Intraday Market Thoughts Archives

Canadian dollar maintains its strong positive correlation with equities. CADJPY daily corr with S&P rose to 0.83 during the last 25 days, up from 0.77 during the Apr 10th-June 26th period. CADJPY ranks 3rd in correlation behind AUDJPY and AUDUSD. GBPUSD correlation with equities weakened to 0.27 during the last 25 days, from the 0.28 during April 10th-June 25.

GBPUSD increasingly failing to break above the $1.6580-00 territory as the pound continues to largely rally n USD weakness but faltering on the absence of positive UK-figures and lack of follow-up in recovering risk appetite. Weekly cable chart shows peaking oscillators and shrinking candles. EURGBP has yet to regain 0.86, while GBPCAD retains strength mainly at the expense of broadening CAD weakness.

Nikkei-25 responded with a 0.8% gain after the 2% rally in the US, while European equities modestly in the black. Dow futures -14 pts awaiting US personal spending; seen +0.3% from +0.5%. USDJPY proves the recurring loser as USD weakness and JPY strength continue to re-emerge. We stick with our current Hotchart for a sub-93 in USDJPY by next week. USDCAD interim support at 1.1415 as oil prices remain above 70, but look for a break below the figure, which could recall +1.1520s. EURUSD eyes 1.4130.

Dollar extends selloff and equities rally as Fed, ECB, BoJ and BoC simultaneously announce extending their swap lines with one another until FEB 1st. Fed extends its liquidity injection facilities. USDCAD supported at 1.1510, Cable capped at 1.6420.

USDCAD attained the 1.1637 session high, short of the 1.1645 resistancewedge between falling trend line resistance from March high and 38% retracement from the March high. A break of 1.1650 sees 1.1720 and 1.1770. Oil recovered above $69 on more attacks on Nigerian oil pipelines. Congress continues to question Bernanke while stocks +0.7%. Unexpected rise in jobless claims dragged down yields (10- yr yield to 3.65%) while gold little changed at $936. NZD shorts may look into hedging with shorting GBPNZD to ook for 2.53.

Sterling shows the biggest deterioration in FX over the past 16 hours as cable breaks below 1.6280 trend line, eyeing next support at 1.6250s. Look for 1.6180. Dow futures + 6pts but FTSE and DAX 28 and -64 respectively. USDCAD hits 1.1620 target as oil breaks to 68.30s. Next level at 1.1650 (trend line resistance from Mar high), with key level at 1.1720 top of 4-week channel. CORRECTION: NZDUSD seen testing 0.6320 (NOT 0.6220), followed by 0.6270, while EURUSD may test 1.3880 in event of weak jobless claims. USDJPY capped at 96.70. Bernanke's testimony at 14:00 GMT

5 days ago we predicted in the latest weekly article EXITING THE EXIT STRATEGY what the FOMC would say and how it could be dollar positive (go to 6th paragraph in bold print) we said FOMC would focus on weak inflation, and today we stated how it will be in NO RUSH to add to its asset purchasing schedule. We spent over 30 tweet messages today cautioning over re-emerging USD strength. see levels and trades in http://www.twitter.com/alaidi

BERNANKE/PAULSON-GATE. The story about Bernanke threatening BoA to buy out ailing Merrill Lynch may not be new, but the latest accusations from Congressman Issa circulating memo to GOP members reinforces what has been suspected to be pressure from former Trsy Sec Paulson for BoA to overstep its directors and buy a damaged investment bank. I did it to save the financial system and the world may become the retort from the Fed and US Treasury. All in all, allegations of a central bank-led cover-up during the worst recession/bear market in 70 years is NOT WHAT THE Dr. ORDERED.

DOLLAR EXTENDS STRENGTH as we warned 3 hours before IMTs as FOMC's barely unchanged statement signals Fed IS NO RUSH TO PUSH DOWN YIELDS, which were already dragged lower by strong auctions and weak housing figures of past 2 days. ALL PRE-FOMC TARGETS (in twitter) already hit USDCAD 1.1530, EURUSD 1.3880 target CABLE 1.6370 (see our trades on tweets) all at expense of stocks and commodities. We may also emerging YEN STRENGTH vs EUR, GBP and CAD.

USD strengthening across the board with EUR and GBP knocked around amid profit-taking ahead of the FOMC. Stocks coming off their highs of the day while USDJPY hits 95.65. Against the backdrop of retreating bond yields, the FOMC may appear to be in no rush to commit to a new wave of asset purchases (treasuries and MBS), in which case could nudge up the dollar at the expense of oil & rest of commodities. Thus, the statement will likely retain the phrase: The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets". USDCAD eyes 1.1530

Dollar extends losses as equities cheer those stronger than expected US figures. Further strength from new home sales could deliver a prolonged rally into early afternoon until the FOMC decision, during which we could see 1.1370 in USDCAD and 1.0880 in USDCHF. Our latest HOTCHART on USDJPY CYCLICAL PATTERNS is now up. According to sentimentrader.com, when the S&P gaps up more than +0.5% on FOMC day, it has closed HIGHER than the open 10/11 times for an avg of +1.2%...but most often reverses in following day(s).

Swiss National Bank attacks with another franc selling intervention, gunning the EURCHF by as much as 250 pips in 40 mins as the currency appreciated on the back of USD and JPY weakness. USDCHF up +200 pips to 1.09 as the SNB remains resilient on containing excessive strength in its currency, which it deems to add to deflationary pressures. US durable orders soared 1.8% vs exp -0.6% spurring Dow +82 pts at the expense of the USD and JPY. USDJPY face s key resistance at 95.90s. Listen to Ashraf on Bloomberg Radio with Tom Keane in 15 mins.

FROM THE APRIL FOMC STATEMENT: ". . . the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets". This LAST SENTENCE of the APRIL FOMC was CHANGED from the last sentence of the March meeting, opening the door for future purchases with committing themselves. APRIL: "The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments". Fed will keep the door open for more purchases without being specific. FX markets may expect modest USD weakness to ensue. especially if yields are dragged down rapidly.

Bond yields fall further after solid 2-year bond auction. 10 year yield at 4-day low of 3.62%, which means the FOMC may NOT say anything about new purchases of treasuries, which could be dollar-supportive at the expense of renewed oil & metals weakness. Stocks await Fed's forecasts on economy. Current USD weakness started mainly vs EUR (Weber's comments) before turning to broader selling. Weber hinted ECB has done its part for now and will leave the rest up to the banks. OVER 30 TWEETS TODAY on FX, levels & articles. Join the wave http://twitter.com/alaidi

Slower than expected US exiting home sales and downward revision of prior month send stocks back in the red. USDCAD held above our 1.1460 support before rebounding near our 1.1590 target (1.1580), with resistance holding at 1.1650. USDJPY failed at our projected resistance of 96 and is slated for testing 94.70. NEW LOWS FOR GBPCH at 1.7480, EUR remains robust after ECB's Weber sees no need for ECB to take further policy steps i.e. dampens possibility for Quant Easing.

Markets stabilize from the overnight sell-off in Asia, awaiting US May existing home sales (exp 2.6%, prev 2.9%), which could further boost appetite and lift USDJPY, GBPUSD and EURUSD towards the 96.00, $1.6425 and $1.4020, respectively. each of which presents near-term resistance. Euro has outperformed most of currencies as traders await Wednesdays 1-year auctionfor Eurozone banks--an operation that will highlight the funding/borrowing needs of European banks and potentially suggest the looming end of cheap fundding. USDCAD seen underpinned at 1.1460.

The 2.8% decline in the Nikkei offered a predictable decline in all risk currencies against the dollar and the yen. Readers of the last 4 Intraday Market Thoughts as well as our tweets http://twitter.com/alaidi saw all of our suggested trades hitting their intended and rolling targets. Selling momentum remains particularly strong in CADJPY, AUDJPY and GBPCHF (down 200 pips). Further upside remains in USDCAD eyeing 1.1590, followed by 1.1650 especially as eyes falters at $67. AUDNZD (a long-time favourite short of ours) is down 100 pips at 1.2405 and down 400 pips from June 10th.

CADJPY's break of its 6-month trend line support has been confirmed as per last week's HOTCHART http://www.ashraflaidi.com/hot-chart/?a=763 . Nikkei-225 CFDs indicate a 220-pt decline on the open, which is helping to intensify the sell-off in AUD, CAD, NZD and GBP vs USD and JPY. USDCAD eyes near term objective at 1.1590, followed by 1.1650. While the selling was attributed to the WB's report on the world economy, Russian and Indian indices were already in the red. The gap up in the VIX to 31 reflected rising fear in the market, but a close above 33 is required.

ONE REASON WHY RISK AVERSION trades in FX may extend well past the US trading session is that Japans Nikkei-225 ended +40 pts at 9,826 on Monday and 30 pts in Friday, which suggests it has substantial room for losses especially given the declines in US, Europe, Brazil, India and Russia. These globalized declines in equities mean that Nikkei-futures could selloff well before the opening of the cash session, which suggests further losses in yen crosses and more gains in USD vs AUD and NZD. Therefore Nikkei may start falling below 9,800 in the futures market before the cash opens.

MORE RISK AVERSION in Forex with stocks intensify losses as warned following escalating selling in emerging markets. GBPCHF and EURCHF downside targets 1.7720 and 1.5010, AUDNZD eyes 1.2430, while cable hits 1.6360 target, eyeing 1.6310. CADJPY BREAKS 6-month trend line support of 83.40, eyeing 82.50 and 82.20.

Falling equities boost the USD and JPY, as FTSE, DAX and Dow futures deepen in the red. USDCAD broke above 1.15, targetting 1.15while GBPUSD tests $1.64 eyeing 1.6360. Selling in Russian and Indian stocks sheds further doubt on the emerging market rally, which should increase risk aversion to the benefit of USD and JPY. EURUSD eyes $1.3790, while USDJPY eyes 95.30. NZDUSD eyes 0.6270.