wednesday's Intermarket Insights chart the implications of the breakout in the USDX to 2-year highs, with new trading ideas in EURUSD and AUDUSD. See more below.

The greenback initially gained across the board but has since lost almost all its gains. European equities are gaining over 1% and the relative strength winners are AUD and NZD.

German Ifo indicators all disappointed today as business climate dropped to 106.9 from 109.9; current assessment fell to 113.3 from 117.5 and the expectations sub index declined to 100.9 from 102.7. Highly uncertain conditions due to worsening of the EU crisis has impacted the survey. One of the few positive aspects of today's data is that the Q1 GDP was confirmed at 0.5% q/q.

German manufacturing PMI declined to 45.0 in May which is the lowest level since 06/2009 from previous 46.2 while services PMI remained unchanged at 52.2. Weak reports from the largest European economy imply that eurozone's data deterioration is likely to accelerate. The downward trend has already started as Eurozone manufacturing PMI declined to 45.0 from 45.9 and services PMI fell to 46.5 from 46.9. EURUSD fell to 1.2515 but currently trades around 1.2570.

UK Q1 GDP was revised lower to -0.3% from -0.2% m/m while the annual figure remained unrevised at -0.1%. The sharpest fall in q/q construction output since the beginning of 2009 is blamed for the revision. BBA mortgage approvals rose to 32.4K from 31.9K. GBPUSD initially fell to a new low at 1.5643 but later retraced most of the losses.

The US session starts at 8:30 am ET with durable goods orders that are expected to grow 0.5% in April after declining 4% in March. Core orders should rise 1.1% from -0.8%. Jobless claims that are due at the same time are seen at 372K from previous 370K.

At 9:00 am the market is likely to respond to ECB president Mario Draghi's speech in Rome and FOMC member William Dudley who speaks at 10:30 am in New York.

Wednesdays Intermarket Insights include trades on EURUSD, AUDUSD, USDCAD, gold and US crude oil . DIRECT access to today's Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=639 Non subscribers can click here: http://ashraflaidi.com/products/sub01/

Ashraf's latest article (open access) charting the recurring FX cycles and their Intermarket implications

http://ashraflaidi.com/articles/charting-the-latest-in-forex-cycles.asp

Ashraf tells CNBC's Becky Meehan of the technical and fundamental arguments for further euro downside as well as his targets http://youtu.be/AktR_PoticI

A rumour about a plan to roll out Europe-wide deposit insurance cushioned a fall in risk assets on Wednesday. The yen was the top performer while the euro lagged. The market will now shift its gaze to China due to the upcoming HSBC manufacturing PMI. Todays Intermarket Insights chart the implications of the breakout in the USDX to 2-year highs, with new trading ideas in EURUSD and AUDUSD. See more below.

Fear about a Eurozone break-up gripped markets once again, sending the euro to 1.2550 from 1.2685 early in US trading. Various reports that Europe is preparing contingencies in case of a Greek exit from the euro ratcheted the fears higher. Another story continued to circulated about how European leaders would forgive 50 billion euros in Greek official borrowing in the event of an exit hinted that at a real possibility of a breakup.

The EU Summit provided the regular disappointing headlines for the most part Merkel rejecting Eurobonds, the Dutch PM saying hes not in favour of bank recapitalizations via the ESM and Finnish leaders saying Europe has done enough for Greece. Late in the day, a rumour about a Europe-wide bank deposit scheme to sparked a rebound in risk assets.

The flight to German debt underscores banking risks. German yields hit record lows across the curve Wednesday, in part due to depositors in periphery countries looking to park funds in foreign assets that their local governments cannot forcibly to convert to a newly issued currency like the drachma.

The S&P 500 declined as much as 1.5% but rebounded to a narrowly positive close on the bank insurance rumor and vaguely dovish commentary from the Feds Bullard and Kocherlakota.

The main event of Asia trading and perhaps the most important data point of the week is the HSBC China manufacturing PMI at 0230 GMT. The metals markets and commodity FX is skittish about a Chinese slowdown and soft data points to GDP growth at 7% rather than the 8% expected. The recent proclamations from Chinese officials on pro-growth policies have only served to underscore the fears.

The HSBC PMI was at 49.3 in April and has been below 50 since November. A fall below 48 would confirm the slowdown but the tepid tone of the market means that an upside surprise (49 or above) would provide a bigger bang to AUD and the commodity bloc.

Wednesdays Intermarket Insights include trades on EURUSD, AUDUSD, USDCAD, gold and US crude oil . DIRECT access to today's Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=639 Non subscribers can click here: http://ashraflaidi.com/products/sub01/

-AB

EURUSD hits a new low on the year, at $1.2555, down 2.3% year-to-date, and down 6.5% from its February highs.GBPUSD fell across the board as was warned in our Pre-UK data preview on Monday, testing the $1.5680s. US crude oil finally breaks below $90 for 1st time since November and nears our target of $88. New developments are ensuing in the US dollar index. Find out in our latest Intermarket Insights on EURUSD, AUDUSD, USDCAD, gold and US crude oil . DIRECT access to today's Insights is found here: http://ashraflaidi.com/products/sub01/access/?a=639 Non subscribers can click here: http://ashraflaidi.com/products/sub01/

BoJ does not budge on QE as MPCs Miles only member calling for more easing; MPC Bean dovish remarks; UK retail sales declined. Market turns to Canadian retail sales, Eurozone indicators and US new home sales. Yen once again the strongest currency of the day on a classic risk-off day despite BoJs easing efforts. Sterling loses further ground on more UK data weakness, which is what we warned about in our Monday Intermarket Insights, making GBP data and Weekly/Monthly charts as the centerpiece of the analysis/trades. We have provided the link to the GBPUSD W&M Premium charts (open access) at the end of this IMT.

USD rally that started yesterday on former Greek PM comments that Eurozone exit is being considered continued today as the greenback pushed higher across the board except JPY. European equities are losing nearly 2% and the relative strength winner is JPY while AUD lags.

JPY strengthened after the BoJ kept the overnight call rate below 0.1% and did not announce any new monetary easing. The BOJ governor Shirakawa reiterated his views on continued powerful easing and ending deflation. USDJPY trades around 79.45 while EURJPY dropped to 100.15.

The MPC meeting minutes showed that David Miles was the only member that voted for additional GBP 25 bln easing. Given that Adam Posen reconsidered his position; that the IMF urged additional easing and that the MPC member Charles Bean said in today's speech that the commission may need to restart QE if the economy deteriorates, the next MPC meeting on June 7th is shaping to be an interesting one.

UK data disappointed again today sending GBPUSD to 1.5675. April retail sales declined 2.3% m/m which was the most in more than 2 years while the annual figure printed -1.1%. CBI order expectations fell to -17 in May from previous -8.

The fact that the EU economic summit is now referred to as "informal dinner" suggests that it is unlikely to bring any breakthroughs as the key topic creation of Eurobonds is not likely to be resolved.

The NY session starts at 8:30 am ET with Canadian retail sales that are seen higher in April at 0.4% from previous -0.2%. Core sales are expected to remain at 0.5%. Leading indicators are due at the same time and are anticipated to grow 0.3% in April from previous 0.4%.

New home sales that are due at 10:00 am ET are seen higher in April at 335K from March's 328K.

Remaining trades in Mondays Premiumk Intermarket Insights include USDCAD, gold an oil. Open access to those GBPUSD charts from Mondays Insights. http://www.ashraflaidi.com/content/images/p_sub01/Cable%20May%2021%20W%20&%20M.JPG_640W.gif Direct Access to the latest Insights is found here: http://www.ashraflaidi.com/products/sub01/access/?a=638

A downgrade to Japan and the upcoming BoJ decision left the US dollar as the lone safe haven on Tuesday. The dollar surged on periphery fears while the commodity bloc slumped. Japan releases trade data ahead of the central bank decision. Both shorts in EURUSD Premium trades hit all targets, awaiting USDCAD, GBPUSD, gold, and oil. See more below.

A slow move into US dollars turned into a surge late in the session on comments from former Greek PM Lucas Papademos. He said the chance of a Greek euro exit is real and that preparations are being considered. He also estimated the cost of breakup at 500 billion to 1 trillion euros. He sees only a very limited scope for renegotiation on bailout terms.

Nothing Papademos said was a revelation but the comments came with markets already on the defensive and helped tip sentiment over the edge. The euro tumbled to 1.2658 and AUD/USD fell to a 2012 low of 0.9789.

Other factors that weighed on sentiment were 1) an outright rejection of Eurobonds from Merkel and other European leaders 2) the Richmond Fed fell to +4 versus +11 expected 3) Egan-Jones downgraded Spain two notches 4) indications that tomorrows EU Summit will not make a breakthrough 5) A Chinese sovereign wealth fund official criticizing Europes response to the crisis.

The Bank of Japan decision is likely to rendered around 0400 GMT. As the hours grow longer, the risk of further QE grows. Market expectations are minimal but may have edged up after the downgrade. No change in policy may lead to a 20-30 pip slump in USD/JPY but given the outsized drop after the last BOJ decision, more cant be ruled out.

Before the BoJ decision, at 2350 GMT, Japans April merchandise trade deficit is expected at 470.8 billion yen. Exports are expected up 11.8% y/y and imports +10.1% y/y.

All of Mondays shorts in EURUSD Premium trades hit all targets, awaiting USDCAD, GBPUSD, gold, and oil. See more below. The Insights also chart the weekly and monthly techs on GBPUSD. Direct access for subscribers click here: http://www.ashraflaidi.com/products/sub01/access/?a=638 Nonsubscribers can get a free 1-week trial here: http://www.ashraflaidi.com/products/sub01/

-AB

Ashraf tells Reuters Insider about the Franco/German dissent on Eurobonds and the cyclical charting in UK CPI, which he shared with Premium subscribers yesterday http://insider.thomsonreuters.com/link.html?cn=share&cid=773208&shareToken=Mzo2N2U4ZWJjMC0yZDk5LTQ2ZWItOTE3Yi1iODE1ZmJmYTYwMWU%3D

UK CPI declines; IMF urges further easing; public sector data distorted; Fitch cuts Japan to A+; EOCD sees continued growth in the US. Existing home sales, Richmond FED manufacturing and Eurozone consumer confidence are next. Last nights Premium Intermarket Insights issued 2 shorts on GBPUSD, charting the recurring cycles in UK CPI as an argument for a lower sterling. See more below.

The greenback is stronger across the board in the ongoing session. Major European equities are gaining nearly 1% and the weakest currency is NZD.

GBPUSD dropped from 1.5840 to 1.5762 after consumer inflation in the UK eased to 3% in April from previous 3.5% y/y which is the lowest level since 02/2010. This means that the BOE governor was not required to write the inflation letter to the treasury today. Core CPI printed 2.1% which is a level not seen since 11/2009.

The IMF urged the UK to consider further monetary easing and possibly even a rate cut below current 0.5%. At the same time it acknowledged substantial progress on budget position.

Public sector net borrowing showed GBP 18.8 bln surplus in April after 15.9 bln deficit a month earlier but the data is distorted due to Royal Mail pension plan transfer onto the government balance sheet.

USDJPY moved to 79.80 after Fitch Ratings cut Japan's long term rating to A+ with negative outlook stating high and rising public debt ratios.

In other news, the OECD reported that the US growth should continue as confidence is picking up but urged the FED keep accommodative policy; JP Morgan trading losses are expected to rise up to USD 7 bln from initial estimate USD 2 bln and FT reports that Greek banking system is being propped up by EUR 100 bln emergency liquidity provided by its central bank which was approved by the ECB. Due to inflation risks, emergency liquidity assistance (ELA) over EUR 500 M needs to be approved by the ECB.

The US session will bring existing home sales that are expected to rise in April to 4.62M from 4.48M, Richmond FED manufacturing that is seen lower in May at 12 from 14 and Eurozone consumer confidence that is anticipated to worsen to -20.5 in May from April's -19.9. All reports are due at 10:00 am ET.

The trading ideas in Mondays Premium Intermarket Insights involved wider targets in GBPUSD than our usual Insights. AUDUSD long was filled, while gold shorts remain in progress http://www.ashraflaidi.com/products/sub01/access/?a=638 Nonsubscribers can get a free 1-week trial here: http://www.ashraflaidi.com/products/sub01/

The lack of bad news from Europe and the global economy was enough to spark a short-covering rally in risk assets to start the week. The commodity bloc led the way while the yen lagged. The Bank of Japan starts its two-day meeting and New Zealand releases inflation expectations data in the upcoming session. Mondays Premium Intermarket Insights trades include dual trades in AUDUSD, with long leg having been filled. We also have GBP trades ahead of Tuesdays UK CPI. More below.

It is difficult to pin Mondays risk rally on a single development. Several headlines contributed including: 1) Wens pro-Chinese growth comments 2) Hollande stirring up Eurobonds and 3) New Democracy making inroads in polls and forging an alliance with a the Democratic Alliance, a smaller pro-Europe party .

Still, the news wasnt all positive as the IIF said Spanish banks are undercapitalized and the Brazilian central bank said global growth has been disappointing.

Overall newsflow was quiet enough to spark a 1.6% relief rally in the S&P 500 after 7 days of losses. That sentiment spread to FX, leading to profit-taking and short-covering in commodity FX. An ominous sign came from the bond market, which hardly moved in response to the giddy mood in other risk assets.

The Asia-Pacific calendar is absent any scheduled events that could have a definitive impact on sentiment. At 0200 GMT, the Conference Board releases Chinese April leading indicators and at 0300, New Zealand releases its survey of inflation expectations. Neither is a market mover.

Nikkei News reported that tomorrows BOJ decision is unlikely to yield and change in outlook. Expectations for new, yen-weakening policies are minimal.

Mondays Premium Intermarket Insights trades include dual trades in AUDUSD, with long leg having been filled. We also have GBP trades ahead of Tuesdays UK CPI. Click here for direct access to these trades http://www.ashraflaidi.com/products/sub01/ access/?a=638 Nonsubscribers can get a free 1-week trial here: http://www.ashraflaidi.com/products/sub01/

-AB

This weeks key UK data include April CPI (Tuesday), May CBI industrial survey (Wednesday), April retail sales and 2nd estimate of UK Q1 (Thursday). Tuesdays release of UK April CPI expected at 0.6% month-on-month from 0.3% m/m, but the year-on-year rate is seen slowing at 3.1% from 3.5%. Although the March release showed the first increase following five consecutive monthly declines, the trend remains clearly negative, suggesting explicit similarities to the 2008-9 cycle Will the same happen in the current cycle? Our latest Premium Intermarket Insights chart the latest UK inflation vs. that of China as well as new ideas on GBPUSD. Click here for direct access to these trades http://www.ashraflaidi.com/products/sub01/access/?a=638 Nonsubscribers can get a free 1-week trial here: http://www.ashraflaidi.com/products/sub01/

French President Hollande to propose Eurobonds; Swiss consumer confidence and Eurozone construction output improved; FOMC Lockhart cannot rule out QE3 but not appropriate now; German auction. Kiwi continues to slump as carry trades unwind. Thursdays shorts in EURUSD have been filled. Thursdays shorts in EURUSD are filled, while the trades in USDCAD, CADJPY and gold remain in progress. More info on rest below.

USD little changed compared to London open and European equities are trading within 0.1% to 0.6%. G8 meeting ended without any surprises as the usual comments about promoting growth and jobs were repeated again. Perhaps the only noteworthy statement came from the French president Hollande who said that he would propose Eurobonds at the upcoming European summit on Wednesday 5/23. The French president claimed that he would not be alone in this proposition.

German resistance to Eurobonds has been strong so it is not going to be an easy task but should president Hollande be able to lift Berlin's veto on this issue an important step towards overcoming the European crisis would be made.

Today's data calendar was short. We only learned that Swiss SECO consumer confidence improved in April to -8 from previous -19 and annual money supply M3 rose 6.3%. Eurozone construction output slowed the rate of its decline as it printed -3.8% in March from previous -16.3%.

Atlanta FED president and FOMC member Dennis Lockhart said during his speech in Tokyo that QE3 cannot be ruled out given the risks posed by the European crises but it is not appropriate in current circumstances, MNI reports.

Germany sold EUR 2.91 bln worth of 12 month bills, nearly reaching EUR 3 bln target. The average yield declined to 0.026% from 0.074% and cover fell to 2.1 from 2.3.

There are no reports due during the US session today. CAD traders should note that Canadian banks are closed in observance of Victoria day so liquidity might be thin.

THIS WEEK'S This weeks array of economic data releases from the G7 include several key indicators from the UK, namely, April CPI (Tuesday), May CBI industrial survey (Wednesday), April retail sales and 2nd estimate of UK Q1 (Thursday). Key releases in other countries include US new home sales, Eurozone flash services and manufacturing PMIs, German IFO, final reading of German Q1 GDP, US existing and new home sales, as well as consumer sentiment survey.

All of Thursdays Premium trades but AUDUSD have been filled. EURUSD, USDC AD, CADJPY, gold and US crude are all in progress. Make sure you note our reminder on EURUSD & those similar conditions. http://ashraflaidi.com/products/sub01/access/?a=637 Nonsubscribers visit here: http://ashraflaidi.com/products/sub01/

Euro shorts covered some positions on Friday, sending the currency higher but CFTC data showed the futures market is more bearish than ever on the single currency. The kiwi continues to slump as carry trades unwind. Thursdays shorts in EURUSD have been filled. More info on rest below.

The euro climbed closed out the week at 1.2780 after falling as low as 1.2642 in European trading. The reasons for the rebound were not clear but hope the G8 can convince Germany to be less aggressive about austerity and short-covering were likely culprits.

The credit crunch in Spain continues as policymakers struggle to identify the problem and banks continue to bleed cash and deposits. The EUs Rehn said Spanish banks dont need EU aid while Hollande said they could tap the ESM. In the meantime, there was talk about further losses in Spanish regional governments and LCH hiked margins.

Despite the euro rebound, strains continue to mount in other asset classes. The S&P 500 fell another 0.7%, WTI crude fell to $91 and copper turned negative on the year.

The CFTC Commitments of Traders report put euro short positioning at a record, up to 174K from 143K last week. The rest of the report showed a continued pullback in AUD longs and a fresh buildup of CHF shorts:

JPY -34K vs -41K prior

CHF -27K vs -16K prior

AUD +5K vs +25K prior

CAD +51K vs +60K prior

GBP unchaged at +25K

NZD +2.5K vs +6K prior

Thursdays positions are in progress (EURUSD, AUDUSD, USDC AD, CADJPY, gold and US crude). Make sure you note our reminder on EURUSD & those similar conditions. http://ashraflaidi.com/products/sub01/access/?a=637 Nonsubscribers visit here: : http://ashraflaidi.com/products/sub01/

-AB