Intraday Market Thoughts Archives

BOTH S&P500 and DJIA FAIL TO CLOSE above their 200-Week MAs. S&P never touched its 200-weem MA of 1225, while the Dow managed only an intraweek close above the its 200-week MA before moving below it. S&P500 however, will end the month HIGHER despite a monthly DECLINE in BRAZILs BOVESPA index. This is the first time a monthly rally in S&P500 escapes a decline in Brazilian equity benchmark index since August 2008. It could be argued that Brazils selloff resulted from this weeks 75-bp rate hike, which is the first tightening since September 2008. This weeks rate hike is far from upsetting the recovering Brazil economy, but 2 more rate hikes of 50-75 bps into end of summer may raise fears as they coincide with Brazils election. Going back to the S&P500 and the Dow, both of these will face the US jobs report as well as the latest damage in US financial stocks after Goldman Sachs was downgraded to a sell by S&P.

RECENT CAD RETREAT will not be helped by todays CAN data, which showed CAN Q1 GDP +0.3% from +0.6% (lowest since Aug 2009) and March PPI -0.4% due to loonie strength. Still looking for 1.0080 in USDCAD while EURUSD needs to show more convincing break of $1.3330 to call up $1.3380-90. US Q1 GDP at 3.2% on soft side but consumer expenditure rose to 3.6% (highest since Q1 07). GOLD EXTENDS GAINS across the board, eyeing next resistance at 1181, which is the 76% retracement of the 1225-1044 decline. The yellow the metalis aided by the risk bounce, which is boosting commodities, as well as lingering worries about Greece. GOLD SURGES TO ANOTHER NEW RECORD HIGH vs YEN.

EURO STABILIZATION is occurring despite CAD WEAKNESS, while YEN IS THE WEAKEST currency so far today. EU officials may be expected to firm up an agreement in Greece this Sunday. More talk of a 3-year deal for Greece in the size of EUR 120-150 billion, which means as much as EUR40 bln could be disbursed. The $1.3320 resistance is being tested as shown in yesterdays chart http://chart.ly/xhgxcv , which could pave the way for a temporary ceiling near $1.3385-90. CAD remains weak after those remarks from BoCs Carney warning about sovereign headwinds on Canada. USDCAD supported at 1.0020 but has yet to regain 1.0080. Both US and CAN Q1 GDP are released. More analysis on that later.

ONE THING WE LEARNED is that ever since the intensity of the EURUSD decline in February, it HAS NEVER recovered more than 3% off its multimonth lows. SEE CHART http://chart.ly/xhgxcv This means the pair is unlikely to break above $1.3510 from yesterdays 12-month lows before resuming towards the $1.31 figure. MOODYs SAYS Its REVIEWING GREECE SOVEREIGN RATING and downgrades more Greek banks. EURO RETRACEMENTS CONTINUE TO FAIL key trend lines as no aid is possible before the May 9 elections in Germany. Size of Aid, Timing of Disbursement and Additional Austerity remain the 3 obstacles to any extended rebound in the euro. $1.3320 stands as the immediate trend line resistance, a break of which could reflect surprise announcement and extend recovery to $1.3390. Key resistance remains at the top of the 5-week channel at $1.3530. But once again, we stick to $1.30 target before quarter-end and $1.27 before Summer end.

LOONIE DROPS ACROSS THE BOARD as Bank of Canada governor Carney plays up the downside risk to Canada RISK from sovereign debt troubles. USDCAD gains half a cent to $1.0070, while CADJPY retreats from 93.97 highs. Although we favour CAD over its sister commodity currency the AUD, buying pressure emerges strong near parity. And when we integrate Tuesdays 31% decline in the VIX6rd largest daily increase on record, the sustainability for improvement in appetite remains dubious. Dip-buying remains preferable between 1.0 and 1.0050 onto 1.02, while EURCAD and AUDCAD seen capped at 1.3380 and 0.9370.

USDCAD drops back closer to parity as CAD extends gains on risk bounce following Feds prolonged dovish stance on interest rates. With the risk of another sub-parity print, possible hedges emerge on short AUDCAD, which is likely to call up 0.9270 ahead of next weeks RBA decision. Considering the extent of the VIX spike earlier this week and oils likely struggle at the 85.10 trend line resistance, USDCAD bulls are likely to show more conviction at 0.9970s. Another way to hedge CAD shorts vs USD would be to long CADJPY towards 94.30s.

YEN DROPS THE MOST as FOMC STATEMENT a marginal upgrade of its economic outlook, while maintaining the extended period phrase regarding exceptionally low levels of the federal funds rate, to which Kansas Feds Hoenig remains the sole dissenter. USDJPY maintains uptrend in weekly channel, set to test 95.20 as prelim target. Whether the Greece Factor was responsible for pushing the Fed to maintain the dovish language is very likely, but from this juncture, markets are back to worrying about the Eurozone and POSSIBLY INCLUDING ITALY, whose debt/GDP ratio is 116% of GDP, GREATER than PORTUGALs 85% of GDP, SPAINs 66.3% of GDP but less than Greeces 124% of GDP. So WHY NOT ITALY? In the meantime, traders may show another short-lived rebound in EURUSD towards $1.3280 before the next selling wave emerges-barring any concrete announcement. We still have US GDP later this week.

TODAY's FOMC DECISION (18:15 GMT) may continue the DOVISH LANGUAGE of keeping "extended period" in the statement, but WATCH OUT out From the possibility that one more FOMC member (in addition to Kansas Feds Hoenig) will dissent with the FOMCs dovish stance. St Louis Feds Bullard has recently suggested changing the extended period phrase in favour of adding a condtionality clause (e.g if economy worsens or depending on grpwth). Any additional dissenters would be hawkish and USD-positive. S&P DOWNGRADES SPAIN to AA, driving EURUSD down to $1.3120. Moody's and Fitch say they have no comment on whether they will be next to downgrade Spain, but Fitch says key risks is whether Spain can recover to robust growth over medium term.

S&P DOWNGRADES SPAIN RATING to AA, prompting GOLD SAFEHAVEN TRADE to 1173. Ashraf's interview on BNN discussing the latest sizes regarding Greece aid. http://bit.ly/dCDjhJ Euro and global markets rebounded on talk of a EUR 12- bln package, which was later not confirmed. Latest indications mention a final deal early next week, but amounts are stilk uknown.

Ashrafs Video Presentation on EURGBP daily and weekly outlook http://bit.ly/aLZPJT GBPUSD broadens losses overnight to test the $1.5160 low50% retracement of the rally from March low to the April high. Todays FOMC decision (18:15 GMT) and Thursdays political debate among the 3 major British Parties will shape trading in the next 36 hours, thereby likely to see $1.5080 holding as the next support. USDX finally breaks to new 2010 highs at 82.56, shattering the 50% retracement of the decline from the 89,62 high to the 74.2 low. Road to $1.30 in EURUSD remains intact, with $1.29 very possible today IN THE EVENT that the FOMC removes "extended period" phrase.

GOLD STAND OUT FROM COMMODITY DAMAGE as the yellow metal soars over $25 to hit new 2010 high at 1172. But the fact that silver, copper and oil each fell sharply today, underlines the knee-jerk reaction of safe-haven buying after the Greece-Portugal downgrades and the questioning of Goldman Sachs. VIX JUMPS 5.30 to 22.81 or 31%, making its 6th largest daily close since records began in 1993, closing ABOVE ITS 55, 100 and 200-DAY MA IN A SINGLE DAY. We have seen over the past 5 months that surging VIX and falling stocks have impacted gold negatively. Combining the escalation in market uncertainty as measured by these historical metrics as well as the potential for tightening policy, gold could face some headwindsespecially if tomorrows FOMC statement removes the extended period phrase. AUSSIE Q1 CPI due at 1:30 am GMT could be especially AUD bearish in the event of CPI comes in at or below 2.5% y/y and/no moir than +0.7% q/q. Any rebound from high CPI is seen capping AUDUSD at 0.9230.

EURO Slammed as GREECE DOWNGRADED TO JUNK STATUS (BB+/B) and PORTUGAL DOWNGRADED by 2 notches to A-/A-2. PORTUGAL. Portugal's public debt is expected to rise to E142.91 billion in 2010, or 85.4% of GDP. We WARNED you on April 7 against the DANGERS OF SOARING Gold vs OIL and the negative implications on stocks. Today, Gold/Oil Ratio surges to 14.10, highest since February, leading to falling equities, just as was warned in the chart below http://chart.ly/gnf2h2 OIL drops below 82.70 target to 82.30, while gold soars on safehaven but needing to close the session above 1161.

USDCAD breaks 1.0070, making the case for a possible 1.0150 later in the week alongside the pullback in oil and gold. US crude risks extending losses towards $82.70, a break of which is ripe for calling up $80.30. Any upside today is seen capped at 84.30. Volatility could be elevated today as Goldman Sachs CEO Blankfein and VP Tourre appear before Congress today.

Goldmans 5-year credit default swap is at 172-bps, highest since May 2009. This represents the annual cost to insure $10 million (not $10K) of Goldman debt for 5 years. The CDS spiked to 107 bps after the April 16 SEC announcement to charge GS with fraud. As long as no retreat is seen in GS CDS, financials could remain pressured, which may weigh on the broader indices and gold.

Watch Ashrafs video presentation comparing the current euro downleg with the last major 3 declines over the last 11 years, and why the losses could extend farther http://bit.ly/brTi5j GBP is the worst performing G11 currency of the day, dragged down by the lowest rise in net mortgage lending since Jul. $1.5280 stands as next support after inability to break $1.55.

CAD NET LONGS in latest speculators commitments report (SEE CHART http://chart.ly/e836wm ) indicate nearly 6 consecutive weeks of net CAD longs (net USD shorts) testing (but failing) the highs of October 2007. Comparing the peaking net longs vs. the peaking CADUSD (price in chart is inverse scale and NOT USDCAD), we find that the pattern does make sense. But stay alert of a retreat in CAD longs and continued gains in CAD, in which case could be a bearish divergence against the loonie. While USDCAD support stands at 0.9970, upside remains capped at 1.0070 and 1.0170. WATCH OUT from deteriorating technicals in OIL, which continues to fail the Apr 6 trend line resistance, now calling for 82.80. FALLING LUMBER PRICES for 3rd straight day could also weigh on CAD, especially as Canada now supplies over a 1/3 of US lumber consumption.

EUROZONE SPREADS SOAR FURTHER as Greek-German 10 year spreads hit new record of 6.35% and Portuguese-German 10 yr spreads at 2.14% from last weeks 1.8%. More doubts were thrown about the expediency of a German disbursement after parliamentary floor leader Kauder said Greece has NOT YET met the conditions required to reduce its budget deficit. EURGBP breaking further below the 100-WEEK MA and the 50% retrcmnt (0.8750) targetting 0.8440 later in quarter. US CRUDE capped at 85.60 trend line. Chancellor Merkel to make a statement at 13:00 GMT. Cable seen supported at $1.5390 (NOT $1.5490). Ashraf interview on CNBC Friday with Maria Bartiromo the Baltic Dry Index, copper, gold, China's trade balance and Brazil's Bovespa http://stk.ly/anojz8

EURO GAPPED LOWER to $1.3310 in early Monday Asia before retesting 1.3390s on back-&-forth reports about EU/IMF confident on cementing a Greece deal, but traders cannot ignore the fact that it will take at least 2 weeks for any disbursement from individual Eurozone nations and IMF to take place. TWO THINGS are important: 1) IMF will attempt to disburse its EUR 30 bln first so that it wins time for Athens because it could take longer for Germany to mobilize its EUR 8.3 bln before the May 9 elections. 2) IMF may ask for further austerity measures, beyond those already triggering national strikes. The levels noted in this EURUSD CHART http://chart.ly/dhxw4q are the resistance levels required to be broken and NOT the targets for the euro. We continue to expect a break of $1.31 this quarter, before seeing $1.27-1.28 before end of summer. Bundesbank Chief WEBER to speak today at 16:00 GMT and TRICHET to speak at 16:30 GMT in NY today.