Intraday Market Thoughts Archives

BOJ raised new QE as expected; GfK consumer sentiment declined; Spanish unemployment rate rose; Swiss KOF economic barometer rose. Traders await US ٍ GDP and core PCE. For those triple charts on EURUSD/GOLD/APPLE, see link below.

USD trades lower across the board. European equities are only slightly changed and the relative strength winner is NZD followed by AUD.

The BOJ decided it will increase asset purchases by additional JPY 10 trillion ($124 bln) while reducing its fixed rate fund supplying program by JPY 5 trillion leaving the new net stimulus at JPY 5 trillion. JPY initially gained, only to spike lower a few minutes later. JPY buyers reversed the course once again and JPY currently trades near session highs against other majors. USDJPY is around 80.65.

GfK German consumer sentiment declined for May to 5.6 from April's 5.8 as high fuel prices continue to plague end users. The willingness to buy and the income expectation sub indices declined as well but the economic expectations index rose.

One day after Spain's two notch S&P downgrade the unemployment rate rose to the highest level in the Eurozone. In Q4 the unemployment rose to 24.44% compared to 22.85% in Q3. The 10 year yield trades higher on the day around 5.95%. EURUSD is likely to have a hard time advancing further but continues to be resilient and trades around 1.3230.

Swiss KOF economic barometer rose in April to 0.40 from previous 0.09. Later during the session, the SNB chairman Jordan reiterated that the SNB will maintain the 1.20 EURCHF floor, that the CHF is still overvalued at current levels and that the SNB is ready to take further measures anytime as needed.

The key event for the NY session is Q1 GDP that is due at 8:30 am ET which is seen lower at 2.5% from previous 3.0%. GDP price index is anticipated higher at 2.3% from 0.9% and core PCE at 2.1% from 1.3%.

The revision of UoM consumer sentiment is due at 9:55 am ET and a revision higher to 75.9 from 75.7 is expected.

XXXXXXXXXXXXXXX See Ashrafs TripleCharts XXXXXXXXXXXXXXX on EURUSD, Gold and Apple, posted in Wednesdays Pre-FOMC insights http://ashraflaidi.com/content/images/p_sub01/Apple%20EUR%20Gold%20Apr%2025.JPG_640W.gif

For the latest on those Intermarket Insights, please click here: http://ashraflaidi.com/products/sub01/access/?a=631

Euro fell after S&P lowered Spain's credit rating early in Asian trading. Earlier, sentiment improved on a Dutch budget deal and improved housing data despite another soft jobless claims report. The Bank of Japan decision looms large with the amount of asset purchases in the spotlight. The latest on Wednesday's Premium trades is below. EURUSD and gold longs hit all targets, while one of the CADJPY longs was stopped out.

S&P downgraded Spain at the most illiquid time of the day's just as Asian trading was set to open. Spain was lowered two levels to BBB+ from A with a negative outlook. S&P also lowered its growth projections and said debt will rise to 84% of GDP next year.

Spanish 10-year yields closed at 5.83% but that is certain to rise when the bond market re-opens at 0600 GMT. An extended move over 6% would be extremely damaging, especially if we break above 6.50%.

EUR/USD fell immediately on the announcement and has continued to decline, last at 1.3185. The market may not yet fully appreciate the potential negative consequences of the downgrade and the euro is likely to remain under pressure on Friday.

The euro made headway in US trading on renewed QE3 rumors and a 4.1% rise in March pending home sales compared to the 1.0% increase that was expected. The US dollar also came under some pressure after initial jobless claims were reported at 388K compared to 375K expected. It was the tenth consecutive jobless claims report that fell below estimates.

TONIGHT's BANK OF JAPAN DECISION is a major event risk for Asia-Pacific trading. Nikkei reported that 5 trillion yen in new easing is expected, without saying where it got the information. Earlier rumors suggested the BOJ would stand pat. There is no fixed time for the announcement but the past three decisions came at 0310 GMT, 0507 GMT and 0344 GMT, respectively. The 0507 GMT decision came with quantitative easing so a late announcement may be a clue about what is coming.

Our EURUSD premium long hit all targets and so did the gold long at 1657, while one of the CADJPY longs was stopped out. For the rest on those Wednesdays Premium Intermarket Insights & charts, click on here: http://ashraflaidi.com/products/sub01/access/?a=631 Non-subscribers click here: http://ashraflaidi.com/products/sub01/

AB

GBP edges up on UK Nationwide consumer confidence hitting 9-month highs, while mortgage applications fell and CBI realized sales declined. Eurozone confidence measures declined; German CPI still being collected. Market turns to jobless claims and pending home sales. Longs in USDCAD & shorts in AUDUSD are among Wednesdays Premium Intermarket Insights, both of which are in progress. These also include 3-in-1 charts of EURUSD/GOLD/APPLE.

The post-FOMC risk rally continued throughout Asia and at the beginning of the London session. Market sentiment then deteriorated and the USD along with the JPY started to gain. Large moves were seen especially on JPY crosses.

GBP bounced back despite yesterday's weak GDP data and continues to rise, partially underpinned by March Nationwide consumer confidence hitting a 9-month high last night at 53 from 44. BBA mortgage approvals declined to 31.9K in March from 32.8K in February which is the lowest level since 4/2011. CBI realized sales also disappointed as they fell to -6 in April from 0 in March. Despite these developments, GBPUSD continues to trade just below the 1.6200 resistance.

Euro came under pressure after Eurozone confidence weakened in April more than anticipated. Economic confidence declined to 92.8 from 94.5, industrial confidence fell to -9 from -7.1 and services confidence dropped to -2.4 from -0.3. Persistently high unemployment, weak growth and fiscal problems that induced severe austerity measures predict that the euro area is unlikely to experience a quick recovery. EURUSD fell from 1.3261 to 1.3200 but has since erased a portion of its losses.

German CPI is still being calculated and the final result which is expected to slow to 2.0% from 2.1% y/y should be published at 2:00 pm.

The data calendar for the NY session is limited today to jobless claims at 8:30 am ET that are seen at 374K from last week's 386K followed by March pending home sales at 10:00 am that are expected to rise 1.3% from previous -0.5%.

To get direct access to Wednesdays Premium Intermarket Insights & charts, click on here: http://ashraflaidi.com/products/sub01/access/?a=631 Non subscribers click here: http://ashraflaidi.com/products/sub01/

For those wo missed Ashraf's webinar tackling the FOMC statement, here is the link below. Ashraf walks you through the important elements of the FOMC statement, the implications on FX, gold, S&P500 and Dow-30, while adding a technical analysis for the key pairs EURUSD, USDCAD, CADJPY and AUDUSD.

CLICK HERE: https://www4.gotomeeting.com/register/221454071

The Fed left its statement virtually unchanged and did not shed any new light on bond purchases. The US dollar slid after Bernanke's press conference but CAD was the top daily performer while JPY lagged. The RBNZ held rates and continued to warn about the strong NZD. The FOMC's balance of projections revealed that 2 members went from expecting a tightening in 2016 to 2014, which was somewhat hawkish. But markets reacted little because the outlook for 2013 was unchanged. For the trading implications of today's FOMC statement and projections in today's latest Intermarket Insights below.

The Fed held rates and did not announce QE3, as expected. We were focused on whether the Fed would alter its pledge to keep rates exceptionally low through 2014 or if other members would join Lacker in dissenting to that pledge. Neither outcome materialized. Instead, the FOMC statement continued to talk about moderate growth and slow improvements in unemployment.

The market was also looking for guidance about the end of Operation Twist but there was no change in language on the topic and Bernanke seemed comfortable with the scheduled June end of the program in his press conference. He was careful to note, however, that the Fed remains prepared to do more if required.

The updated Fed forecasts suggested a slightly better trajectory for employment, slightly higher inflation this year and slightly better growth this year with small downgrades for 2013 and 2014.

The market was choppy throughout but not overly volatile. The most decisive reaction was US dollar selling after Bernanke left the QE option on the table. The Fed appears comfortable with growth prospects and the lower range of its 2.4-2.9% growth estimate for 2012 is above the 2.3% market median.

Data earlier in the day didn't appear to phase the Fed. US March durable goods orders fell 4.2% compared to the -1.7% expected. Excluding transportation and other volatile components also left a disappointing result.

The RBNZ left rates at 2.50%, as expected. In his statement, Governor Bollard said inflation is expected to stay near the middle of the bank's target range. He added that if the exchange rate remains strong without anything else changing, the Bank would need to reassess the outlook for monetary policy. Last month, he said sustained strength in the New Zealand dollar would reduce the need for future increases in the OCR. The kiwi strengthened slightly after the decision.

Today's Premium Intermarket Insights & charts, go click here: http://ashraflaidi.com/products/sub01/access/?a=631 Non subscribers click here: http://ashraflaidi.com/products/sub01/

AB

The 2 most important items drawing immediate market scrutiny in todays FOMC statement/projections are (in this order) 1. (12:30 EST, 17:30 BST) Final paragraph of the statement revealing any additional members joining Mr. Lacker in disagreeing with the notion that conditions warrant low Fed Fund rate through late 2014. 2. (14:00 EST, 19:00 BST) Figure 2 of the FOMC projections, showing the number of FOMC members projecting the year most appropriate for policy firming. Click here for direct access to todays Pre-FOMC Intermarket Insights & charts. http://ashraflaidi.com/products/sub01/access/?a=631 Non subscribers click here: http://ashraflaidi.com/products/sub01/

UK GDP contracts; Draghi comments; German auction; India outlook. Market turns to durable goods orders; Onto FOMC decision, rate projections, press conference and Ashrafs LIVE FOMC Webinar (see details on how to register)

USD is mixed in the ongoing session; weaker against EUR, AUD, NZD and JPY and stronger against the rest of the majors. European gain about 1.5%, with the weakest currency being GBP.

ECB president Mario Draghi said that LTROs have been timely and successful but would not precommit for another round. He noted that the inflation is likely to remain above 2% target in 2012 but should decline in early 2013. He also reiterated that the SMP is not eternal.

The UK is officially back in a recession as Q1 GDP contracted 0.2% from -0.3% q/q (0% from 0.5% y/y). The decline is mainly attributed to construction sector that dropped 3%, which is the biggest q/q decline since Q1 2009 and to industrial production activity that fell 0.4% while the service sector grew a mere 0.1%. GBP declined across the board and fell from 1.6169 to 1.6082.

UK CBI industrial orders were unchanged in April at -8 but manufacturing business optimism surged compared to the beginning of the year.

Germany sold EUR 2.405 bln worth of 30 year bond today vs. EUR 3 bln target. The yield declined to 2.41% from 2.62% but cover declined dramatically to 1.1 from 2.1.

In other news, S&P revised its outlook for India to negative as India suffers high fiscal deficit and dim economic growth prospects.

The US session starts at 8:30 am ET with durable goods orders that are expected lower in March at -1.5% from February's 2.4% (core orders seen at 0.6% from 1.8%).

Todays FOMC Statement, Projections & Bernanke Press Conference

Todays FOMC statement/decision is due at 12:30 pm ET (17:30 BST = London time). At 2:00 pm EST, the FOMC will release the ALL IMPORTANT ECONOMIC PROJECTIONS, in which it will publish the distribution of the members expecting the appropriate time for policy firming. 15 minutes later, Chairman Bernanke will give the anticipated press conference.

xxxxxxxxxxxx REGISTRATION LINK TO ASHRAFS FOMC WEBINAR http://seminars.cityindex.co.uk/cgi-bin/seminars.cgi?rm=show_event_details&se_id=940&interaction_id=2 xxxxxxxxxxxxxxxxx

The Operation Twist will complete by the end of June so should an extension or another type of QE be announced so easing can continue without interruption, it would have to be today or on June 19/20 meeting as the FOMC does not meet in May. A hawkish surprise could come in the form from the rate hike projections.

At 5:00 pm EST, the RBNZ will announce their rate decision. Market expects the cash rate to remain unchanged at 2.5%.

Sentiment improved in US trading ahead of Wednesday FOMC meeting. On the day, AUD lagged on the low CPI print while fellow commodity currency CAD led. Australian markets will be quiet in the upcoming session due to ANZAC day and Japanese small business confidence is the lone indicator of note. Monday's shorts in AUDUSD & USDCAD hit all targets, while the rest of the trades in EURUSD, EURJPY, Gold and US crude oil remain in progress. Ashraf will give a LIVE WEBINAR during Wednesday’s FOMC statement, walking you through the market reaction to this key event at 17:00-18:00 BST (London Time).

The US session was packed full of economic data and it continued to paint a soft, but steady, picture. Consumer confidence was fractionally lower than expected at 69.2 compared to the 69.9 expected. The current conditions index hit the highest since before the Lehman Brothers collapse but future expectations declined.

The April Richmond Fed climbed to 14 from 7. New homes sold at a 328K pace compared to 319K expected. In Canada, retail sales ex-autos rose 0.5% in Feb compared to +0.6% expected.

EUR/USD fell slightly below 1.3150 in early trading but rebounded to a session high of 1.3218 as persistent repatriation flows late in European trading continue to underpin the common currency. Cable came within two pips of the October high of 1.6165 but was unable to break through.

The overwhelming trade was to wait and watch what the FOMC will do tomorrow. No changes in policy are expected but the market is eager to understand what will take place when Operation Twist expires at the end of June. The Fed must also react to recent softness in jobs data and may even define QE3 expectations.

The Asia-Pacific is likely to remain subdued ahead of the FOMC decision with only April Japanese small business confidence at 0500 GMT. The prior reading was 48.7.

The direct link to Monday’s Premium Intermarket Trades and the charts on Dax vs EURUSD vs German PMIs is here http://ashraflaidi.com/products/sub01/access/?a=630 Non subscribers can click ere: http://ashraflaidi.com/products/sub01

AB

Australian CPI lower; BOJ to ease; UK public debt higher; Swiss trade surplus declined. Dutch, Spanish and Italian auctions without surprises. US session brings Canadian retail sales fell on the headline but rose on the core. US consumer confidence and new home sales. Monday's Premium Intermarket Insights include EURUSD, AUDUSD and Gold.

The Asian session saw the release of Australian Q1 CPI that eased significantly to 1.6% from 3.1% on annual basis. The Aussie sold off on the news to 1.0246 but has recovered a portion of its losses. A rate cut on May 1st seems probable so the selling pressure is likely to persist.

The London session opened on a positive note, sending the USD slightly lower across the board except the JPY. JPY crosses jumped higher on Reuters report that on Friday's policy meeting, the BOJ is likely to announce an increase of asset purchases by up to 10 trillion JPY ($123 bln). Over the past hour, the greenback started to gain traction and EURUSD declined back to 1.3150.

In the UK, public sector net borrowing rose in March and reached GBP 15.9 bln from February's result that was revised lower to GBP 9.9 bln. The debt/GDP hit a record high at 66%. Despite the expectations of a disappointing GDP result, GBP continues to be bid and oscillates around 1.6150 against the USD.

In other news, Swiss trade surplus in March reached CHF 1.69 bln from CHF 2.61 bln and Eurozone industrial orders declined 1.3% from previous -2.9%.

Dutch, Spanish and Italian debt auctions did not impact the market and passed without any surprises. Italy reached its target EUR 2.5 bln, Spain sold EUR 1.93 bln vs. 2 bln target and Dutch sold EUR 2 bln vs. 2.5 bln target.

Canadian retail sales fell 0.2% in Feb vs expected -0.1% from 0.5%, core sales +0.5 vs expected 0.5% from -0.5%.

US reports are due at 10:00 am ET. Consumer confidence is expected lower in April at 69.9 from 70.2 and new home sales are seen higher in March at 321K from 313K.

CAD could experience volatility at 3:30 pm ET when BoC Mark Carney testifies in Ottawa.

Click here to see Monday's PREMIUM INTERMARKET TRADES, with our charts on Dax vs EURUSD vs German PMIs. Latest trades on EURUSD, EURJPY, with shorts in USDCAD, AUSDUSD all done. Also trades in Gold and US crude. http://ashraflaidi.com/products/sub01/access/?a=630 Non subscribers can click ere: http://ashraflaidi.com/products/sub01

The Dutch Prime Minister and his entire cabinet resigned on Monday, sending a shudder through European markets. The yen was the best performer while AUD lagged ahead of first quarter inflation data. The calendar was light on Monday ahead of a busy week. The euro staggered into US trading, falling to 1.3220 on worries about China and political upheaval in Europe. The concerns were ratcheted higher as the Dutch PM resigned along with his entire cabinet. Monday's Premium Intermarket Insights include EURUSD, AUDUSD and Gold.

The round of risk aversion than followed sent Spanish 10-year yields back above 6% and the euro down to 1.3104. European stocks tumbled once again with the French CAC closing at the lowest level of 2012 and broad European indexes down 2-3.8%.

The euro worries ebbed once European markets closed and it eventually recovered above 1.3150. Cable, similarly, fell to 1.6078 before climbing back to 1.6125.

A slight change was noted in comments from Bundesbank President Weidmann. He said that if bond buys are needed, then the ECB should do them. Nowotny also said the ECB can act in a very forceful way if needed while saying bond buys are in sleep mode.

The key event of the upcoming session comes at 0130 GMT when Australia releases Q1 CPI. The consensus is for a slide to 2.2% y/y from 3.1% y/y in Q42011. The trimmed mean is expected at 2.4% y/y. In the most-recent RBA statement, policymakers warned that this will be an important data point. Recent indications may have put a slight downside bias into the market but any miss from the consensus will spark a reaction in AUD.

At 0200 GMT, the Conference Board's leading index for China will be released. Merkel also continues meetings with Chinese Premier Wen Jiabao in Germany.

Click here to see Monday's PREMIUM INTERMARKET TRADES, with our charts on Dax vs EURUSD vs German PMIs. Latest trades on EURUSD, EURJPY, USDCAD, AUSDUSD, Gold and US crude. http://ashraflaidi.com/products/sub01/access/?a=630 Non subscribers can click ere: http://ashraflaidi.com/products/sub01

AB

Fragmented Eurozone politics over austerity implementation is quickly becoming the disorder of the day, while the IMF renews its calls for budget restraint during a doubledip-bound Eurozone.Todays flash PMI from the Eurozone and Germany allow a better look under the hood of the Eurozone machine. We warned in Fridays note that despite the rise in Germanys IFO survey, we ought to give more scrutiny to the already falling PMI rather than the IFO and ZEW surveys. Click here to see todays latest PREMIUM INTERMARKET TRADES, with our charts on Dax vs EURUSD vs German PMIs http://ashraflaidi.com/products/sub01/access/?a=630 Non subscribers can click ere: http://ashraflaidi.com/products/sub01

Australian PPI declined; Chinese HSBC PMI still in contraction; Eurozone and German PMI disappoint; Spain re-enters a recession. Canadian wholesale sales are next. Todays Premium Intermarket Insights shall be added around the UK Close. Ashraf warned on Friday after the IFO that "If the tapering off in the IFO begins to move in line with the retreat in the PMI, then this could clash with the ECBs attempts to leave the LTRO behind and return to worrying about inflation". Indeed, today's Flash PMI add to the already falling fiures from the past 3 months.

USD stronger in the ongoing session against all majors except the JPY. European equities are losing nearly 2% and the relative strength winner is JPY while AUD and NZD are the weakest.

The Asian session started with two releases that both contributed to AUD weakness. Australian Q1 PPI printed lower than expected -0.3% from 0.3% q/q (1.4% from 2.9% y/y) and HSBC Chinese manufacturing PMI remained for sixth month in a row in contraction as it printed 49.1 from 48.3. AUD is likely to stay under pressure as this evening's CPI is also expected to decline, indicating that rate cut at a next RBA meeting is probable. AUDUSD fell to below 1.03 level.

The common currency came under pressure during the London session and fell to 1.3133 after all Eurozone April PMIs confirmed intensifying contraction. The composite index fell to 47.4 from 49.1, PMI manufacturing declined to 46 from 47.7 and PMI services dropped to 47.9 from previous 49.2.

Germany had solid Ifo and ZEW numbers last week but today's PMI was mixed. PMI services improved to 52.6 from 52.1 but PMI manufacturing dropped to 46.3 from 48.4 which is the lowest level since July 2009. The Bundesbank said that basic conditions remain good but acknowledged that the economy lacks momentum.

Germany sold only EUR 1.96 bln worth of 12 month bill, considerably below EUR 3 bln target. However, the average yield was slightly lower and cover improved.

In other news, Bank of Spain estimates that Spain entered into a recession as the economy contracted 0.4% in Q1 q/q (-0.5% y/y) and the Dutch cabinet will offer resignation to the Queen.

The US session is limited to Canadian wholesale sales that are expected to remain negative but rise in February to -0.1% from January's -1.0%. There are no US data reports due today.

Parik Urban

Join Ashraf for a live webinar on Wednesday, April 25th, covering the much anticipated Fed statement, due at 17:30 BST (12:30 ET).

Will the FOMC statement reveal more hawkish dissent to the prevailing view that US interest rates shall remain low into 2014?

Will the statement reveal more of the same, in which case, may see further run-up in equities, gold and a potential sell-off in the US dollar?

Ashraf will walk you through the market implications of the FOMC statement as well as the ensuing market reaction in FX, equity indices, gold and US crude oil. The webinar will start at 17:00 BST and ends at 18:00 BST

SIGN UP HERE: http://seminars.cityindex.co.uk/cgi-bin/seminars.cgi?rm=show_event_details&se_id=940&interaction_id=2

Francois Hollande, French Socialist challenger won 28.2% of the first 1st round elections ahead of centre right Sarkozy, who won 27%, both advancing into the 2nd round.The IMF announced it has raised more than $430 billion in new funds to fight the sovereign debt crisis. On Friday the Swiss franc was the top performer while the US dollar lagged. Weekly CFTC data showed a 17% rise in euro shorts. The latest on Thursday's Premium Insights are below.

Francois Hollande, French Socialist challenger won 28.2% of the first 1st round elections ahead of centre right Sarkozy, who won 27%, both advancing into the 2nd round. Whether the 20% votes for the far-right will abstain in the 2nd round, or vote for Sarkozy's centre right shall determine the balance of the 2nd round due next month. Markets are fearing that a large victory by Hollande's centre left may hamper the EU treaty and complicate the required austerity measures as required by the bond market.

Friday's US trading was extremely quiet as market participants watched headlines from the G20 spring meeting in Washington. The lone economic data point was Canadian CPI, which rose 1.9% y/y, just shy of the 2.0% expected.

Officials were tight lipped but sentiment improved on assurances the IMF would announce more than $400 billion. Those leaders may have been sandbagging as the amount announced was more than $430 billion with the BRIC countries expected to kick in around $70 billion more.

Draghi said the ECB has not discussed cutting interest rates of expanding other measures and Dow Jones reported that, behind the scenes, ECB officials were signalling there will be no more LTROs. The ECB’s Weidmann said the outlook is now more favourable with Nowotny saying inflation may overshoot the target for a period.

EUR/USD made some technical strides, climbing over the two-week high of 1.3213, set on April 12. It reached has high as 1.3225 as the US dollar was in broad decline.

On the week, the pound sterling was easily the best performer while JPY lagged. The S&P 500 closed the day 0.2% higher and was up 0.6% on the week.

The coming week should bring more volatility with the FOMC and Q1 GDP on tap. French elections will be held on Sunday but they are widely expected to end in a run-off with Sarkozy and Hollande.

CFTC Commitments of Traders

The overall US dollar long fell by 4% as the market piled back into euro shorts and commodity currency longs.

Net EUR shorts rise 17% to 118K versus 101K prior

Net JPY shorts falls to 58K versus 66K prior

Net GBP short to 13K versus 19K prior

Net CHF short to 14K versus 10K prior

Net AUD longs up to 48K versus 39K prior

Net CAD long to 38K versus 28K prior

Net NZD long to 12K versus 7K prior

Thursday’s Premium Intermarket Insights charts the periodicity of Eurozone bailouts and has trading ideas on EURJPY, AUDUSD, USDCAD, gold, and US crude oil. EURUSD shorts were stopped out. For direct access to these ideas, direct access is found here: http://ashraflaidi.com/products/sub01/access/?a=628 Non Subscribers, can click here to join: http://ashraflaidi.com/products/sub01

AB