Intraday Market Thoughts Archives

BoJ's Kuroda reiterated the Bank's plan to buy longer-dated JGBs as a way to push inflation towards the 2%, which he stated could take up to 2 years. Cyprus banks are set to open today under capital controls, 1 day ahead of Good Friday Holiday, which coincides with the end of month and quarter. Yesterday's higher than expected Canada inflation figures at 1.2% y/y compared to an expected 0.8%. Canada authorities said were investigating the suspicious decline in USD/CAD of 50 pips to 1.0150 before the figures were released. Final US Q4 GDP figures are out today (exp +0.5%), as well as Mar Chicago PMI exp 56.5 from 56.8. 2 new trades on USDJPY and 1 on EURUSD were added this morning. See full view of trades and rationale in latest Premium Insights.

More signs that European leaders plan to put bank deposits at risk emerged Tuesday. The Canadian dollar was the best performer while the yen lagged. The Asia-Pacific session lacks any meaningful economic data. 2 new Premium trades were added in EURUSD on Tuesday, while the 1 of the 2 GBPUSD shorts awaits hitting its final target at 1.5130. Ashraf will be in the Middle East until the rest of the week. Full details of the latest trades, including EURAUD, GBPUSD, EURGBP and gold are found in the latest Premium Insights.

Leaders in European parliament are working on new bank restructuring proposals that would include bail-ins for deposits worth more than 100K euros, according to a report from Reuters. The news confirms fears that the rules are changing.

The timing of the proposals is curious because it threatens to chase money out of the European banking system at a time when it's needed most. The euro slipped on the headlines but was buffered by strong buying interest at 1.2825.

Overall moves in the market were small and economic news countered the recent trend of US economic strength. Core durable goods orders fell 2.7% compared to a 1.1% decline expected; consumer confidence dropped to 59.7 compared to the 67.5 consensus forecast and the Richmond Fed was at +3 versus +6 expected.

The risk with US data over the next month is that later payouts for tax returns this year may be skewing consumer-driven data.

USD/JPY made modest gains on a report in Nikkei that the Bank of Japan will fold its liquidity and QE programs into one new, larger operation at next week's meeting. The danger in trading yen crosses this week is that Japanese year-end flows may lead to volatile moves.

EURUSD closed below its 200-day moving average for the 1^st time since mid-November. Although it seemed to have closed the week above its 7-week resistance, the close below its long term trend trend is more material. We have always said that breakouts above and below major trend indicators such as 200 and 100-day moving averages in liquid instruments such as the EURUSD (25% of the daily turnover in the spot FX market) may tend to be game-changers. See rest of analysis here

The Eurogroup leader suggested Cyprus will be used as a template for future European bailouts. The comments sent the euro to a close below the 200-day moving average. The highlight of Asia-Pacific trading is a speech from RBA Governor Stevens. Some subscribers have asked why Ashraf considered the  Premium long in EURJPY targetting 123.90 from 122.50s to have been stopped out, the market rallied to 123.85. The rule is to only consider a trade to have hit all targets when the full range has been attained, even if some clients may have exited at a profit. The same applies to the existing shorts in GBPUSD. Full details can be seen in the latest Premium Insights.

The Eurgroup's Dijsselbloem sent a shudder through Europe saying that future bank bailouts should include bondholders and deposits over 100,000 euros before taxpayers are asked to contribute. Adding to the euro declines was a widespread rumor – which proved untrue -- that Moody's was preparing to downgrade Italy.

From 1.30 at the start of US trading, the euro sank as low as 1.2829 and closed below the 200-DMA and 55-WMA. Virtually every euro cross posted a bearish engulfing candle pattern, foreshadowing further declines.

The comments from Dijsselbloem caused a deep drop in European banking stocks on speculation that anyone with a deposit larger than 100K euros will flee the region. He later backtracked with a statement saying every program is unique and there are no templates but the euro hardly bounced.

US news was light but dovish comments from the Fed's Dudley caused a drop below 94.00 in USD/JPY. He said monetary policy must be kept 'very accommodative' and that there is a case for more asset purchases. Japanese year-end repatriation may have also been at work.

The upcoming session is relatively light but the leaders of central banks from Japan and Australia will make appearances. At 0000 GMT, Kuroda will appear before the Diet for the semi-annual report on currency and monetary policy controls.

The RBA's Stevens speaks at a forum at 0445 GMT.

Looking beyond the capital controls imposed in Cyprus, €4.2 bn in deposits from Laiki bank greater than €100,000 will be placed in a "bad bank". Not only depositors at Laiki bank will lose their funds, but so did all of its bondholders. Deposits at the Bank of Cyprus of less than €100K will not be levied, but those above €100K could lose up to 40% as part of the banks' recapitalization. Instead of using the Eurozone's bailout funds to save the Bank of Cyprus, Nicosia will resort large depositors' funds to restructure the Bank. Ashraf's apearance on AlArabiya.   Yen is once again the biggest gainer of the day as risk aversion hits world markets. EURUSD breaks below its 55-WMA and eyes its 200-DMA, while nearing 4-month lows, while the yen drags EUR by over 200 pts. 1.3055 will be the level to watch for EURUSD monthly close to prevent a breakdown of the July trendine. In our latest Premium Insights, buying GBPUSD near 1.5120s hit the 1.220 target before opening the 2 shorts as part of the Dual trades. Long AUDUSD and US Crude were stopped out at 1.0470 and 94.70, while the gold short remains in progress. For full access, please see our Premium Insights, please click here

Cyprus has appeared close to a bailout agreement for the past two days but the inability to close the deal suggests a growing risk that talks collapse. The euro has opened about 15 pips below Friday's close as the market awaits news on Cyprus. Weekly CFTC positioning data showed yen shorts scaling back. Both of our EURUSD longs hit their final targets of 1.30 and 1.3010, so did the long in GBPUSD. The other half of the GBPUSD dual trades are in progress. Full details are seen in the latest Premium Insights.

On Saturday it appeared as though a political leaders from Cyprus were close to securing a deal with the Troika that would tax deposits at the Bank of Cyprus by 20-25% while taxing other accounts at 4% and leaving pensions untouched. Since then, newsflow has grown quiet and scattered.A Eurogroup meeting was expected to be held on Sunday but it was repeatedly delayed and Dijsselbloem now says it has been rescheduled for 0500 GMT.

In addition, Reuters reported on Sunday that Cypriot President Nicos Anastasiades had threatened to resign in a heated exchange over a proposal to shut down two Cypriot banks. Any deal must be approved by Cypriot parliament and that adds another round of risks.

Overall, Cyprus is walking a thin line and running out of time. The risks run both ways for the euro but are beginning to skew toward the negative. If talks collapse, there is a substantial chance Cyprus leaves the eurozone.

In the near term, the market is free to focus on Cyprus because calendar is empty to start the week. The lone indicator of note is the UK Hometrack housing survey for March at 0001 GMT. In February, the survey rose 0.1% month-over-month.

Commitments of Traders

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

EUR -44K vs -25K prior JPY -80K vs -94K prior GBP -61K vs -50K prior AUD +54K vs +23K prior CAD -65K vs -53K prior NZD +12K vs +19K prior CHF -10K vs -13K prior US Dollar Index longs at 54K vs 32K prior

Yen shorts were trimmed last week after falling to a 5-year low last week. The slight tempering of expectations may mean the window is open for fresh yen shorts. AUD longs jumped for the second week in a row, demonstrating the incredible power of positive carry but the lack of significant upside follow through from AUD shows there may be a rush to the exits if AUD begins to slide.