Intraday Market Thoughts Archives

The Team at AshrafLaidi.com wishes you great health, lasting prosperity and peace of mind. 2011 delivered its share of economic and political surprises, but the creation of our Premium service, now entering its 7th month was no surprise to many of you. While we keep members abreast of the medium-term picture (1-2 months), we offer short-term signals, supported by technical and intermarket flows. It is a challenging task and our aim is to conquer it to the benefit of our diverse members--some are intraday traders, others hold positions for days into weeks and months. Fundamental dynamics are also respected, yet these do not always present themselves in the intraday-picture. Our commitment to readers of AshrafLaidi.com is such that we kept free access to our INTRADAY MARKET THOUGHTS, brought to you around the clock by , and . These IMTs keep our readers covered with previews and wrap-ups of the Asian, European and North American sessions. Not to mention the multilingual TV interviews posted on Twitter and in the IMTs. Speaking of TWITTER, our + 20K followers on @alaidi and @alaidiPremiumFX have seen their share of trades, insights, breaking news (sometimes beating the mainstream media outlets), geopolitical articles, TV interviews and the inevitable humorous posts. We also thank all FORUM members for your constant participation, which leads others to respond, criticize, confirm and support your postings, thereby creating an informative and valuable arena of ideas. AshrafLaidi.com will bring more improvements and additions to both the free and premium sections. Stick around to find out.

With the all surprises 2012 has to bring, we wish you many pleasant ones, in health, prosperity and happiness.

The euro wilted again on the final trading day of 2011, falling to a 10-year low against the yen. AUD and JPY were the best performers on the day; EUR was the worst. The CFTC Commitments of Traders report showed the net short at a fresh record.

The focus was on the Spanish government Friday as they unveiled plans to cut 8.9B euros of spending. Officials also revised deficit estimates higher -- to 8% of GDP from 6% -- in what has become a familiar PIIGS occurrence.

Heading into the new year, the deficit miss was a reminder of the impossible position facing several eurozone countries. They must cut deficits but cant afford the slowdown in growth from cutting spending.

EUR/JPY broke below 100.00 for the first time in 10 years and closed at the daily low of 99.50. EUR/USD fared better, climbing to 1.2999 on a spurt of buying at the London fix only to slip back to 1.2948 at the close.

Flows and positioning were clearly a factor as accounts were shuffled at year-end. The S&P 500 fell 0.4% to close at 1257 precisely the same level where it opened the year.

CFTC COT Report

Non-commercial traders continued to buy US dollars in the report for the week ending Dec 27. The net USD position grew to +$20.35B from +$17.65B a week earlier. The bulk of the gains were against the euro as it fell to a record -128K from -114K last week. Other changes:

JPY -2K to +22.6K

GBP -3K to -29.1K

CAD +5K to -21.8K

AUD +7 to +37.2K

NZD +1K to +1.4K

Thanks for making it a great year at Intermarket Strategy. We wish you all the best in 2012!

German finance minister ruled out Eurozone breakup; UK house prices fell; Italian PPI rose m/m but declined y/y, Spanish annual CPI lower; France announced bond auction on January 3rd. EURJPY reached decade's low. Progress on Premium trades is found below.

The greenback is consolidating yesterday's gains and trades little changed. European equities are mixed between -0.2% to +0.4%. Relative strength winners are NZD and JPY.

German finance minister Wolfgang Schaeuble said today that Eurozone has the risk of contagion under control and ruled out Eurozone's breakup. He also reiterated that the ESM rescue mechanism will be implemented in Q1 with ESM active in mid-2012.

In the UK, nationwide house prices fell in December -0.2% from previous 0.4% m/m which translates to 1% from 1.6% y/y. Expectations are for weak activity throughout 2012 with flat or modestly lower prices. GBPUSD trades around 1.5450

On the data front, Italian PPI rose in November in line with expectations 0.2% after -0.2% contraction in October which is 4.5% from 4.7% y/y. Spanish annual CPI declined in December to 2.3% from November's 2.9%. Another sobering news came from Greece as October retail sales dropped nearly -11% y/y after -6.5% in September.

Attention on bond auctions is likely to continue as France announced today that it will attempt to sell EUR 4 4.5 bln in 3 month bills, EUR 1.8 2.2 bln 6 month bills and EUR 1.8 2.2 bln 11 month bills on January 3rd, 2012. According to MNI calculation, the total Eurozone bond issuance was EUR 821 bln in 2011.

EURJPY fell below 100 on EBS today for the first time since June 2001. The follow through has been minimal so far and pair recovered to 100.20 level.

Thursdays Premium Intermarket await the 99.80 target in the EURJPY short as well as both shorts in USDCAD. USDJPY hit all targets, while both gold & silver shorts were stopped out as the Aussie shorts. One EURUSD short is in progress. Direct Access http://ashraflaidi.com/products/sub01/ access/?a=576 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/products/

There are no fundamental data releases during the NY session.

Wishing everyone a prosperous & healthy New Year

The euro fell to the lowest levels of the year but rebounded a full cent as flows dominate the final hours of 2011 trading. In a tell-tale sign of the uneven trading day, AUD and JPY were the best performers while GBP and USD lagged. The final reading on the HSBC China PMI is the lone event of the Asia-Pacific session. Thursdays Premium Intermarket Insights played the risk trade, shorting USDCAD but remained short AUDUSD. Other trades include EURUSD, EURJPY, AUDUSD, USDCAD, gold & silver found below.

The euro fell to a 15-month low after the Italian government paid 6.98% in a 10-year note sale, dashing hopes for an LTOR-driven bid. Other yields were better, however, and the euro bottomed as US traders arrived to their desks. EUR/USD went on to rebound to 1.2963 from a low of 1.2858.

Thursdays Premium Intermarket Insights played the risk trade, shorting USDCAD but remained short AUDUSD. Other trades include EURUSD, EURJPY, AUDUSD, USDCAD, gold & silver found here: http://ashraflaidi.com/products/sub01/access/?a=576 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/products/

Economic data also bolstered confidence. The Chicago PMI essentially held steady at 62.5 compared to the 61.0 expected and pending home sales rose 7.3%. A lone trouble-spot was jobless claims which climbed to 381K versus the 370K expected. In spite of the miss, claims still remain well-below the 400K danger zone.

Gold fell in tandem with the euro, breaking the September spike low of $1532 and touching the lowest since July. But it also rebounded and closed out the day at $1544. Hedge fund and central bank selling has been widely speculated as a factor in the decline. Technically, the intraday fall also broke below the uptrend that began in late 2008.

The S&P 500 climbed 1.0% to 1262, moving back into narrowly positive territory on the year.

The lone indicator of note in Asian trading is the HSBC China manufacturing PMI at 0230 GMT. The flash estimate rose to 49 in December compared to 47.7 the month before.

Mixed results from today's Italian bond auction; German CPI expected higher m/m; GBPUSD at fresh 13 week low and EURJPY nears 100 level. Market turns to jobless claims, Chicago PMI and pending home sales. Thursday's Premium trades are up (see link below).

Risk aversion stabilizes while EURUSD struggles to regain $1.29 after dipping to 1.2850s. US equity futures are modestly higher.

German December CPI is still being collected but states that have already published their results saw annual inflation in the 1.7% to 2.4% range. Monthly CPI rose 0.5% to 0.7% which is attributed to holiday season. Results for the whole of Germany will be published later today.

Italy sold EUR 7.02 bln (5 to 8.5 bln target) worth of bonds today. The yield was mixed, bonds maturing in 2014 and 2022 saw lower yield while bonds maturing in 2022 and 2018 saw higher yield. Bid to cover was on the weak side between 1.35 and 1.97. The 10 year Italian-German spread widened 13 bps immediately after the auction and stands at 519 bps. Italian business confidence fell in December to 92.5 from previous 94.0.

Thursdays Premium Intermarket Insights include EURUSD, EURJPY, AUDUSD, USDCAD, gold & silver found here: http://ashraflaidi.com/products/sub01/access/?a=576 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/products/

GBPUSD fell to a fresh 13 week low and reached 1.5360. During the decline, EURGBP jumped to a 0.8395 high.

EURJPY continues to trade about 40 points above the key 100 mark. Stop loss orders have likely accumulated below and given thin liquidity, the pair could plunge should these orders be tripped.

The US session starts at 8:30 am ET with jobless claims that are expected to rise to 372K from previous 364K. Print that would be in line with expectations or better could boost sentiment as prospects for a solid NFP result on Jan 6 would improve.

At 9:45 am ET Chicago PMI is due and is seen lower at 60.4 in December from November's 62.6. Pending home sales that follow at 10:00 am ET are expected to pull back to 1.5% in November after soaring 10.4% in October.

Risk trades deteriorated in early US trading on Wednesda, sending EUR/JPY to its lowest level in 10 years. USD was the top performer while GBP lagged. The Asia-Pacific schedule is quiet.

As US traders came to their desks, the GBP began to fall sharply. It was quickly followed by the euro and, later, the broad risk trade. Low liquidity exaggerated the moves, which were driven by a number of reasons : 1) Concerns about a growing ECB balance sheet after weekly data was released 2) A rise in overnight ECB deposits, suggesting banks are unwilling to lend to one another 3) rumors of European sovereign downgrades 4) worries about the Italian auction

None of these reasons stand up particularly well to scrutiny. Flows, year-end settlement and possible hedge fund closures/redemptions were more likely culprits.

No major US economic data was released in the session but various metrics on the US holiday shopping season suggested a 3-5% y/y improvement. We caution that it is still early for drawing conclusions.

Oil fell back below $100 after climbing earlier on the growing war of words between Iran and the US regarding the Strait of Hormuz. US naval commanders said a closure of the Strait will not be tolerated.

Perhaps the most significant move was a brief fall in EUR/JPY below the October low of 1.0075 to a fresh 10-year low. A more sustained break would be deal a significant technical blow.

Other large moves came in gold (-2.7%) silver (-6%) and the S&P 500 (-1.3%) as it fell into negative territory on the year.

With no data scheduled for the Asia-Pacific session, the focus will sharpen on a series of longer-dated Italian debt auctions in the day ahead. Yields at short-term bill auctions on Wednesday were roughly half of what they were a month ago. This helped to pull down longer-dated yields in early trading but after the sharp euro selloff, 10-year rates climbed back to nearly unchanged at 7%.

The market doesnt appear to be betting on a large improvement partly because of persistent signs of year-end cash hoarding. Even if yields improve in the sale, it may be risky to buy EUR given illiquid markets and unpredictable flows.

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Italian bond auctions sees strong demand that results in lower yield; Swiss KOF weakest since mid 2009. Market continues to trade in narrow ranges. No data is due in NY session. US equity futures are up 0.25-0.30%. Our latest Premium trades on EURUSD, AUDUSD, USDCAD, gold & silver are found in the link below.

Despite low volatility and narrow ranges, the greenback is slightly weaker in the ongoing session. European equities are higher between 0.3% to 0.7% and the relative strength winners are NZD followed by CAD.

Results from Italian bond auction helped to improve sentiment as Italy sold EUR 9 bln (9 bln target) worth of 6 month bills with average yield considerably lower at 3.251% from previous 6.504%. Bid to cover also improved to 1.62 from 1.47. The Italian treasury also sold EUR 1.73 bln (1.5 2.5 bln target) of 2013 CTZ bonds with 4.853% yield compared to previous 7.814%. Bid to cover also improved to 2.236 from previous 1.59. Lower yield and good demand could imply that ECB's LTRO is being received well and at least temporarily calmed investors. EURUSD trades little changed around 1.3070.

Latest Premium Intermarket Insights include trades on EURUSD, EURJPY, AUDUSD, USDCAD, gold & silver found here: http://ashraflaidi.com/products/sub01/access/?a=575 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/products/

Swiss KOF leading indicator fell in December to 0.01 from November's 0.34 which is the weakest print since mid 2009 and marks 8th month of gradual deterioration. CHF ignored the news and trades slightly stronger against the EUR at 1.2198 and also the USD at 0.9330.

WTI pushed nearly to 101.60 earlier during the session which underpinned the CAD. USDCAD fell from 1.02 to 1.0163. Despite higher oil, gold and silver remain under pressure.

The euro continues to edge higher as traders close out short positions and the year winds down. In early trading on Wednesday, NZD is the top performer while GBP lags. A swath of Japanese economic data showed an economy that continues to underperform. Tuesday's Premium trades are below.

Ranges remain extremely tight in the FX market but the euro has gained a half-cent since the start of the week. Speculators remain extremely short EUR and many will be balancing out positions before the dawn of 2012.

The main risk to a slow rise in EUR for the remainder of the week is a series of Italian bond auctions on Thursday. BPT yields inched higher again Tuesday with 10s flirting with 7%.

US markets were unable to capitalize on a surge in the Conference Board consumer confidence index. It gained nearly 10 points to an eight-month high of 64.5, easily beating the 58.2 expected.

Oher data was mixed as the Richmond Fed improved to +3 from 0 but fell short of the +5 expected. House prices in 20 of the largest US cities fell 3.4% y/y compared to the -3.2% expected.

The tone of Japanese data was considerably worse. Unemployment remained at 4.5% as expected but consumption and production numbers were significantly worse than expected. Industrial output shrank 2.6% in Nov compared to the -0.8% consensus. Retail sales fell 2.3% year-over-year in Nov versus the flat reading expected.

The latest Premium Intermarket Insights are found here: http://ashraflaidi.com/products/sub01/access/?a=575 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/products/

With UK and Canada still on holidays, volatility is likely to remain subdued.

Compounding worries about Japan are growing press reports that the government will hike the consumption tax to 10% from 5% and the dawn of a riff with the US on FX intervention. In the US Treasurys semi-annual report on FX manipulation they made it clear that the US does not support the efforts. In the same report, they took no issue with the CHF peg and once again refrained from calling China a currency manipulator.

USD is little changed as markets continue to trade in a narrow range. European equities are higher by about 0.5% and the relative strength winner is CHF. US consumer confidence & housing prices are due. Link to latest Premium trades is found below.

The only fundamental news out of Europe this morning was Swiss UBS consumption indicator that fell in November to 0.81 from previous 0.9. The Franc sold on the news but quickly recovered its losses and is currently trading stronger against the EUR and the USD as well. EURCHF trades right above 1.22 support while USDCHF trades near 0.9330.

An interesting development came yesterday when China and Japan unveiled a currency deal that allows their companies to exchange Chinese currency Yuan directly into Japanese Yen without having to use USD in the process. This step will cut costs between two major Asian economies, boost trade and strengthen Yuan's global role. It will also allow Japanese firms to raise a debt that is denominated in Chinese Yuan (CNY). CNY closed today at 6.3223 against the USD, slightly lower compared to Monday's 6.3198.

Pressure on periphery bonds is reappearing again as Italian 10 year yield moved back above 7% and reached 7.14% high. Italian-German spread reached 5.20% high before pulling back to 5.14%.

Tuesdays Premium Intermarket Insights are found here: http://ashraflaidi.com/products/sub01/access/?a=575 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/products/

With UK and Canada still on holidays, volatility is likely to remain subdued.

The NY session will bring S&P/CS composite index due at 9:00 am ET which is seen lower at -3.2% in October from -3.59% in September followed by December consumer confidence and Richmond FED manufacturing due at 10:00 am.

US Dec Consumer confidence is expected to rise to 58.5 from 56 while manufacturing sector in Richmond is anticipated higher at 6 from previous 0. This could be the first month with positive growth indicating improving conditions since June.

FX markets was quiet on either side of Christmas but a surprise currency deal between China and Japan made waves. AUD was the best performer on Dec 26 but overall moves have been miniscule. The minutes of the Nov 30 BOJ meeting showed growing concern about Europe. Premium trades due next. Latest CFTC Committment data are below.

China and Japan, the second and third largest economies, agreed to promote direct currency exchange rather than settling trades in USD. The move is designed to promote trade and cut costs. Japanese companies will also be permitted to issue debt in yuan in a move that could help to weaken JPY over time.

More specifically, Japan will make an initial purchase of 500 million dollars (about JPY 39 billion) in Chinese government bonds using its foreign currency reserves in the Foreign Exchange Funds Special Account. We saw last year how China has already began increasingly investing in Japanese stocks & bonds, reaching JPY 10.5 trillion by end of 2010.

On the other hand, China strictly regulates outside investment, and allows only a limited number of foreign governments and central banks to purchase Chinese government bonds. Australia, Malaysia and Singapore are among this select group.

The main takeaway is that two old rivals have started to co-operate economically and that is a positive for global growth. Meanwhile, the dollar continues to slowly lose its status as the lone reserve currency.

Asia-Pacific trading has been choppy after a quiet Boxing Day. Flows appear to be dominating in an extremely thin market. Gold is a main loser, falling to $1597 from $1606. Overnight, Japanese Nov housing starts fell 0.3% y/y following a 5.8% decline in Oct.

The Bank of Japan released the minutes of the mid and late November meetings. Growing concern about Europe was a theme with all members saying market stress was likely to persist for a protracted period. They said the risks point to a higher yen, which could hurt the economy.

4 of last Friday's Premium trades remain in progress. Here is the direct link to those trades: http://ashraflaidi.com/products/sub01/access/?a=573 To become a member, please click here: http://ashraflaidi.com/products/

Commitments of Traders

Fridays CFTC report on non-commercial positions showed a reversal in some recent trades anticipating risk aversion. Although commercial open interest declined dramatically, traders were adding to EUR positions; pointing to the possibility of volatility at year end. The net euro position fell from a record -116K to -114K.

The net JPY position fell to +24K from +35K. The sterling net improved to -26K from -34K. The Canadian dollar was unwanted, falling to -27K from -16K. AUD fell to +26K from +33K.

US markets await the Oct Case-Shiller house price index at 9 EST, followed by Dec consumer confidence at 10 EST.