Intraday Market Thoughts Archives

A round of upbeat US economic data wasn't enough to add a fresh wave of US dollar buying Tuesday. The Australian dollar was the best performer while CHF lagged as global stocks rebounded. The Asia-Pacific calendar is barren.  We issued a new set of Premium trades; 2 on EURUSD and 1 on GBPUSD in light of triple moving average confluence in the former and stabilizing 55-MA in the latter. These and more trades in the latest Premium Insights.

The Fed is beginning to prove critics wrong with its upbeat economic forecasts. The number of releases pointed to a strengthening economy.

• Core durable goods orders rose 1.1% compared to 0.5% expected
• June consumer confidence rose to a 4-year high of 81.4 versus 75.1 expected
• The Richmond Fed rose to +8 compared to the +2 consensus
• The Case-Shiller April US home price index rose 1.7% m/m versus 1.2% expected

Equity markets remain a key factor as volatility continues to increase, especially in Asia. The Shanghai Composite fell nearly 6% at one point on Tuesday only to completely rebound. In Japan, the Nikkei is trading 1.5% higher but swings of that magnitude are now common.

Early in Asian trading, USD/JPY has found some upside momentum tracking to 98.15. A break of Monday's high of 98.71 could spark a rush into longs.

Last week, Fed Chairman Bernanke surprised markets with his forthright assessment on a possible tapering of asset purchases. This week, the doves struck back, with Kocherlakota and Dudley, partly criticizing the Fed's forward guidance on intebers Kocherlakota and Dudley, partly criticizing the Fed's forward guidance on interest rates, partly taking into consideration market's volatility, with the implication that any tapering of purchases may not materialise if market declines extend into the rest of summer. We await more Dudley remarks on Thursday, scrutinizing whether  he shows any signs of hawkishness (providing time reference for tapering).  We issued a new set of Premium trades; 2 on EURUSD and 1 on GBPUSD in light of triple moving average confluence in the former and stabilizing 55-MA in the latter. These and more trades in the latest Premium Insights.

The US dollar struggled for direction Monday with bonds and stocks volatile. The Australian dollar was the best performer while its Canadian cousin lagged. The Asian calendar is light but all eyes will be on delicate stock markets in China and Japan. Premium trades currently in progress are 2 shorts in AUDUSD, 3 longs in USDCHF and 1 long in GBPUSD. The technical and fundamental arguments are laid out for each of the trades, with recent emphasis on the USDCHF trades in the latest Premium Insights. 

Bonds and stocks were hit by a wave of forced liquidation to start the week as hedge fund investors rush to the exits. The S&P 500 fell more than 30 points at the lows and US 10-year yields jumped 12 basis points to 2.66%.

The FX market was unsure of how to respond to the declines. The Australian dollar had tumbled as low 0.9148 in early European trading on the rout in Shanghai stocks but it slowly recovered and then took off to 0.9299.

The euro was caught in a brutal 40-pip chop in early US trading, bouncing between 1.3100 and 1.3060 a dozen times. Eventually, the dollar bears won a small victory as pairs climbed higher.

The market was looking for clarity from the Fed comments from Dudley and Kocherlakota were scrutinized. The NY Fed published comments Dudley made at a weekend meeting. The first headlines were comments saying monetary policy can't work with financial instability. The knee-jerk reaction was to sell the dollar and buy risk trades but a closer look at the speech showed he was talking about something like the 2008 crisis, not the type of instability in current markets.

Kocherlakota criticized the Fed's forward guidance on interest rates (but not tapering). He took the unusual step of releasing a statement, which is usually a sign of displeasure with markets but he then said the market reaction was 'not a cause for concern.'

The moves on the day left market participants unsure of what to do next. The slate of Fed speakers continues throughout the week.

The calendar is light in Asia with Japan's May corporate service price index at 1950 GMT. It's expected to be flat year-over-year. The focus will be on Chinese stocks after a 5.3% fall on Monday. Indications are for a moderate 2-3% bounce.

The US dollar struggled for direction Monday with bonds and stocks volatile. The Australian dollar was the best performer while its Canadian cousin lagged. The Asian calendar is light but all eyes will be on delicate stock markets in China and Japan. Premium trades currently in progress are 2 shorts in AUDUSD, 3 longs in USDCHF and 1 long in GBPUSD. The technical and fundamental arguments are laid out for each of the trades, with recent emphasis on the USDCHF trades in the latest Premium Insights. 

Bonds and stocks were hit by a wave of forced liquidation to start the week as hedge fund investors rush to the exits. The S&P 500 fell more than 30 points at the lows and US 10-year yields jumped 12 basis points to 2.66%.

The FX market was unsure of how to respond to the declines. The Australian dollar had tumbled as low 0.9148 in early European trading on the rout in Shanghai stocks but it slowly recovered and then took off to 0.9299.

The euro was caught in a brutal 40-pip chop in early US trading, bouncing between 1.3100 and 1.3060 a dozen times. Eventually, the dollar bears won a small victory as pairs climbed higher.

The market was looking for clarity from the Fed comments from Dudley and Kocherlakota were scrutinized. The NY Fed published comments Dudley made at a weekend meeting. The first headlines were comments saying monetary policy can't work with financial instability. The knee-jerk reaction was to sell the dollar and buy risk trades but a closer look at the speech showed he was talking about something like the 2008 crisis, not the type of instability in current markets.

Kocherlakota criticized the Fed's forward guidance on interest rates (but not tapering). He took the unusual step of releasing a statement, which is usually a sign of displeasure with markets but he then said the market reaction was 'not a cause for concern.'

The moves on the day left market participants unsure of what to do next. The slate of Fed speakers continues throughout the week.

The calendar is light in Asia with Japan's May corporate service price index at 1950 GMT. It's expected to be flat year-over-year. The focus will be on Chinese stocks after a 5.3% fall on Monday. Indications are for a moderate 2-3% bounce.

Following gold's two failed rallies of 12% and 6% in April and May respectively, the next failure point is increasingly suggested to be near 1345-50. This may intensify silver damage, particularly as the Gold/Silver ratio has broken well above its usual +73% rising cycles (see past 20 years in chart) to chart a 99% rally from its 2011 lows. More charts & analysis here

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The Canadian dollar slumped to a 16-month low on Friday. The US dollar was the best performer last week while the yen lagged. Weekly positioning data showed the market was wrong-footed headed into the FOMC. The remaining 2 EURUSD shorts hit all targets, while 1 of 2 GBPUSD longs remain in progress and the other stopped out. All Aussie and CHF shorts remain in progress.

The Canadian dollar joined the commodity currency selloff on Friday after inflation and retail sales data. USD/CAD broke through the 2013 and 2012 highs in a following the numbers, paving the way to the 2011 high of 1.0658, which is two cents above Friday's close.

Comments from new BOC Governor Poloz have revealed little but the impression is that he is relatively upbeat about the Canadian and US economies. That could eventually translate into rate hike expectations but in the near term US dollar strength is the main story.

The theme since the FOMC has been to sell bonds and buy US dollars. The calendar is relatively light around the globe on Monday (although the German IFO survey is an exception). We will be interested to see how the market reacts after a weekend to digest the change in Fed rhetoric.

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

EUR +20K vs -7K prior JPY -61K vs -73K prior GBP -20K vs -54K prior AUD -64K vs -63K prior CAD -26K vs -36K prior NZD +2K vs +2K prior CHF +5K vs -21K prior US Dollar Index longs at 14K vs 43K prior

The speculative market gave up on euro and pound shorts just as they were about to pay off. The market leaned away from US dollar longs ahead of the FOMC but likely piled in afterwards. The trimming of JPY positions away from extremes is a reason to think the USD/JPY rally could continue higher.