Intraday Market Thoughts Archives

The overwhelming influence of politics in markets continued Wednesday as the US dollar recovered after the transcripts of Trump's call with Ukraine's President were released. Stocks opened higher on a trade deal between US and Japan, but fell anew on fresh questions regarding the US-Huwawei case and the whistleblower's report (more below). The US dollar was the top performer while the pound lagged. A 4th Premium trade was released ahead of the NY close, supported by 4 charts & detailed notes. The next 2 trading days (Friday and Monday) will prove highly volatile and noisy as the end of month and quarter draw to a close. The chart below is among the 4 charts of today's Premium trade. A 6% decline in Micron on disappointing earnings could sway the technology sector on Friday.

Trump is being investigated on whether he asked Ukraine's President to contain Democratic rival Joe Biden as a favour, but there wasn't a clear connection tying it to military aid. With that, the market concluded it wasn't a smoking gun that could force the President out of office and/or force him into a situation where he might stir up geopolitical turmoil elsewhere as a distraction. The whistleblower's account spelled out that Trump attempted to pressure the Ukraine into indirectly influencing the 2020 elections. But the formal report on whether the Whistleblower account had enough to get Trump impeached by both chambers of Congress remains far from done.

Wednesday's market reaction was to unwind Tuesday's trade: The dollar rallied, stocks climbed, bonds slumped and gold sank nearly $30. On Thursday, stocks ended in the red again, but well off their lows.

Watching Huwawei again

Stocks earlier had made a fresh move lower on reports the US is unlikely to extend a temporary waiver to supply Huwawei as well as reassessing intelligence sharing with allies using Huwawei. Although USDJPY pushed back up to as high as 107.96, inflection points can emerge anywhere on any new twist in the US-China-Huwawei continuum.

Wednesday comments from the Fed's Evans were a further – albeit smaller – reason for dollar strength. He indicated reluctance to cut rates further this year unless the outlook deteriorates. He said was open to the idea but he's a consistent dove and his lack of enthusiasm for lowering rates raises the risk that the Fed could be done for the year.

Finally, US housing continues to show signs of surprising strength as August new home sales rose to a 713K pace from 666K prior. Lower rates are clearly having a simulative effect.

In such an uncertain, headline-driven market, technicals become increasingly important as a way to manage risk. EURUSD 1.09 is key.

Euro Retests 1.0900

EUR/USD resumes its selloff, one day after notable hawk ECB Executive Board member Sabine Lautenschlaeger announced she was quitting two years ahead of schedule. She was an ardent opponent against further ECB easing. Her departure is the strongest message yet that caution has been thrown to the wind at the central bank. The euro is in a well-defined downtrend, feel below 1.0920, threatening the double bottom into the end of the week/month. Next key level stands at 1.0770.

يقدم لكم خبير الأسواق العالمية أشرف العايدي تقريره عن أداء القطاعات في الدورة الاقتصادية وكيفية استعمال هذه القطاعات للحصول على أفضل أداء خلال أي جزء من الدورة. تابعوا الفيديو الكامل

Never mind the title -- It was just a silly wordplay. US House Democrats will start impeachment proceedings against the President in a move that's unlikely to be successful but could deepen political wounds. NZD is now paring earlier gains, which were initially triggered by the RBNZ statement coming less dovish than expected. A heavy dose of Fedspeak Wednesday should be closely watched (more below). GBP gives up all of the post-Supreme Court decision gains as Boris Johnson returns to Parliament, vowing to keep Brexit on time. The latest stocks selloff means that all of our 3 Premium Insights trades are well in the green, yielding more than 500 pts in the green. The rationale and implications behind and of those trades is laid out in the members video below.

Trump tried to head off impeachment proceedings by authorizing the release of the transcript of a call with Ukraine's President but it wasn't enough. House leader Pelosi announced the formal inquiry late Tuesday after markets earlier moved on rumors it was coming.

The House of Representatives needs a two-thirds majority to impeach and that's a longshot-at-best with Democrats holding a narrow majority. However Pelosi hinted at a wide-ranging inquiry will delve deeper into Trump's finances and affairs.

The market reaction was risk aversion mixed with broad US dollar selling. Even the Canadian dollar managed to gain versus USD despite a 3% drop in oil. One of the side effects of impeachment proceedings is that they will delay ratification of the new NAFTA trade deal.

While the impeachment news pushed risk trades over the edge, they were wounded earlier in the day by three other news items. 1) The Sept Richmond Fed fell to -9 vs +1 expected. 2) The Conference Board consumer confidence index slumped to 125.1 from 133.0, including a sharp drop in the 'expectations' component. 3) Trump took a hard line on China at the UN.

Central bank focus is currently pushed to the sidelines as markets focus on politics, but it will be economic considerations that ultimately win out.

Looking at Wednesday's US calendar, August new home sales are due but it's the Fed speeches that could matter -- from George, Brainard and Evans. The latter two are the ones to watch. They're doves but we will be watching closely for signs on whether they're supporting a cut in October or waiting until December.

Global equity indices are back in the red with silver sharply higher on conflicting signals from the US-China trade front. The Euro is on the backfoot after German PMI manufacturing sustained its shapest decline in a decade. Draghi's speech at the European Parliament starts at 9:00 am Eastern (2 pm London). Today's appearancees from Fed members include NY Fed's Williams, San Francisco Fed's Daly and St. Louis Fed's Bullard (who voted for a 50-bp rate cut last week). It is official, the Fed's liquidity injections are here to stay for another 3 weeks. GBP awaits Tuesday's UK Supreme Court ruling on the proroguing of Parliament. Euro shorts stormed back in the latest CFTC data. All 3 existing trades from the Premium Insights are in the green.

http://ashraflaidi.com/forex-poll/will-fed-do-qe4

Reports and denials about Chinese officials leave trade talks early highlighted the stakes in the precarious negotiations. Markets were roiled late on Friday on a report that Chinese officials had cancelled a planned trip to the US states or Montana and Nebraska. Risk trades dropped on a sign that talks had come undone; something that was underscored by Trump comments suggesting he didn't want a partial deal and was prepared to wait until after the election to get a full deal.

On the weekend, however, both sides released statements saying that mid-level talks had gone well and that top deputies will meet in October. A NYT report said the trips were cancelled by the Chinese side to avoid the appearance of political meddling in an area that has been hard hit by halted farm purchases. That led to early buying in yen crosses. It also underscored how sensitive markets will continue to be to any sign of success or failure in talks.

Looking ahead, GBP traders are eagerly awaiting Tuesday's UK Supreme Court ruling on the proroguing of parliament. In the US, the September prelim US PMIs from Markit are due at 1345 GMT. The manufacturing reading is expected at 50.4 and services at 51.5; both improvements from August. Fedspeak includes Williams, Daly and Bullard. Silver outperforms all, while gold pulls back from Sunday night's high as the Gold/Silver ratio eases back following a sharp rebound.

Fed's Injections Extended to Oct 10

After four bouts of injections last week, the Federal Reserve has decided to hold overnight repo operations for up to $75b DAILY through Oct 10th, as well as three 14-day term repo operations on Sept. 24, Sept. 26 and Sept. 27.

CFTC Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -69K vs -50K prior GBP -86K vs -92K prior JPY +24K vs +33K prior CHF -5K vs -7K prior CAD +20K vs +12K prior AUD -59K vs -61K prior NZD -36K vs -30K prior

Euro shorts had faded to 39K at the start of the month but they have been rebuilding in the past few weeks and are at the most extreme since mid-June. The divergence in CAD positioning versus the antipodeans continues to diverge.