Intraday Market Thoughts Archives

EURUSD loses further ground in line with chart in yesterday's article, suggesting downside to extend to as low as $1.4500. The importance of this figure is underlined by the confluence of 2 fibonacci retracements--38% retracement of 1.3878-1.4865 rise and; 50% retracement of 1.4150-1.4865 rise. A possible resolution over the Rescue package on Monday may act as the catalyst. Also remain alert of rumblings of troubled European banks from failed US banks.

University of Michigan consumer sentiment index (final for Sep) drops to 70.3 from initial 70.9 but higher from Agust figure. Final US Q2 GDP was revised down to 2.8% from 3.3% due to a scaling down in personal consumption from 1.7% to 1.2%. Not only this suggests that the role of the stimulus package had already faded in Q2, but also confirms a contraction in Q3 GDP due to the negative retail sales, industrial production, durables and housing figures in the quarter. A US recession is a foregone conclusion and interest rate cuts are imminent at this point.

Dollar extends losses and S&P futures drop more than 1.5% as what was thought to be disagreement over the rescue package turned out to be a deeper source of dissent, giving way to a Republican-backed proposal that is already facing opposition. This means that equities are set to erode all of Thursdays gains tomorrow, which were largely based on hopes of resolution to the package. Having attained the 107 yen figure and failed, USDJPY may now be dragged by fresh risk aversion back towards the 105.20 support. CHF remains favored, targeting USDCHF at 1.08. The smaller than expected decline in NZ Q2 GDP is boosting NZDUSD back towards 0.7020s.

CORRECTION: NZD Q2 GDP release 10.45pm GMT is 6.45pm EST (not 5.45pm). NZD already losing ground ahead of report.

USD & stock futures retreat as US Congressional leaders make no collective media statement after Bailout metting. USD may extend losses in Asian trade if no chances of resolution by week's end.

NEW ZEALAND & WASHINGTON. NZ Q2 GDP data due at 5.45 pm EST expected to drop by 0.4% q/q from -0.3% in Q1 and 0.6% y/y from 1.9%. Annualized average seen at 2.3% from 3.0% in Q1. See today's article on NZ FOREX IMPLICATIONS. US SENATOR SHELBY says no agreement reached on Bailout package but after hours markets are not moving. If package is not agreed upon before week's end, Thursday's rally may flounder tomorrow.

The intensifying dollar rally predicted earlier on Tuesday is materializing further (breaching 106.50 yen, sub $1.46 vs EUR and sub $1.84 vs GBP). Despite the dismal US data trifecta (jobless claims, durables and new home sales), the move is primarily led by equities, which found an excuse for bargain hunting on what seems to be Congress/White House consensus on the bailout package. This is very much a bear market rally, where Dow and S&P500 resistance stand at 11,380 and 1,260. See todays article for EURUSD chart. USDJPY seen retesting 107 and onto 107.40.

USD reverses earlier declines and rallies across the board along with surging stocks despite 11.5% plunge in August new home sales (biggest drop since November). Wire services attributing improvement to increased chances that $700 bln package be passed before week's end. GBP slumps past our $1.8450 target, targetting $1.84, EURUSD tests $1.4600 support, eyeing 1.4580s. USDJPY also in line with our morinng forecast, breaching the 106.30s, now eyeing 106.60s.

US data deteriorates across the board. JOBS (Weekly claims surged to 490K) DURABLES (-4.5% vs exp -1.9%). We stick with expectations of INTERMEETING RATE CUT prior to Oct 29. CHF seen as the broadest winner today.

Following the GE news, CHF rises across the board, closely followed by JPY. EURCHF, GBPCHF and AUDCHF are the sharp movers. EURUSD also dropping off its highs on selling in EURJPY and EURCHF.

TUNE IN FOR ASHRAF LAIDI's LIVE INTERVIEW on BLOOMBERG TV at 10.40 am EST (2.40 PM GMT) TODAY.

DOWNSIDE MARKET RISKS SOAR as GE suspends its buyback program and lowers its Q3 earnings. LIBOR Rates push up higher. Fed Chairman Bernankes economic testimony sounded off a clear focus on the downside economic risks away from the usual balanced focus on inflationary and downside risks. This further increases the ODDS OF A 50-bp INTERMEETING RATE CUT . The next FOMC meeting is 33 days away, which is far too long a period of time for the rapid deterioration in credit conditions such as rising LIBOR/TED rates, as well as negative corporate news such as this mornings GE news.

BANK OF ENGLAND MPC member Andrew Sentance says UK economy could contract in H2 2008 but does not suggest rate cut is key as his ultra dovish colleague Blanchflower has consistently indicated throughout the year. GBP continues to weaken vs USD due to USD strngth and not GBP weakness.

Dollar strength extends across the board, nearing the targets mentioned in yesterday's "Intraday Thoughts", led by GBPUSD sub $1.8490. Cable's interim target stands at $1.8450. EURUSD could well reach $1.4580 before week's end. USDJPY seen regaining 106.30s onto 106.60s, where significant resistance emerges.

German Sept IFO lower than expected across the board. Climate index 92.9 vs exp 94.1; Current Assessment index 99.8 vs exp 101.9; Expetctations Index 86.5 vs exp 87.3. EUR strengthens despite the news and the fact that IFO survey was taken before last week's market metdown. GBPUSD shorts may be hedged with AUDUSD longs and EURGBP shorts.

Dollar unable to hold on to gains as stocks deepened their selloff highlighting the extent of negative sentiment/fundamentals in the US, further validating the case for GOLD. The decoupling between the rising dollar and tumbling equities took place today as investors showed little confidence to the debt purchase plan after Bernanke and Paulson stated taxpayers will incur a risk through the repurchase program. Also, there are little signs that lawmakers are showing support for the Paulson Plan, rather, there is more agreement among the Senators than between Senators and the Treasury. Nonetheless, i MAINTAIN USDJPY to bottom at 105.20s in Asian session and GBPUSD to find its way lower back towards $1.8500s

FOREX MOVES IN LINE WITH MY5 .30 AM CALL, which noted EURUSD will drop from $1.4770 to $1.4680, GBPUSD to $1.8480 and USDJPY to jump amove 106. Expect continued USD gains after the lunch hour into remainder of US session. Negative GBPUSD with hedging thru GBPCAD longs may be considered ahead.

I stick with the forecasts made 3 hours ago in the previous INTRADAY THOUGHTS as I confirm that we have seen the day's lows in USDJPY and day's highs in GBPUSD and AUDUSD. As per this morning's article, USD bulls are in for an autumn equinox treat, with GBPUSD dropping below $1.84, EURUSD below $1.47, USDJPY regaining 106.20s as interim target.

My preliminary analysis suggests we will see a stronger USD in US Tuesday session, that could take USDJPY to as high as 107 and onto 107.60 in Asian Wed session. GBPUSD seen falling towards $1.8350 in US session and bottom near $1.8200 at beginning of European Wed session. We could then see recovery in EUR and GBP at beginning of EU Wed session and renewed USDJPY declines. Analysis to remain unless explicitely revised.

CADJPY ANALYSIS: Reposting my insights from the Comments Section on CADJPY. Based on further gains in oil, I would not jump on this trade due to the increased possibility of a BANK OF CANADA RATE CUT at the October 21 meeting. With the US economy increasingly strained, North of the Border is struggling across the board with the exception of oil driven Alberta. Yes, they did have a few stronger than expected job reports, but combining risk aversion, yen strength and US weakness, CAD may be in for some hard times. WEELY CADJPY TECHNICALS look technically toppish, with gains limited at 103, but ample downside room towards 100 and 99.30. WILLIAMS % R looks BEARISH both in Daily and Weekly.

Dollar slump accelerates as US stocks deepen their declines, making this a USD-centric play, propping gold to $907 and oil to $116. With the high yielders rallying against the dollar during sharp Wall Street sell-off, the only explanation is that it is triggered by eroding USD sentiment. Big government bailout means a deterioration in the US structural deficiencies (budget deficit) rather than cyclical deficiencies (weakening economy). With budget deficit already slated to surpass $480 billion in 2009, the latest bailout is expected to push the imbalance closer to $520 billion, excluding the Iraq War and added spending resulting from the new president.

105.80 yen and $1.8480 in cable were attained as dollar losses intensify. Despite the deflationary repercussions of the sharp break in credit formation from struggling banks and the deflationary implications of the increasingly weak macroeconomic dynamics of escalating joblessness and falling consumer demand, the required monetary policy response from the US and overseas central banks will have to take the road of easing, thus, propping gold prices anew against the dollar and rest of major currencies. The rally in oil prices will be less pronounced than that of oil, hence my long-held prediction of a rebound in the gold-oil ratio from its 5.8 lows in July to the current 8.4.

USDJPY 4-hour Chart bears the signs of the beginning of another extended sell-off, whose initial target is likely to emerge at 106.00 and 105.60. While everybody having access to a TV station has heard of the $700 billion govt purchase of bad banking debts, even the pros are not sure of the details of the plan, or which banks and credit institutions will be eligibile to sell their debt. Same goes for which particular companies could qualify for the short sales ban aside from the "financials".