Intraday Market Thoughts Archives

While the topping process is likely to last into next week, any selloff is unlikely to accelerate until June, which is the likely time when markets that the June FOMC meeting could show less hands-on-stimulus from the Fed. It may be a coincidence that the S&P500 low in 2002 was 777, while the March low is 666, but it is no coincidence that the duration of bear markets never lasted less than 3 years. We're still in year 2.5. Hot-Chart on CAD-S&P updated.

FX markets unleash an attack against the yen despite muted activity in Europe as FTSE-100 is barely unchnaged from yesterday. We could see prolonged gains in appetite in case the ISM release shows more evidence of slower pace of conraction (exp at 40 from 39.1). Markest well aware of next week's upcoming stress test results on US banks from the Treasury. NZDUSD resistance at 0.5780, GBPUSD eyes 1.4960-65. EURUSD still unable to breach above 1.3414.

My March 20th piece analyzing the MAJOR FOMC ANNOUNCEMENTS of Sep, Dec and Mar each weighed substantially on the dollar http://www.ashraflaidi.com/articles/gauging-the-reversal-in-the-dollar-gold-oil.asp But the effect was short-lived. On Wednesday's meeting, the FOMC dared not take a new rabbit out of its hat to prevent bond yields from hitting -month highs. Now the dollar is gradually back up as soaring yields in a recession are anything but desirable.

The S&P500s best month since March 2000 ends with the bankruptcy of a major US auto company, which will result into the US gvt owning 8% of the company and the Canadian govt 2%. Shareholders and bond holders have lost out. Followers of candlesticks will notice todays price action having formed a bearish doji. Yesterdays post-FOMC rally was attributed to 2 misleading factors (i) Fed slightly tempered its negative outlook; (ii) and soaring bond yields pushed money away from bonds to stocks. Playing the second derivative of economic data can be dangerous as economic deterioration did slow back in Q4 2007 and Q4 2008 only to re-emerge later. And have not even mentioned the next week's stress tests...

President Obama confirms Chrysler's bankruptcy, prompting a modest retreat in stocks, and some gains in USD but no firming in JPY. Check out my twitter updates on financial ETFs for those wishing to capitalize on a retreat in banks and insurers. Our analysis on the 8-week cycle for stocks suggests that global indices could run further gains next week, which coincides with the results from the stress tests. FX pairs presevring their bearish outlook are NZDUSD, GBPUSD and NZDJPY. USDCAD today touched near its 200-day MA for the first time since July.

USD dragging EUR, GBP, AUD and NZD off their highs despite surging stocks. JPY and NZD remain the biggest losers. Markets unaffected by looming bankruptcy announcement of Chrusler. Chicago PMI widely better than expected, which could mean tomorrow's ISM manufacturing release could come in ebtter than the expected 38. A close above 880 in the S&P500 and 8,500 in the Dow to provide a powerful new argument for the bulls. NZDUSD targets 0.5620, followed by 0.5580. 0.57 stop intact. USDCAD bottomed just above the 200-day MA of 1.1848.

Risk currencies backing off their highs despite the fact that US equity futures remain firmly in the green. Cable off 150 pips from its $1.4947 high, EURUSD a full cent down from its 1.3384 high, failing to breach above the key 1.3412 resistance. Watch the $1.4890 high, which serves as the gateway for renewed attempt towards $1.4980. Failure to do so on risk aversion could extend towards $1.4760. Key levels in S&P, Dow, FTSE at 880, 8,510 and 4,560 respectively.

4% rally in Tokyo fuels risk currencies higher, while dragging down USD, JPY and NZD (due to RBNZ rate cut). The rally in Tokyo was double that of US indices (those ended 1% off their intraday high). CAD riding its positive correlation with equities as USDCAD hits 4 month lows. 1.1820 seen as the next target low. Canadian February GDP due at 12:30 GMT, exp -0.2% from prev -0.7%. Cable broke above the 1.4830 resist, now eyeing 1.4960. AUDUSD surges to new 6 month high at 0.7383, eyeing 0.7420. Key resist stands at 0.7455.

RBNZ slashed rates by 50 bps to 2.50%, leaving Australia as the only country with the highest rate among the major 11 currencies. This adds to our negative Kiwi outlook signaled in the latest HOT-CHART. See our TRADING IDEAS on http://twitter.com/alaidi Sticking with the bearish call for equities issued before the FOMC. The retreat in stocks off their highs further unwinding FX risk trades i.e. dragging down GBP, EUR, AUD and NZD vs USD and JPY.

NZDJPY and GBPJPY remain the preferred play to buy JPY than AUDJPY or CADJPY. Short stop for GBPJPY seen 145.20. For NZDJPY, see more in todays HotChart specifying the various techs from the H&S level. Today's unexpected increase in Q1 US consumer spending boosted market sentiment. We turn to tomorrow's release of the March consumer spending (12:30 GMT) for a more updated figure

Fed does not increase purchase of LT treasuries or agency debt, driving the 10 yr yield to 3.16% (highest since Nov 26). Dollar bounces off its lows against most currencies with exception of the JPY, which is the biggest loser as stocks retain their gains at session highs. Soaring bond yields and rallying equities is a rare combination. More declines in GBPUSD seen ahead, with 1$.4680 target, followed by $1.46. $1.4830 still holds for the day.

Markets remain in buy mode ahead of the FOMC announcement (18:15 GMT, 19:15 London) EURUSD eyes $1.3330, GBPUSD still unable to breach above $1.4830, while S&P500 +2.10% on the day and 29% since the lowest close of March. Bond yields push further up after the 7-year auction. FOMC announcments have proven to be catalysts to turning points in the markets. We expect stocks to sell-off following the announcements as the Fed may not suceed in forcing down yields. Pay attention to rapid volatility in the 20-30 mins after the announcement.

Rising risk appetite unleashes the sharpest FX gains in NZD, AUD and CAD at the expense of JPY, USD and EUR. Unexpectedly strong rise in US Q1 consumer spending helps to alleviate concerns but the rise may not have been a surprise on the back of the biggest consecutive quarterly declines in spending (Q3 & Q4). Note how despite the 2% rally in US indices, both gold and oil are advancing. S&P500 30% limit from the March closing low stands at 879. Todays Hot-Chart on NZDJPY is updated. FOMC decision at 19:15 GMT

Upcoming US Q1 GDP (13:30 London time) expected -4.7% from -6.3% in Q4, with consumption (key component) expected +0.9% from -4.3%, which would be the first increase since Q2 2008. A GDP growth of -4.7% or better is theoretically positive for the US economy, but the current improvement in risk appetite could be further emboldened at the expense of the dollar. Cable breaks above 1.4730, eyes $1.4830.

Ten year yields hit 3%, a deja vue of the day before the last FOMC meeting. Will the Fed buy or not to buy? Or could the Fed ask the US Treasury to create a new maturity of bonds (rumored 50-year bonds)? EURAUD HotChart +400 pips. 1.8820 seen next. For quick & brief updates http://twitter.com/alaidi

CLARIFYING THE CONCLUSION of my latest article: Bond traders will be all over the statement accompanying tomorrows FOMC decision looking whether the Fed will step up its planned purchases of LT treasuries beyond the already announced $300 billion. If FOMC does so (and if it increases its purchases of non-treasury bonds), then bond yields could come off todays highs, which USD-negative, stocks positive and gold-positive. If Fed does not announce new purchases, then expect USD strength, stocks weakness and potentially neutral to positive gold. Treasuries' reaction will control the day.

AUDNOK's 4-week bull run lost nearly a 1/3 of its 14% gains last week, signaling the beginning of a possible turnaround, which could be prompted by protracted unwinding of risk appetite. With Aussie interest rates at 3.00% compared to 2.00% in Norway, AUD is set for further losses in the event of prolonged pullback in equities. As the analysis stands more favorable for NOK than AUD, we could see more upside for EURAUD than EURNOK, and more downside in AUDUSD than gains in USDNOK. USDNOK nears the trend line resist at 6.85--also the 100-day MA, followed by a possible break out of the 6.9.

Yen strength dominates currency markets on 4% declines in BoA & Citigroup as these were reportedly told by US regulators they need to raise more capital following the stress tests. Yesterdays Hot-Chart on EURAUD hit the 1.8550 target, but more gains seen towards 1.8740. AUD, NZD and NOK underperform as these high yielders fall prey to unwinding of carry trades. Head -&-Shoulder formations are increasingly apparent in AUDJPY and NZDJPY. The topping out formation in major world indices is increasingly apparent, further validating our expectations for more downside next month.

Aside from renewed acceleration in stock's selling, EURUSD drops to $1.30 after ECB's Novotny reminds markets of a possible move into quantitative easing at next month's meeting. he adds that European ABS market is "more or less dead". USDMXP surges 0.75 to 100-day MA of 13.94. USDCAD eyes 1.2360.

JPY and GBP at the top of the best perfomers while AUD and EUR at the bottom as equities eke out a rebound in prompted by rising health care stocks and falling travel and airline sectors. We're closely watching the US 10-year bond yield as it nears Friday's 3.0% highs. Gold and silver retain their bid tone, while GBPUSD's recovery 170-pip recovery from its $1.4515 low remains capped under the $1.4730 TL resistance.

Wells Fargo shares drop 3% after notable bank analyst Richard Bove downgrades the stock to a "Hold". Note that Wells stock touched a high of $21.40 (CORRECTION not $74) Note that on Friday JP Morgan ended lower despite S&P500 close higher. All signs of a down day in stocks are here, hence we could see USDJPY dragged to 96.00 and NZDUSD testing 0.56.

Just noting that Mexico secured a $ 47 bln from the IMF in credit facility as as far back as April 1st as precaution in the event of further deterioration in global markets. This was the biggest financial arrangement in the history of the IMF. Interesing how the IMF can provide such gigantic loans at a time when its suffering serious shortage of resources. So how far back did Mexico know about the flu epidemic? USDMXN eyes 55-day MA at 14.21. New EURAUD Hot-Chart updated.

European equities open lower, shrugging the rally in Tokyo as both BNP Paribas and Societe General open 5% down on reports that the SocGen wrote down 5bln in assets last year. Large airline stocks also hit hard on the Swine flu fears. Cable extends losses to $1.4515 after sending a sharply negative sign on Friday (ending lower on the day and the week) despite an intraday high of $1.4774. JPY leads the winners, followed by USD and CAD. Gold nearing $920 target