Intraday Market Thoughts Archives

Here is the link to yesterday's Ashraf webinar with FXStreet, focusing on USDCHF, EURCHF and AUDUSD trades, as well as USDJPY vs yields.  Recording link

US economic data continued to solidify with an upbeat initial jobless claims report but the real test will come next week. The New Zealand dollar was the top performer on Thursday while the euro lagged. A major data slate is due from Japan including the jobs report, CPI and retail sales.  

Jobless claims fell to the lowest since November at 311K compared to 325K. The final revisions on Q4 GDP missed expectations at 2.6% compared to 2.7% but consumer spending and trade were upbeat and that's a positive sign for 2014.

The euro slumped to a three-week low at 1.3728 as the market weighs the chance of a surprise ECB move at the upcoming meeting. The Fed's Bullard also called for a rate hike in Q1 2014, giving the US dollar a boost. Another factor was EUR/GBP selling following the strong UK retail sales report.

Cable has stormed back with four days of gains following five consecutive days of losses. With the Fed beginning to talk about rate hikes and the UK economy showing far healthier signs, including quickly rising house prices, the focus could easily shift to the BOE.

The stars all week have been the commodity currencies. The loonie rose for the fifth day in a row, the Aussie hit a four-month high and the kiwi took out last year's best level and rose to the highest since 2011.

There wasn't a particular driving force in the market but the London fix was particularly active for the fourth day in a row. That could be a sign of elevated flows, possibly due to Japanese fiscal year end.

The focus will remain on Japan in the hours ahead with all the top-tier data on the schedule. At 2330 GMT, Japan releases employment and inflation data. The main headline to watch is Feb national CPI, which is expected at 1.5% y/y compared to 1.4% in January. At 2350 GMT, the retail sales report for Feb is due and expected to rise a healthy 3.5% m/m as spending is pushed forward ahead of the April sales tax hike. 

Tune in for Ashraf's webinar on FXStreet, starting at 11:00 ET, 17:00 GMT/London, where he will discuss his latest trades and his medium term view on USD pairs. Click here for Registration Link

It's time to focus on Sweden's SEK, which is the only currency alongside CAD to have fallen against USD so far this year out of the top 11-traded currencies. AUDSEK longs will likely become the next popular trade. Full Charts & Analysis

A weak durable goods orders report emphasizes the shakiness of the US recovery. The yen rallied late in the day but the loonie was the top performer while the euro lagged. The Fed's Bullard is scheduled to speak in Asia-Pacific hours.

The main headline of the durable goods orders report was upbeat but the details told a far different story. Overall orders rose 2.2%, easily beating the 0.8% consensus but the gains were entirely driven by volatile aircraft, defense and auto orders. Core orders, which excludes those and other elements, fell 1.3% compared to a 0.5% rise expected. Even worse, the prior month was revised to +0.8% from +1.7%.

The good news is that that report was for February and the base case for dollar and stock market bulls is a pickup starting in March/April as the weather improves. Next week's ISM and jobs reports will be the first good look at this month's data.

So far signs are moderately positive. Consumer confidence rose to a 4-year high on Tuesday and today's March Markit services PMI rose to 55.5 from 53.3 in February.

The Australian dollar remains a standout performer after the close above the 200-day moving average and comments from Stevens. His efforts to talk down the Aussie were half-hearted and his talk about better growth and higher inflation remove the threat of rate cuts.

Another currency benefitting from a squeeze is the loonie. Speculators are heavily long USD/CAD but the pair has fallen for four consecutive days. Last week's better CPI and retail sales numbers reverberate; the approval of some LNG projects helped on Wednesday as well but with the BOC still leaning toward rate cuts, most traders are waiting for the right dip to buy.

The risks are low in the hours ahead but one event to watch is the 0020 GMT speech from the Fed's Bullard in Hong Kong. He's an outspoken central banker and could shed light on when the Fed hopes to hike rates.

The Australian dollar closed above the 200-day moving average for the first time in 11 months. It's kiwi cousin edged it out as the top performer while the Swiss franc lagged. Up later, two key members of the RBA are delivering speeches. 

AUD/USD rose to the highest since November in the fourth day of gains. The drivers weren't domestic but better risk sentiment underpinned the rally. The 200-dma has been an important marker in Aussie trading in the past so a squeeze on the crowded short trade is possible.

The euro was also in focus as the market attempted to decrypt commentary from ECB members. Makuch talked about taking decisive steps due to a higher risk of deflation but Visco sees no deflation risk just now. The euro tested 1.3750 but the level held and when Draghi offered nothing new, save for some weak anti-euro jawboning, the euro jumped nearly 100 pips from the lows.

The US economy was also in focus. The Richmond Fed was soft at -7 compared to +4 expected but consumer confidence rose to the highest since 2008 to grab the most headlines. The 82.3 reading was well-above the 78.5 expected and suggests a strong Spring recovery is on track. What's worrisome is that neither the dollar nor stocks were particularly impressed by the data point.

In the near-term, the risks for the Australian dollar are high. At 2230 GMT, RBA Depute Lowe delivers a speech and then 5 hours later its Stevens' turn. Certainly, the RBA leader won't be pleased with AUD strength and will use some words to talk it down but unless he talks about downside risks to inflation, it's likely to only be a passing event.

What will the usually interventionist RBA governor say when he wakes up on Wednesday and find the Aussie at 3-month highs? AUDUSD breaks above its 200-dma for the first time since April 2013, on a combination of improved global appetite and post-Yellen market re-assessment of USD positions sending the US currency falling across the board. Will RBA officials remind markets of their opposition to fresh AUD strength? Or will they temper their rhetoric as fundamentals improve gradually?

There has been a high profile bearish technical development in the price of gold, namely, a “death cross” formation, as indicated by a decline in the 100-week moving average below the 200-week moving average—for the first time since 2002. Care must be paid when drawing conclusions from “death” and “golden crosses” due to the time lag involved.  Complete charts & analysis here

The Markit US PMI was slightly soft and it's a chance to highlight the market expectations about a blooming, booming Spring in the US. The Australian dollar led the way while USD lagged. Scheduled news in the Asia-Pacific region is light.  

Trading was dominated by unease about the US economy and sabre-rattling over Ukraine. There was more talk about Russian troop buildups on the border. G7 leaders met and promised more action but only if Eastern Ukraine is invaded. Unless that happens, the story will slowly fall off the front pages.

The economic story was the Markit PMI at 55.5 versus 56.5 expected. It's one of the first looks at March data and the US dollar selling afterwards highlights the two main ideas on the path of growth:

1) The economy will surge in Spring as pent up Winter demand is released 2) Pent-up demand will appear more slowly over the course of the year.

The differences for markets may be far-reaching. Fast-money traders are heavily invested in #1 but #2 is a real possibility (and there's also the chance that no fresh demand materializes at all).

data point like the Markit PMI isn't powerful enough to shakeout the trade and manufacturing was only marginally affected by weather but the market still took notice. In the weeks ahead, look for outsized reactions for US  economic data misses, especially on the downside.

One of the benefactors Monday was EUR/USD as it shot up above 1.38 and that's a cross that's set up technically to benefit from USD weakness. Another might be AUD/USD; the pair broke the 200-day moving average briefly. A close higher would be the first since last April and bears close watching in the days ahead.

The fast, non-fundamental moves in USD on Monday also underscore the lack of conviction in the market. Be nimble. 

The Australian dollar was the top performer last week as it rode a wave of risk appetite and quickly shook of hawkish comments from the Fed. The challenge to start the week is Chinese data with the HSBC manufacturing PMI out shortly after the market open.

The flash China PMI is due at 0145 GMT and is expected at 48.7 compared to the 48.5 final reading in February. Some weakness in February Chinese data was blamed on the Lunar New Year holidays so don't rule out a snap back above 50.

Commitments of Traders

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

• EUR +53 vs +36K prior
• JPY -62K vs -99K prior
• GBP +26K vs +22K prior
• AUD -24K vs -40K prior
• CAD -70K vs -52K prior
• CHF +15K vs +9K prior

Yen shorts threw in the towel just before Janet & Co threw them a lifeline. Still, comments from the BOJ don't sound like a central bank ready with more stimulus and episodes or risk appetite haven't boosted USD/JPY like in the past.

The other move was to pile into Canadian dollar shorts after Poloz warned about a soft Q1, soft inflation and didn't rule out rate cuts. Inflation on Friday wasn't so soft and a few traders were caught off-guard but USD/CAD recovered most of the initial losses by the end of the day.