Intraday Market Thoughts Archives

Out of the last 17 quarters (including Q3), gold had only 3 falling quarters, Risk rally pushes further but a part of gains was lost; Spanish bank stress test due; EZ CPI higher; German retail sales improved. Market turns to core PCE, personal income and spending, Chicago PMI, UoM consumer confidence and Canadian GDP. Mondays Aussie & silver calls hit all targets, while gold was stopped out. See the final paragraph for more detail.

The risk rally that started yesterday after Spain released its budget figures continued throughout the Asian and at the beginning of the London session. The common currency was able to push to 1.2955 but it gave up a part of its gains and now trades around 1.2930. The buck started to recover against other majors as well.

The door to the ECB bond buying is more open now and market participants assume that there would not be further austerity measures required. However, Spanish bank stress test results are due later today so the sentiment could easily turn again. Furthermore, MNI reports that Moody's could change Spanish ratings as they said in June that they would do so within three months. Rating is now one notch above junk and on review for a downgrade.

Eurozone CPI was significantly above expectations as it rose to 2.7% from 2.6% y/y while analysts predicted easing to 2.4%. Higher price level is attributed to rising energy prices, higher prices of services and also increases due to higher sales tax that were introduced as part of measures designed to cut budget deficits. CPI further above the ECB 2% target makes a rate cut less likely.

Other data showed that German retail sales rose 0.3% in August after 1.0% decline seen in July which translates to -0.8% from -1.6% improvement on annual basis. Swiss KOF economic barometer index rose in September to 1.67 from 1.59.

The US session starts at 8:30 am ET with core PCE that is expected to rise 0.1% in August from previous unchanged figure but remain steady at 1.6% on annual basis. Personal income is seen lower at 0.2% yet personal spending is anticipated to rise 0.5%. Canadian GDP is expected to slow in July to 0.1% from 0.2% m/m and to 2.0% from 2.4% y/y.

Chicago PMI is due at 9:45 am and it is seen marginally lower at 52.9 from previous 53.0. Final result of UoM consumer confidence comes 10 minutes later and revision lower to 79.0 from 79.2 is expected.

1 AUDUSD and 1 silver hit all targets while both EURUSD, 1 GBPUSD, 1 silver,1 EURJPY, 1 CADJPY are in progress. 1 gold and 1 EURJPY were stopped out. Direct access to trades, charts and rationale can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

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The euro rebounded from the 200-day moving average after Spain released its austerity budget. The kiwi was the top performer while the US dollar lagged. Japanese employment, CPI and industrial production close out Asian trading for the week. Monday's Premium Insights were based on further risk on trades and are nearing their final targets, from euro to Aussie, cable, silver and gold. See below.

Spain released its budget in the highlight of a non-stop news day. The euro slipped to a session low of 1.2829 when the headlines from the budget were first released but it stormed back when Finance Minister de Guindos said the budget exceeded EU recommendations.

The market took this as a sign that Spain is preparing to ask for ESM aid and the euro stormed a full cent from its lows. We are skeptical because, in almost the same breath, Guindos said its unclear what the bailout requirements are.

US economic data was mixed but tilted to the downside. The final revision on Q2 GDP was terrible, knocking it down to 1.3% from 1.7% on multiple downgrades. The shocker was durable goods orders which fell 13.2% compared to -5.0% expected in the largest fall since Jan 2009. Volatile aircraft orders were a major drag but underlying signs were also soft. The upbeat news was from initial jobless claims, which improved to 359K from 378K.

The S&P 500 surged 1% after 5 days of losses on optimism about Spain spread. Risk appetite may be short-lived as signs of slowing global growth mount. Brazil slashed its 2012 growth estimate to 1.6% from 2.5%.

The market will get a sense of Japanese growth in the hours ahead. At 2330 GMT, Japan releases August employment and CPI. That is followed at 2350 GMT with retail sales and industrial production. At 0500 GMT, Japanese housing starts wrap up the data slate.

Monday evening's Premium Insights test the efficacy of integrating medium term oscillators into short-term momentum changes. These are show in the 3 charts of EURUSD (Monthly) and GBPUSD (Weekly & Monthly). Direct access to trades, charts and rationale can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB

Gold hits a new record in euro terms at 1375/oz as Spain further delays an eventual request for an official bailout and the euro consolidates against most currencies awaiting this inevitability. Secession + Recession = Fresh Metals Expansion. There need not be actual secession of Catalonia from Madrid, but... http://www.cityindex.co.uk/market-analysis/market-news/111502012/gold-hits-new-record-vs-euro/

Chinese stimulus; record UK current account deficit; UK GDP revised higher; German unemployment rose; Italian auction. Market awaits durable goods orders, jobless claims, GDP revision and pending home sales. EURUSD, USDJPY, AUDUSD, GBPUSD, gold and silver trades from Monday's Premium Insights are in progress. See below for details.

The USD is mixed in the ongoing session. It is weaker against NZD and GBP, stronger against EUR and CHF and little changed against the rest of the majors. European equities are gaining about 0.5% and the relative strength winner is NZD while EUR lags.

Trading has been influenced by rumors of 8T CNY investment/infrastructure stimulus that could be announced after China national day on October 1st.

UK current account deficit widened during Q2 to GBP 20.8 bln from previous deficit 15.4 bln, which is the highest level on record. Today's figures along with Q1 revision to 15.4 bln from initial 11.2 bln point to serious deterioration. GDP was revised higher to -0.4% from initial -0.5% q/q but the annual rate was unrevised at -0.5%. GBPUSD weakened to 1.6155 but quickly rebounded to 1.6217. It currently trades around the 1.6200 figure.

German unemployment rose by 9K in September which is slightly less than anticipated 10K. August result was revised from 9K to 11K. The unemployment rate remained steady at 6.8%. EURUSD trades around 1.2855.

Italy sold EUR 2.72 bln worth of 5 year BTP vs. EUR 2-3 bln target. The average yield declined to 4.09% from 4.73% but cover fell to 1.38 from 1.46. The 10 year yield is slightly higher around 5.25% while the Spanish equivalent trades around 6.05%.

The US session begins at 8:30 am ET with durable goods orders that are expected to drop 4.7% in August after rising 4.1% in July (core orders seen rising 0.2% from -0.6%). Jobless claims are anticipated lower at 378K from 382K and Q2 GDP is seen unrevised at 1.7% y/y.

Pending home sales that are due at 10:00 am are seen falling 0.4% in August after 2.4% growth in July.

Monday evening's Premium Insights test the efficacy of integrating medium term oscillators into short-term momentum changes. These are show in the 3 charts of EURUSD (Monthly) and GBPUSD (Weekly & Monthly). Direct access to trades, charts and rationale can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

The euro fell below 1.2850 as worries about Spain continue to mount. Overall market moves on the day were modest but NZD was the top performer while CAD lagged, in an unusual divergence of commodity currencies. The Asia-Pacific calendar is light and could be thin with Japan winding down the fiscal half year. EURUSD, USDJPY, AUDUSD, GBPUSD, gold and silver trades from Monday's Premium Insights are in progress. See below for details

Risk assets struggled on new signs of discord in Europe after Germany and other countries said the ESM shouldnt be used to bailout Spanish banks. The comments suggest that the June crisis agreement may be unraveled.

The main risk is the Spanish budget on Thursday, which will include fresh austerity measures. Protests seem to be growing in strength and regional unrest is evident.

US new home sales fell to 373K compared to 380K expected, sending risk assets to the lows of the day. Later in US trading, the euro bounced to 1.2370 but the overall tone remained negative.

Spanish stocks fell more than 3% and the S&P 500 closed 0.6% lower. The slide in oil continued despite unexpected tightness in weekly US supply data. WTI crude fell below $89 to the lowest since early August.

At 2100 GMT, minor data on New Zealand business confidence will be released. The action heats up at 0355 GMT with the German employment report but the highlight of the day comes later when Spain tables its 2013 budget.

Monday evening's Premium Insights test the efficacy of integrating medium term oscillators into short-term momentum changes. These are show in the 3 charts of EURUSD (Monthly) and GBPUSD (Weekly & Monthly). Direct access to trades, charts and rationale can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB

Spanish GDP to continue falling; Greek 24 hour strike; UK CBI sales rose; Italian auction. German CPI; US new home sales and oil inventories are next. EURUSD, USDJPY, AUDUSD, GBPUSD, gold and silver trades from Monday's Premium Insights are in progress. See below for details

USD consolidated Asian session gains in the ongoing session. European equities are losing over 1.5% and the relative strength winner is GBP while EUR lags.

Spanish 10 year yield continues to push higher, currently around 6.01%. The rise is attributed to Bank of Spain monthly bulletin that suggest that GDP continued to fall in Q3 at significant pace. Meanwhile in Greece a 24 hour national strike to protest against reforms and budget cuts in under way today. The government is expected to announce these in the days ahead. EURUSD trades heavy near session lows around 1.2865.

UK CBI realized sales rose in September to 6 from previous -3 as retailers reported rise in sales volume along with expectation that growth will strengthen next month. EURGBP is under pressure, trading around 0.7945.

German CPI is still being collected and final result should be announced at 8:00 am ET. Most states that already published results saw annual inflation rate easing to 2% or even below. General consensus is for CPI to slow to 2.0% from 2.1%.

Italy reached a full take up as it sold 6 month BOT totaling EUR 9 bln. The average yield declined to 1.503% from 1.585% but cover fell to 1.39 from 1.69. Italian 10 year yield rose to 5.18%.

The upcoming session will bring new home sales due at 10:00 am ET that are anticipated to rise in August to 380K from previous 372K. Considering how much oil prices have fallen over the past week (WTI currently around 90.70) traders will take clues for the next move from crude oil inventories that are due at 10:30 am. The inventory is expected to shrink to 1.7M barrels from last week's 8.5M barrels.

Monday evening's Premium Insights test the efficacy of integrating medium term oscillators into short-term momentum changes. These are show in the 3 charts of EURUSD (Monthly) and GBPUSD (Weekly & Monthly). Direct access to trades, charts and rationale can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB

A laundry list of problems in Spain finally tipped sentiment on Tuesday, sending US stocks to their worst day in two months. The yen was the top performer while the Australian dollar lagged. The Asia-Pacific session is light on data.Monday's Premium Insights are mostly in progress and nearing their targets. 3 charts were also added to EURUSD and GBPUSD.

US economic data was roundly better than expected but it wasnt enough to calm fears about Spain and the periphery as massive protests erupted in Madrid.

US consumer confidence improved nearly 10 points to 70.3, easily beating the 63.1 expected. The Richmond Fed also rebounded to the highest since April at +4, compared to -5 expected.

Risk trades peaked shortly after the releases with the euro at 1.2970 and AUD/USD at 1.0460. The lack of follow-thru and images of protesters storming Spanish parliament ahead of Thursdays austerity budget sparked a reversal.

In addition, Spanish region Catalonia called early elections that are seen as a referendum on independence and reports suggested Andalusia will ask for a bailout. Spanish budget figures were weak, with the deficit through August topping the full-year estimate.

Construction equipment-maker Caterpillar also dampened enthusiasm, cutting its profit forecast. In Greece, the local media reported aid will not be distributed until debt is restructured again. Finally, the WSJ reported that a Russian bailout for Cyprus may have fallen apart.

WTI crude oil fell as low as $91.07 after the Feds Plosser said a new stimulus program probably wont spur growth.

The lone item on the calendar for the upcoming session is Australian DEWR skilled vacancies at 0100 GMT. In the absence of data look for consolidation with the euro most recently at 1.2905 and AUD at 1.0384.

Monday evenings Premium Insights with 3 charts in EURUSD and GBPUSD can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB

200-MONTH moving averages are most effective when consistent with cycle tunrounds. We examine the 200-month moving average in the most heavily-traded currency pair - EURUSD: http://www.cityindex.co.uk/market-analysis/market-news/78072012/shift-in-euro-cycle/

We just added 3 charts on EURUSD and GBPUSD Monday evenings Premium Insights to make the case for our ongoing trading ideas. These can be accessed directly here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribes can join here: http://ashraflaidi.com/products/

The euro fell to the lowest level since Oct 13 but later rebounded in choppy but relatively quiet trading. The yen was the top performer while the New Zealand dollar lagged. The upcoming session may continue to lack purpose with no news on the calendar. Tuesdays new Premium Insights are out. New trades on EURUSD, cable, Aussie, gold, silver

EUR/USD fell below 1.29 on Monday, but just barely, and then rebounded to 1.2930. Conflicting reports on Spanish aid and ESM leverage left traders scratching their heads. Greece remains in the spotlight with Lagarde hinting the Troika will give them more time to meet program targets. The IMF leader also said global growth will be a bit weaker than assumed in July.

USD/JPY was in focus, also falling to a one-week low. The slide accelerated below 78.00 but stalled at 77.80. Selling came after finance minister Azumi announcing he will step down and be replaced on Oct. 1. Some are speculating that the week-long power vacuum reduces the threat of intervention.

Focus will now shift to Azumis replacement The new fin min will likely be someone tipped to take decisive action on the yen. The strong yen is a major issue in Japan and the government will be keen to show progress ahead of elections early next year.

Speculation about further Fed easing has already erupted. San Francisco Fed President Williams said the Fed could buy Treasuries if needed and analysts at Morgan Stanley said the new purchases could come as soon as December unless the trajectory of the economy improves.

There are no economic releases on the Asia-Pacific calendar except the low-tier Conference Board leading index for China. The prior reading was 44.8.

Monday evenings Premium Insights can be accessed directly here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribes can join here: http://ashraflaidi.com/products/

-AB

The USD is stronger against all majors in the ongoing session. European equity indices are losing around 1% and the relative strength winners are USD and JPY while NZD lags. 4 clips of Ashraf's CNBC appearance are found here: http://ashraflaidi.com/t/?h3567

Sunday's Der Spiegel magazine reported that the EZ is preparing to increase the ESM firepower from EUR 500M to EUR 2 bln. By using the same leverage that was used in the EFSF, the size would increase without the need of the EZ countries to contribute more capital. German finance minister said today that he supports the idea but added that the size is unlikely to reach EUR 2 bln. Traders will also continue to watch Spain as some reports suggest it could formally request aid this week.

The pressure on the common currency increased after German data came in below expectations. The Ifo business climate continued to fall in September which was the fifth back to back monthly decline. The main index dropped to 101.4 from 102.3 while the current assessment fell to 110.3 from 111.1. The expectations sub index declined to 93.2 from 94.2. EURUSD trades near session lows around 1.2900.

The BOJ minutes from the 08/09 meeting revealed that one member said that the BOJ may need to boost inflation expectations by influencing FX rates. Other comments were hardly surprising citing that prolonged slowdown in overseas economies could delay Japan's recovery. USDJPY briefly fell under 78.00 but reversed and now trades round 78.05.

There are no reports due during the US session. However, markets could react at 3:00 pm when the BOC governor Mark Carney participates in a panel discussion in Ottawa and also at 3:30 pm when the San Francisco FED president John Williams delivers his speech on economic outlook.

Ashraf's CNBC appearance earlier today broken down into 4 video clips.

1. Tail-risks vs economic risks, outlook for EURJPY, commodities, ECB and commodities.

http://video.cnbc.com/gallery/?video=3000117480&play=1

2. Currency Depreciations, currency/trade wars & 1.35 forecast

http://video.cnbc.com/gallery/?video=3000116930&play=1

3. Asking questions to Economics Nobel Laureate Michael Spence

http://video.cnbc.com/gallery/?video=3000117504&play=1

4. My insights on Gold/Silver after 2 mins

http://video.cnbc.com/gallery/?video=3000116977&play=1

The latest news over the weekend is chatter that Eurozone nations are reconsidering plans to leverage the ESM up to EUR 2.0 trillion. In the beauty contest of the forex market, they are all ugly ducklings. The volatile week ended with the yen as the top performer and the euro as the laggard. CFTC positioning showed a sharp pullback in euro longs. The latest on our Premium Insights is found below.

Finding reasons to sell currencies is far simpler than reasons to buy at the moment. Central banks are printing and Europe is bumbling the ESM. The resulting threats to growth could undermine the commodity bloc.

Those dynamics were captured on Friday and resulted in a volatile day. The euro rallied on indications Spain could be less than a week away from requesting ESM aid and then stumbled when officials said no application was coming.

The US dollar initially slumped when San Francisco Fed President Williams put QE4 on the table saying the Fed could buy Treasuries when Operation Twist runs out in December if the economy remains weak.

EUR/USD whipped back and forth before closing the day nearly unchanged at 1.2979. Gold shot to a six-month high at $1787 and then sank back to $1772.

CFTC Positions

It was the first look at positioning since the ECB and Fed meetings. Although euro shorts were trimmed 23%, the market retains a strongly negative bias, which points to the continued possibility of a short squeeze.

EUR -73K vs -94K prior

JPY +15K vs +33K prior

GBP +14K vs -4K prior

AUD +69K vs +68K prior

CAD +111K vs +102K prior

CHF -4K vs -9K prior

NZD +17K vs 10K prior

See the latest Premium Insights on EURUSD, EURJPY, AUDSD, GBPUSD, CADJPY, gold, silver and oil found here: http://ashraflaidi.com/products/sub01/access/?a=682 Non subscribers can click here: http://ashraflaidi.com/products/sub01/

-AB