Intraday Market Thoughts Archives

US equities near their session lows but risk currencies are well off their worst levels of the day as USD and JPY retreat. Oil rebounds to $75.90s from 72.40, while gold gains $40 from its $1,136 low. Some CDS traders say the reaction to Dubai is exaggerated. But next week shed more detail on HSBC and RBS involvement in Dubai Worlds lending. Stay tuned on the confirmations from banks material exposure (if any). We could expect the usual rebound in equities andd risk currencies on Monday, but pre-US jobs report cautiousness may halt any concerted optimism. Aussie bears watch out from next week's RBA decision, which is expected to produce a 25-bp hike BUT if equities fail to recover hal of the week's losses, then it might as well remain on hold, in which case could provide a sharp selloff in the currency.

Watch Ashraf's interview on Bloomberg TV earlier today discussing the YEN & USD consequences of Dubai debt fallout, the decline in oil and the potential risks on the Aussie and the Reserve Bank of Australia

http://bit.ly/6X004r

Replaying ASHRAF's YEN WARNING earlier this week on Cantos Charts Program AUDJPY, NZDJPY, CADJPY http://bit.ly/5vXss7

YEN's PERFECT STORM as the Japanese currency soars on a combination of unexpected decline in Japanese unemployment and falling equity futures following the Dubai fallout. USDJPY HIT 84.84, AUDJPY drops 200 pips in 55 mins to 76.55, EURJPY down 300 pips below 127 and GBPJPY tumbles by 500 pips to 139.59. We warned our readers incessantly about emerging yen strength (it happened in each of the last four Fridays) and the Dubai fallout will intensify these declines. USD strength also emerges but not to the same extent as JPY. FOLLOW US ON TWITTER FOR HIGHER FREQUENCY TRADING twitter/alaidi.com Expect brief yen weakness on Japanese comments and the open of the Nikkei. KEY SUPPORT AUDJPY at 76.30, EURJPY supported at 79.40

*** WISHING YOU HAPPY THANKSGIVING & EID MUBARAK ***

Ashraf's latest Video Analysis on the FTSEs 55-day moving average, falling oil, FX dynamics & the Dubai Debt Drop http://bit.ly/6OIyH .

Also CATCH ASHRAF TODAY on CNBC-Europe at 18:15 GMT

SHANGHAI COMPOSITEs bearish engulfing DAILY & WEEKLY chart http://chart.ly/sc6bca suggests that prolonged losses next week may not go unnoticed by the DJIA-30. The Dow regained the 10.400 level on Wednesday, but HAS YET TO CLOSE THE WEEK above the all important 10,335 level, which marks the 50% retracement of the decline from the Oct 07 high to the Mar 09 low. Will the losses in Shanghai push the to Dow close below 10,335 on Friday? Last week, Dow failed to close above 10,335 after succeeding in doing so on Mon-Tues-Wed. Weekly closes are the ones that matter.

MARKETS JITTERY AFTER DUBAI refuses to pay bond holders, requesting a debt stand still for 6 months. Shanghai fell 3.6%, FTSE-100 fell 99 pts before trading at the London Stock Exchange was frozen due to technical difficulties and the YEN REMAINS THE STRONGEST CURRENCY as we repetitively warned over the last 5 weeks. The Dubai story was minimized as the announcement took place AFTER local bourses shut for a 4-day holiday. Next week, US and Gulf markets return from their break, coinciding with ECB meeting and US jobs report. Talk of SNB intervention after EURCHF bounced from 1.5008 to 1.5090s, but no official confirmation by SNB. Similarly, Japanese officials warned against excessive JPY appreciation after USDJPY hit fresh 14-YEAR low of 86.30.

Catch Ashrafs latest Video Charts analysis on GOLD & SILVER

http://bit.ly/5TiYzx

And a recap of Tuesdays Video Charts analysis on Yen crosses

http://bit.ly/5vXss7 before they resumed their downfall

USD SELLING NO LONGER TAKING PLACE with the usual advances in oil prices. The inverse correlation between USD index and US crude oil weakened from -0.75 in October to -0.56 in November (1st-25th), while the correlation between EURUSD and crude fell from 0.78 in October to 0.49 in Nov. This could well be a case of oil bulls unable to keep up with USD weakness, especially as the lack of broad follow-up in global equities may not warrant real demand for oil prices to regain its $82.00 highs of the year. Meanwhile, OIL/EURUSD ratio is now below 50.75, further declining from 51.85 when the chart was first posted http://bit.ly/3eJEdf

STRONG US FIGURES (jobless claims fell to 466K from 500K, Pers spending 0.7% vs. exp +0.5% from -0.5%) but durable were weak. Considering oils deteriorating fundamentals despite USD weakness, oil would likely be among the first victims of unwinding carry trades from equities and profit-taking from metals. The 15:30 GMT release of EIA inventories is expected to show +1.5 mln barrels of crude oil. Yesterdays release of the API oil inventories showed +3.35 mln barrels. The post-hurricane replenishment in inventories could be critical in dragging down oil towards the $75.37 support. Follow us on twitter for short term trades. Twitter/alaidi.com

View Ashraf's Video Charts Analysis on how commodity currencies remain dragged down by the Japanese yen

http://bit.ly/5vXss7

FX markets show unusual occurrences as USD and JPY stand at opposing sides of the return spectrum. USD is the worst performing currency of the day (USD falling to fresh 11-month lows) and JPY is the second highest performer (just behind AUD). Yesterdays FOMC minutes describing USD decline as orderly was a green light to sell the currency, especially as risk appetite improved following a 2% rebound in China. UK Q3 GDP was revised to -0.3% from -0.4%, sending GBPUSD to $1.67, but resistance stands at $1.6755. Gold hits 1,180, while silver retreats to 18.55. OIL STILL LAGS BEHIND, below 77 despite USD weakness. CADJPY seen capped at 83.90, EURJPY eyes 131.20 and capped at 132.70.

FOMC minutes of the Nov 3-4 meeting show officials at odds over asset sales and some expressed their alertness over the negative side effects of low substantially interest rates. FOMC raised its 2009 and 2010 forecasts on GDP target to -0.4% to 0.1% from the previous -1.5% to -1.0% and to +1.0% to +3.5% from previous +2.1% to 3.3%. FX showing no major moves away from post-GDP ranges as indices remain in negative territory. EURGBP makes a fresh attempt towards regaining the 0.9070 resistance but must break the 38% retracement of the 0.9408-0.8835 decline. EURGBP follows no clear-cut path with risk-aversion, but the 0.88 support shows to be a more solid support. Tomorrow's UK Q3 GDP revision & US Oct personal spending will be key. HAVE YOU CHECKED THE OIL PRICE LATELY? Read our Nov 19 article.

MIND THE DOW-NIKKEI GAP. Watch Ashraf's video charts presentation on the unfolding relationship between the Dow-30 and the Nikkei-225

http://www.cantos.com/node/5020/company/CMC%20Markets/project/5443/term/Cantos%20Charts

US Q3 GDP was revised down to 2.8% from the initial 3.5% reading while the personal consumption component was revised to 2.9% from 3.2%. Risk currencies are faring better than prior to the figures, but with equity indices yet again failing to near those 50% retracement levels (we shall not stop emphasizing this point as long as the indices remain near them), we continue to have a clear case of lower highs in JPY crosses and the inability for EURUSD to regain $1.5050. The release of the FOMC minutes (19:00 GMT) from this months meeting could cause further drag on USD if they reveal a little or no consideration towards reducing liquidity among Committee members.

GBP DROPS AS KING SPEAKS seems to be the recurring headline each time the head of the Bank of England testifies. GBP drops below $1.65 as BoEs King testifies to Parliament, but this time sterling losses are part of overall risk aversion. Nikkei (-1%) once again failed to rise despite the +1.3% gains in Dow and S&P500. MARKETS ARE JITTERY AHEAD of US Q3 GDP, expected to be revised to as low as 2.7% from the initial estimate of 3.5%. GBPUSD testing the 61.8% retracement of the 1.6265-1.6874 rally. Interim support emerges at 1.6460, but a deeper decline towards 1.6380 is seen in case of a sharper negative revision in US GDP. USDCAD held up above the 1.0490 support, eyes 1.0690.

The 10% increase in Oct existing home sales was nearly 10 times greater than expected but currencies fail to show any significant shift towards risk plays, as EURUSD remains shy of $1.50, $GBPUSD under at 1.67 and USDCAD above 1.05. The REAL TEST will be tomorrows preliminary (second revision) of US Q3 GDP, expected to be revised to 2.8% from 3.5% (range 2.5%-3.4%). $1.5050 remains a psychological level, while $1.5055-60 is the more relevant resistance, a breach of which this time could coincide with $1,200 gold. A US GDP downward revision of no less than 3.0% would boost appetite at the expense of the USD, especially that Fed officials continue to reiterate prolonged liquidity for a considerable period of time as did Atlantas Fed Bullard. German Nov IFO could also induce moves towards $1.50 in the event of a figure of at least 92.5 in business climate index and 97 in the expectations index.

Ashrafs interview earlier on Bloomberg TV http://bit.ly/5Zq7lI / The limits of risk appetite are being pushed towards 092.90 in AUDJPY, 0.9315 in AUDUSD and 1.6680 in GBPUSD. Oil attempts to regain 80, but once again, it is the importance of having an intraweek high above 80.50 that would suggest a potential break of 5-week downtrend. Gold options strike prices held at $1,200, imposing resistance at 1,190-95.

Another Monday Rally in Equities at the Expense of USD & JPY

Just as the last 4 Fridays have proven positive for the USD and JPY at the expense of equities and oil, today (as in the last 4 Mondays) proves negative for USD and JPY to the benefit of global equities and oil prices. Japan was closed, Dow futures +90 pts as markets await US Nov existing home sales (exp +2.3% to 5.7 mln) will likely reflect the rise in pending home sales released earlier this month. USDCAD await the 13:30 GMT release of Canadas Sep retail sales (exp +0.6% from +0.8%, core exp -.4% from +0.5%). GBPUSD seen capped at $1.6675-80, while USDCAD risks extending losses to 1.0530, Stronger than exp CAD and US data could seen testing 1.0499s, which is just above the 61.8% retracement of the Nov 16-Nov 20 rally.

A Thanksgiving-shortened week in the US will not prevent it from being a busy calendar week (US Exist/New home sales, Pers. pending, Q3 revised GDP, German Q3 GDP, German IFO, Canadian retail sales). CAN Sep retail sales 13:30 GMT expected to slow to 0.6% from 0.8% and core sales (ex autos) exp at 0.4% from 0.5%. USDCAD faces interim TL resistance at 1.0750, followed by 1.0795 (from Aug 17 high) with support starting at 1.0595. CATCH ASHRAF OM BLOOMBERG TV Monday 10:15 GMT (5:15 EDT)