Intraday Market Thoughts Archives

With US equity indices showing smaller daily swings and consolidation becoming the name of the game, Forex markets seek less guidance from equities and more from the sell dollar theme, with major currency pairs targeting key August levels. Cable targets $1.62, USDCAD at 1.09, AUDUSD at 0.80 and NZDUSD at 0.64. Commodity traders push up oil to $66 and gold to $977. With neither the Fed or the Treasury likely to mention dollar weakness, markets will continue to push the envelopes on USD weakness. Todays weaker than exp Chicago PMI reminded markets that the green shoots argument of second derivative optimism has yet to be tested. Accordingly, next weeks ISM index could also surprise on the downside, while the May labour report will be key for any signs of stabilization on the unemp rate side.

Oil is up by over $15 in May, its biggest monthly gain in more than a decade attaining a 6-month high of $66.40. The 38% retracement of the slide from the record high of $147 to the $29.40 low stands at $74.40. The gold/oil ratio reached 14.5, dropping below its 200-day MA of 15.50. Next support emerges at 13.80, which is the 55-week MA. While there seems economic resistance surging oil prices, theres less strains associated with rising gold and metals prices. USDNOK drops 14% off its 7.32 high to 6.30, nearing the 50% retracement at 6.13. Downward channel from Feb high eyes 6.15, followed by 5.80.

USDCAD remains on course for the preliminary target of 1.08, a break of which to clear the way for 1.03. CAD has largely gained on the 110% rally in oil prices from their low. The pace of the decline in USDCAD from 1.30 to 1.10 in 13 weeks was rapid, but as rapid as the rise from the 1.0580 low in October to the 1.3020 high in October, which lasted only 4 weeks. The sharp market deleveraging has dealt a sharp blow to CAD but the broadening USD damage and stock market stabilization have boosted the currency due to its improved correlation with equity indices. AUDCAD continues to consolidate around 0.8770s for the 11th straight week, coinciding with the 61.8% retracement of the decline from the 0.9843 high to the 0.7177 low. Dow futures +54 pts.

GIFT THAT KEEPS ON GIVING: Selling USD against all major currencies remains path of least resistance, especially against the commodity currencies. Aussie remains the BEST PERFORMING currency year-to-date against top traded 10 currencies, followed by GBP, CAD and NZD. JPY is worst performing currency, followed by CHF and USD. Since the bottom of world equities of March 8th however, NZD is the highest performer, followed by AUD and GBP, while USD is the worst performer. GOLD has now breached over the key resistance of $967 /oz, eyeing 987 as the next target. Silver broke through the key $14.90 level, looking to test $16.39--61.8% retracement of the drop from the all time high to the 8.5 low.

Members of the AshrafLaidi.com can now attach charts from as many as 16 currency pairs, as well as gold and oil, posting their own comments, charting and drawing. Yen weakness is the order of the day, followed by USD weakness, while gold, oil and silver have broken above 963, 65 and 15. Yield hungry Japanese investors are piling on the higher yielding foreign bonds denominated in anything other than yen. Check out the link on my twitter site to the article on Japanese housewives perfecting the art of the “carry trade” .

S&Ps reaffirmation of New Zealands credit rating lifted NZD to 7 month highs vs USD and JPY. NZDJPY breaks the triple top resistance, joining all currencies in damaging the yen amid prolonged signs of Japanese outflows chasing higher yields elsewhere. NZDJPY could be set up for 61.30 and 62.50, especially as periodic rallies in equities further drive down the yen. Our negative positioning in EURJPY and GBJPY has been largely eroded by the ensuing yen weakness and accumulated bids in EUR and GBP amid neutral-to-positive risk climate. EURJPY breaks above 134.30 resistance, setting up for 137.30 on the weekly chart. NOK lost some ground after Norway lowered its 2009 CPI and money market rates forecast to 2.2% and 2.5% from 2.3% and 3.1% respectively.

Weekly Jobless claims drop to 623K from 636K, while durables rose by a stronger than expected 1.9%. Both figures are good for the economy but add negativity to bonds, further spiking the rally in bond yields. We cannot imagine the Fed sticking with its current plan to purchase $300 bln in treasuries when their yields are exasperating the fragile jobless recovery and further endangering the value of their foreign holders. The only solution so far is for the FOMC to step up purchases, the implications of which will flash the green-light for dollar selling. The long term hedge strategy of shorting AUDNZD backing our long AUDUSD is in the green on both sides of the trade as AUDNZD extends damage to 400 pips off its 1.29 high after its triple top failure, while AUDUSD maintains its upward run. Note the AUDUSD remains in its 2-month channel, with support at 0.7560 and medium target at 0.8180.

A fairly well subscribed 5-year Treasury auction (bid/cover 2.32%) is not altering the status quo of selling the dollar across the board, even as equity indices remain near neutral territory. EURUSD may not have broken above $1.40, but retains its positive bias ahead for $1.43, while sterling remains above $1.6. EURGBP dropped below the key 0.8736 support (50% retracement of the 0.7700-0.977 rally) eyeing 0.86. Metals retail their gains while US crude hits fresh 6-month high of $63.85.

AUD & CAD are on a tear as the risk appetite theme morphs into the sell-USD story to the benefit of commodities. Both currencies at fresh 7-month highs vs USD, with USDCAD carrying the technical underpinnings for further declines towards 1.08. AUDUSD approaches the 0.7960 target--50% rertracement of the move from the all-time high to the 0.6094 low. We reiterate our favour for prolonged gains in these currencies vs USD, as well as the case for $1.47 in EURUSD. Gold pushes towards $956, while silver eyes the $15.24 target from the current 14.81.

Oil breaks above its 200-day MA for the first time since August, hitting $63.05, the highest since November. With OPEC seen unchanged on supply, and US equities likely to make a fresh attempt to take out their 200-day MAs (8829 in Dow, 934 on S&P500), oil strength and US weakness could get a fresh boost into $68 per barrel. GBPUSD breaks $1.60 and on its way to completing its reverse head-&-shoulder formation, targeting 1.6350, with support gaining to $1.5730. EURCHF Hot-Chart out now. Yen weakness deepens on rallying Asian equities and North Korean nuclear tensions.

Equity bulls attempt retesting the highs of May 8 and make a break out of the double top, which could unleash a new force of bullish momentum. This is especially as the S&P have yet to retest their 200-day MAs at 936 and 8,966. Today's auction passed without any fireworks, but the ones that matter are Wednesday and Thursday. Meanwhile, Downward momentum in USDCAD suggests 1.08 has a 70% chance of occurring, while EURUSD medium-term target remains at 1.47, especially as $1.37 is held for the week. Watch Ashraf on CNBC Europe Wednesday at 9:50 am BST (London Time).

Dollar sustains broad damage after the 8-month high in consumer confidence boosts risk appetite. The sell-dollar story shows very little resistance as long as the S&P, Dow and FTSE-100 remain above 880, 8200 and 4,300 respectively. Todays auction of 2-year US treasury notes due at 6pm London (1pm EST) may not be as closely watched as Wednesdays 5-year auctions and Thursdays 7-year auctions because these two involve rising bond yields and reduced purchases from Chinese investors. Thus, weak foreign participation in Wednesday and Thursdays auctions may exacerbate the rise in yields and the dollars decline.

latest data from currency futures showed EUR longs vs. USD exceeded the shorts by 12,250 contractsthe highest level since the week of July 15 (the week when EURUSD hit its record high). JPY longs vs. USD exceeded the shorts by 6,000 contracts, the highest since March. see PECULATIVE FUTURES section of the website for the long term charts. Considering that EUR and JPY net longs vs. USD are about 11 times lower than their record highs, speculators may have plenty of upside against the USD in terms of quantity as well as price.

Asian equities finally in the red, paring Monday's gains, which is stabilizing USD and JPY off their lows. With equities set to test key support and metals holding on to their highs, the Win-Win situations for gold and silver could emerge, especially as all eyes fall on this week's latest usage of the Federal Govt's credit card, with $100 billion in auctions and the AAA rating in doubt and in the limelight. Any sign of an unsuccessful subscription (low # bids for the 2, 5 and 7 T-notes) could be give metals an important extra boost.

Yen weakens across the board after N. Korea launches nuclear test, threatening to destabilize Japans trading partners. Most Asian indices ended higher, but off their session highs. Thin trading volumes due to UK & US holidays. Markets await the LATEST FLOOD OF US BORROWING to come this week in the form of $100 billion in US Treasuries and to what extent will the auctions be successful. (see related story in our twitter site) With bond yields already on the rise and the dollar at 5-6 month lows, the interest in the auctions will be closely scrutinized. Follow our twitter updates on related topics: http://twitter.com/alaidi