Intraday Market Thoughts Archives

We'll show why and how we predicted today's NFP at 70K vs actual reading of 69K in our upcoming Premium Insights to be posted over the weekend. Needless to say, luck always helps. Most economists had 120K-150K. It was the worst reading since September 2010, when payrolls fell by 27K. The rise in the UNEMPLOYMENT rate to 8.2% from 8.1% was the FIRST INCREASE SINCE JUNE 2011. The LAST TIME NFP SLOWED FOR 4 STRAIGHT WEEKS WAS IN 2008 (see our quotes in this weekend's FT) EURUSD showing signs of a potential rebound into middle next week after shedding 5 straight weeks, longest losing streak since 2010. POSSIBLE CAUSES FOR FRIDAY's EURUSD rebound are i) Passing of Irish referendum favouring Euro austerity ii) end-of month fixing coinciding with start of 4-day weekend in London (mkts shut until Wednesday). We will post our Premium Intermarket Insight over the weekend ahead of what promises to be a messy and volatile Asia Monday open. AUDUSD shorts, EURUSD shorts, all GBPUSD shorts are all done, with 1 EURUSD short outstanding and 1 gold sot stopped out. Direct access to those trades is here. http://ashraflaidi.com/products/sub01/access/?a=642 To become paid subscriber and to view archives of all our Insights going to May 2011m click here: http://ashraflaidi.com/products/sub01/

AL

China PMI fell; UK manufacturing PMI dropped; Swiss retail sales and PMI declined; Eurozone unemployment steady and PMI revised higher. Market turns to NFP, Ashraf's prediction is +70K. unemployment rate, personal spending and Canadian GDP. See the latest on our current Intermarket Insights below.

Trading during the Asian session was influenced by manufacturing PMI from China that fell in May to 50.4 from 53.3. The Aussie was initially sold across the board but later recovered. Otherwise ranges were relatively narrow.

USD buying started yet again right after the London session began.

Fundamentals did not provide a reason why the sentiment should change so all majors were quickly sent below their yesterday's lows against the buck.

GBPUSD dropped to 20 week low at 1.5269 on the back of much weaker than anticipated UK manufacturing PMI data that fell sharply in May to 45.9 from 50.2, reaching the weakest print in three years. Manufacturers cut back output and employment as new orders dropped at the fastest pace since 3/2009. Orders slowed not only from Europe but also from Asia and the US. More QE now seems nearly inevitable.

From other news we learned that Swiss retail sales declined in April to 0.1% from previous 4.7% y/y and SVME PMI fell to 45.4 from 46.9. Eurozone unemployment rate remained unchanged in April at 11% and manufacturing PMI was revised marginally higher to 45.1 from initial 45.0.

The result of the Irish referendum on the fiscal pact will be announced later today.

The US session starts at 8:30 am with May NFP report that is expected to rise to 151K from previous 115K while the unemployment rate is seen steady at 8.1%. Personal spending is anticipated stable at 0.3%.

ISM manufacturing is due at 10:00 am ET and it is anticipated lower in May at 54 from previous 54.8. See Ashraf's IMT for detailed explanation why it is likely to disappoint.

Canadian data is limited to March GDP which is expected to grow 0.4% from previous -0.2% m/m and 1.9% from 1.6% y/y.

Ashrafs Premium Intermarket Insigts stick with the 2 outstanding shorts in EURUSD and AUDUSD; 1st objective in EURUSD short is at 1.23. USDCAD long is done at 1.0360. For direct access to our remaining trades, click here http://ashraflaidi.com/products/sub01/access/?a=642 ; Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

The euro continued to make new lows as economic data deteriorates and European policymakers stay mum on Spain. The yen was the top performer while the pound sterling lagged. Fridays Asia-Pacific session will be busy as China releases the official PMI. See the latest on our current Intermarket Insights below.

US economic data continues to show an economy that is muddling along. The Chicago PMI fell to 52.7 the lowest since 2009 as manufacturing strength ebbs alongside the slowdown in the global economy. The report followed soft data on initial jobless claims and ADP employment.

No solutions appear in sight for the credit crunch in Spain. A report saying the IMF is preparing contingencies for a bailout was flat out denied. Other chatter in Europe suggests no imminent plans to shore up banking or back distressed sovereign debt.

As a result, investors are fleeing to the safest assets. US, German and UK 10-year yields continued to make record lows. In turn, the forex market sought out yen. EUR/JPY closed below the January low of 0.9307 to the lowest since shortly after the common currency was introduced.

Signs of fear on global growth were everywhere with oil falling as low as $85.86. Some positive signs from the periphery helped to stabilize sentiment late in the day as polls show New Democracy with a slight lead over Syriza and Irelands referendum likely to pass.

The top release in Asia comes at 0100 GMT when the Chinese official manufacturing PMI will be released. The consensus is for a 52.0 reading after a 53.3 print in April. The final HSBC PMI will be released at 0230.

Other reports include Australias AiG performance of manufacturing at 2330 GMT and Japanese Q1 capital spending at 2350 GMT (exp +1.0%). Late in the session, the market may begin to quiet ahead of non-farm payrolls.

2-year support level hit in GBPUSD and executing out 1.5465 target. We stick with the 2 outstanding shorts in EURUSD and AUDUSD, whose objectives are longer than the usual targets in the Premium Insights. For direct access to our remaining trades, click here http://ashraflaidi.com/products/sub01/access/?a=642 ; Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB

I just finished chatting with a reporter friend of mine in NY (former FX trader in the 1980s) and we reached the conclusion that "Just because there is no dollar funding crisis does not mean the world isnt coming to an end"

This very point was shown in my charts yesterday, illustrating the plunging spread between EU & US 3-month LIBOR. We showed in the 2nd of yesterdays 4 charts that BRICs may no longer carry the world economy on its back as all 4 economies are cooling to the extent of cutting rates to all time lowsas in the case of Brazil last night. (More below)

Earlier today, the Chicago PMI hit its lowest level since October 2009 at 52.7 in May, from last months 56.2. The index has fallen by 10 points in 2 months, pushing its New Orders sub-index to the lowest since September 2009. Considering that the correlation between Chicago PMI and ISM surveys is above 0.88, and the ISM manufacturing is due tomorrow, the expected 53.8 reading may prove ambitious. We showed our paid subscribers of Intermarket Insights our prediction for the recurring cycles of 2007/8 into today HERE: (September EURUSD calling 1.29 in December based on macro & technicals) http://ashraflaidi.com/articles/fed-twist-ecb-turn-euro-shouts.asp AND HERE: http://ashraflaidi.com/articles/april-fears-ahead-of-fed-spain-china.asp

But last week, the US Conference Board told us consumer confidence hit its highest in 4 years (yes, highest since 2007). So once again the CONSUMERS ARE ALWAYS THE LAST TO KNOW . Yet, govts are ailing and corporations are stashing cash. Gold is no longer a safehaven. Central banks are running of imagination and so are govts.

But one thing you can depend on is the recurrence of these 2007-08 cycles, which we consistently covered in our intermarket charts over the past 4 months.

Yesterdays $1.4650 target in GBPUSD was reached, and so was 1.0360 in USDCAD. GBPUSD call was based on the initial chart posted 2 weeks ago. Both EURUSD shorts are in progress, and only 1 of 2 AUDUSD shorts is in filled and in progress. Gold stopped out at 1570 & were sitting back for now. For direct access to our remaining trades, click here http://ashraflaidi.com/products/sub01/access/?a=642 ; Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

AL

Draghi's urges leaders to clarify there is EZ vision; German retail sales rose m/m but fell sharply y/y; German unemployment rate lower; Eurozone CPI eased; Swiss GDP rose. USD ADP rose to 133K from 113K but was 20K less than expected; Q1 GDP revised down to 1.9% and jobless claims rose by 10K. Chicago PMI is next. Details on last nights Premium Intermarket Insights are found below. These include key chart on monthly stochastics of Spains 10-yr yields chart as part of the 4-in-1 charts.

The ECB president Mario Draghi said today that European leaders must clarify their vision for the Eurozone. They should outline a banking union that would guarantee pan European deposits, create European bank resolution fund and centralize bank supervision, MNI reports. As a consequence sovereign spreads and risk aversion would decline, he added.

German retail sales rose only 0.6% in April after 1.6% in March while annual sales dropped by 3.8% from previous 3.2%. The labor market continues to be resilient as the unemployment rate declined to 6.7% from 6.8% and the number of unemployed Germans remained unchanged.

In other news, Eurozone CPI eased further to 2.4% from 2.6% reaching a 15 month low; Swiss Q1 GDP rose 0.7% from 0.5% q/q but remained steady at 2% on annual basis and UK nationwide HPI declined 0.7% in May from previous -0.9% y/y.

Spanish and Italian 10 year yields are lower today around 6.51% and 5.83% respectively. Spain-German 10 yr spread enters its 4th day above 5%. +5% is the bailout territory for Greece, Ireland and Portugal.

US May ADP disappointed at 133K from a revised 119K ve expectations of 150K, while US Q1 GDP was revised down to 1.9% from 2.2% as expected, with Personal Consumption revised down to 2.7% from 2.9%. US Jobless claims rose to 383K from a revised 373K, vs. an expected decline to 370K.

Chicago PMI is due at 9:45 am and it is seen marginally higher in May at 56.7 after falling considerably in April to 56.2.

Ireland is voting today to ratify the fiscal treaty. While an approval is widely expected, a failure to ratify the treaty would weaken the common currency even further. The polling stations close at 10 pm local time (5pm ET).

Both of Wednesdays EURUSD trades are in progress; only 1 of 2 USDCAD longs is filled and in progress and only 1 of 2 AUDUSD shorts is in filled and in progress; GBPUSD short has been filled, targeting the key target from last weeks premium charts; Gold stopped out at 1570 & were sitting back for now . For direct access, click here http://ashraflaidi.com/products/sub01/access/?a=642 ; Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

Fixed-income markets signaled a new level of fear on Wednesday with no solutions in sight for Spain and global growth slowing. The yen was the top performer while the Australian dollar lagged. The calendar is plentiful in Asia including Japanese industrial production and Australian building approvals. Wednesday's Intermarket Insights contain new trades on EURUSD, AUDUSD, and GBPUSD as well as 4-in-1 Charts on intermarket cyclicals. More Below

Yields on US, German and UK 10-year debt hit record lows in a sure sign that the European financial crisis has entered a new stage. The yield on the German 2-year schatz hit 0% with investors fleeing to safety and eager to hold something akin to a call option on Deutsche Marks in case of a eurozone breakup. At the same time, Spanish 10-year borrowing costs hit the highest since November.

In fx, the worries translated to EUR below 1.24, cable below 1.55 and USD/JPY below 79, all cycle lows with the commodity bloc closing in on similar breakdowns. Oil fell nearly $3 to $87.82 and the S&P 500 declined 1.4%.

Headlines werent particularly frightful but the Italian 10-year auction over 6% and a lack of meaningful direction to quell the credit crunch in Spain sparked a rush to the exits. A Greek poll showed Syriza back in the lead with 30% of the vote and other showed them in a tie with New Democracy. US pending home sales plunged 5.5% in April compared to the flat reading expected.

European officials dont have a coherent plan as ECB rumors continue to be unfounded and Rehn ruled out taping the EFSF for banks. Eurobonds remain on the table but they are a long-term solution to a problem that needs near-term action.

The market is coming to the conclusion that its outside of the political structure of will of European politicians to adequately address the crisis and the fallout for global growth could be severe.

In the US, policymakers are also aloof. The Feds Dudley said the costs of further QE probably outweigh the benefits while Fisher said liquidity is adequate. The Boston Feds Rosengren called for more QE but hes a marginalized voice at the table.

Early in the Asia-Pacific session, Brazil is expected to announce a 50 bps rate cut to 8.50% but a 75 bps cut cant be ruled out. The Brazilian finance minister scaled down his growth estimate to at least 3% today from the January 4.5% estimate.

At 2350 GMT, Japan will release April industrial production, which is expected to gain 0.5% m/m. At 0130 GMT, Japanese labor cash earnings are forecast to increase 1.1%. At the same time, Australian April building approvals are expected up 0.3%.

Our cyclical charts shown over the last 4 months on BRICs policy rates, Eurozone macro deterioration, EU-US LIBOR spreads and the implications of EU Libor leading the decline (instead of USD labor pushing higher) are all outlined in todays Intermarket Insights with the latest trades. Click here http://ashraflaidi.com/products/sub01/access/ ?a=642 Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB

There are no significant EURUSD support levels between $1.24 and $1.22, but we urge extra care in the rebounds (however brief) as near the end of shortened week and the all important NFP. We are entering the 5th weekly decline in EURUSD, which is the longest losing streak since February 2010. Our cyclical charts shown over the last 4 months on BRICs policy rates, Eurozone macro deterioration, EU-US LIBOR spreads and the implications of EU Libor leading the decline (instead of USD labor pushing higher) are all outlined in todays Intermarket Insights with the latest trades. Click here http://ashraflaidi.com/products/sub01/access/?a=642 Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

Spain 10-yr yields hit 6.70%, German and US 10 year yields at record lows; Eurozone consumer confidence improved but economic and business confidence fell further; UK mortgage approvals rose; KOF economic barometer improved; poor Italian auction. Market turns to pending home sales and Draghi's and Dudley's speech. Latest on the adjustments from Tuesdays Intermarket Insights is below.

The markets escalated their sellof after the ECB refused Madrid's attempts to inject Govt bonds into Bankia and exchange that for fresh funds from the LTRO. But the ECB said such move would be an indirect form of govt funding from the ECB, which is illegal.

USD continues to push higher across the board except the JPY. European equities are losing about 1.5% and JPY leads while NZD lags.

Flight to safety continues today as the German 10 year hit a record low at 1.315% and the US counterpart fell below 1.6820%. At the other end of the spectrum, the Spanish 10 year yield hit 6.7%, which is the highest level since 11/2011 and the Italian 10 year broke above the psychological 6% level.

Eurozone consumer confidence slowed its fall by printing -19.3 in May from April's -19.9 but business confidence deteriorated further (-0.77 from -0.51) and economic confidence also declined (90.6 from 92.9). The labor market is therefore unlikely to improve in coming months making any recovery improbable in the short term. EURUSD fell to 1.2433.

UK Mortgage approvals rose in April by 51.8K from previous 51.1K which is the highest level this year but still low compared to historical averages. Net consumer lending was GBP 1.4 bln in April compared to GBP 1.7 bln in March.

KOF economic barometer rose in May to 0.81 from April's upwardly revised 0.43. This is the third back to back increase but rather than reflecting any improving fundamentals it is more likely that it is caused by a significant decline seen between 05/2011 and 1/2012. EURCHF continues to be stuck in the absurd 6 pip range.

Italian auction was rather poor today as Italy failed to reach a full take up, average yields rose and cover declined. 5 year BTP yielded 5.66% from 4.86% and 10 year BTP yielded 6.03% from previous 5.84%.

US reports are limited to pending home sales due at 10:00 am ET that are expected unchanged in April after growing 4.1% in March.

Markets also await ECB president Mario Draghi's speech in Brussels that is scheduled to start at 11:30 am and FOMC member William Dudley who will deliver a speech and also answer audience questions at 1:30 pm.

Tuesdays Intermarket Insights were adjusted for their entries in EURUSD, EURJPY and gold following the sharp moves around the London close. 1 of the 2 adjusted EURUSD shorts has been filled and hit all targets. One of the 2 USDCAD hit all targets. Since the adjusted entry in gold remained unfilled (changed to 1560 but market rebounded to only 1558), we adjusted it a second time by pushing the entry lower. For the latest on those insights and chats, please click here for direct access: http://ashraflaidi.com/products/sub01/access/?a=641 To subscribe, click here: http://ashraflaidi.com/products/sub01/

A note to subscribers of our Intermarket Insights: About 4 hours after we issued the Intermarket Insights yesterday, we adjusted the entries in EURUSD, EURJPY and gold following the sharp moves around the London close. 1 of the 2 adjusted EURUSD shorts has been filled and is in progress and the same applies for the adjusted EURJPY shorts. Since the adjusted entry in gold remained unfilled (changed to 1560 but market rebounded to only 1558), we are adjusting it a second time by pushing the entry lower. For the latest on those insights and chats, please click here for direct access: http://ashraflaidi.com/products/sub01/access/?a=641

A rapid assault broke against the euro and most risk assets right after the London close, driving EURUSD below 1.25. Gold lost $30 while New Zealand dollar outperformed. Australian retail sales, due later tonight, will be the impetus in Asia-Pacific trading. Tuesdays Premium Insights titled : Fading Gold & Sticking w/ EUR Shorts were revised later in the day after the rapid moves exceeded the stated entries. More details below.

Rumors were plentiful once again but solid reasons for the euro decline were hard to uncover. The euro climbed to 1.2550 early in US trading on unfounded talk that the ECB would roll out a bank recapitalization plan. The rumors grew so loud that officials were forced into a denial, which sank the euro back to 1.2525.

Shortly afterward, EUR/USD began a rapid plunge to a nearly three-year low of 1.2462. An Egan-Jones downgrade of Spain and banks repaying LTRO funds because collateral no longer qualified were variously cited but the move didnt add up. A hint may have come late in the day as the ECB rejected Spains plan to recapitalize Bankia with government bonds rather than cash.

The euro recovered as high as 1.2510 as the S&P 500 gained 1.1% but fell back below 1.2500 shortly after the US close.

Economic data was negative with US consumer confidence falling to 64.9 compared to 70.0 expected. The main index and most sub-indexes were at the lowest since January. The latest Greek poll showed New Democracy at 23.4% compared to anti-bailout Syriza at 22.1%.

The focus of Asia-Pacific trading is on Australia ahead of the June 5 RBA decision. April sales are expected up 0.2% after a 0.9% in March. The market is currently pricing in 32 bps of cuts at the meeting and this is the last Tier 1 data point beforehand. Expectations are likely to drift toward 25 bps if sales grow 0.0% or more. That should conspire to limit rate cut hopes. A strong number could make the market reconsider cuts this month and kickstart an AUD rebound.

Tuesdays Intermarket Insights, include new ideas in EURUSD, EURJPY and gold, with USDCAD and oil in progress. The GBPUSD hit all targets. For direct access to todays edition, click here: http://ashraflaidi.com/products/sub01/access/?a=641 Non subscribers, click here: http://ashraflaidi.com/products/sub01/

-AB

Looking at the latest record highs in Commitment of Traders' net EURUSD shorts is not enough when excluding the futures flows in the overall USD Index. Our latest HotChart examine the positioning in the USDX and their potential implications for EURUSD. Click here for lates HotChart http://ashraflaidi.com/hot-chart/?a=3318

There is much talk about the so-called extreme net shorts in EURUSD versus the relatively stable pick up in USD Index net longs among speculative futures traders in the Chicago Mercantile Exchange. We have discussed this in the latest HotCharts section. But what about speculators positioning in gold and oil? The latest data on speculative futures traders in the Comex shows net longs in gold contracts have stabilized at 115,151 contracts, just above the prior weeks 114,142 contracts, Todays Intermarket Insights looks at the latest in gold, EURUSD, EURJPY and GBPUSD. For direct access to todays edition, click here: http://ashraflaidi.com/products/sub01/access/?a=641 Non subscribers, click here: http://ashraflaidi.com/products/sub01/

4 Greek banks recapitalized; German CPI still being collected; UK CBI sales soars by 27 pts; Swiss UBS consumption improves; Italian auction. Market turns to SP Case Schiller and CB consumer confidence. A new Intermarket Insight edition is due before the US open. See below for more detail.

USD trades slightly stronger across the board in the ongoing session and the major European equities are trading within -0.2% to +0.15%.

Four Greek banks were recapitalized yesterday as they received EUR 18 bln via bonds from the EFSF rescue fund which allows them to access the traditional ECB funding instead of the Emergency Liquidity Assistance (ELA) that has to be managed by the Greek central bank. Market sentiment improved throughout the Asian session but once London traders got to their desks they started to buy the greenback again.

German CPI for May is still being collected and the result is due later today. From states that have already submitted the results it seems that the monthly as well as the yearly inflation will ease further.

In the UK, CBI distributed sales soared 21% in May from April's -6% reaching the best levels in 13 months. June expected orders rose 18% from previous 6%. GBPUSD retraced momentarily but quickly lost its gains and trades near session lows around 1.5680.

The Swiss UBS consumption indicator rose again in April to 1.41 from previous 1.20. CHF has not responded at all to this report which was not surprising considering that it has been ignoring the ongoing chatter about the possibility of a capital controls on foreign deposits.

Italy was able to reach a full take up as it sold EUR 8.5 bln 6 month BOT but the average yield rose to 2.104% from 1.77% and bid to cover fell to 1.61 from 1.71.

The US session starts at 9:00 am ET with S&P Case Shiller index. The selling price of a single family home is expected to fall additional 2.7% in March after a 3.5% decline seen in February. May CB consumer confidence is due at 10:00 am ET and it is anticipated slightly higher at 69.8 from previous 69.2.

A new Intermarket Insight edition is due before the US open. All of our EURUSD shorts hit all targets, while the AUDUSD and gold shorts were stopped out. Oil, GBPUSD and USDCAD positioning remain in progress. Direct Access to these trades, click here: http://ashraflaidi.com/products/sub01/access/?a=639 Non subscribers, can click here to join http://ashraflaidi.com/products/sub01

Spanish regional funding shortfalls and problems at banks knocked EUR/USD briefly below 1.25 to cap a dismal week for the currency. Trading was light as the US heads for a long weekend but the USD was the top performer and CAD lagged. The CFTC positioning data showed a fresh extreme in euro shorts.2nd EURUSD short hit 1.2520 target while the other did not hit 1.25 & remains in progress. All AUDUSD shorts and USDCAD longs remain progress. 1 GBPUSD short closed at 1.5650, the other remains in progress. Both gold shorts stopped out. US crude short in progress.

The Catalonia regional government leader said debt financing is running out and that needs help from the central government. The report pushed the euro below barriers at 1.25 but the currency later rebounded on mild positive optimism from the final University of Michigan consumer sentiment survey, which rose to 79.3 compared to 77.8 exp.

After the euro rebounded to 1.2548 it began weakening again and continued lower or confirmation of the rumor that Bankia would need more than the promised 15 billion euro bailout. The government pledged 19 billion euros in return for a 90% stake. Later, S&P downgraded 5 Spanish banks, including Bankia and Banco Popular, which were cut to junk.

The euro closed out the week narrowly above 1.25 and the US holiday is likely to keep markets quiet to start the new week.

The market is futures heavily short euros according to the latest CFTC Commitments of Traders report. The euro net short rose to a record 195K compared to 174K last week, which was also a record. The yen short was pared to 18K from 34K. All other changes saw a net USD gain. Of note was AUD, which fell to a net short position (-17K from +5k) for the first time since Jan 2011.

Direct access to those remaining trades in EURUSD, USDCAD, AUDUSD, GBPUSD and US crude, please click here: http://ashraflaidi.com/products/sub01/access/?a=639 Non subscribers can click here: http://ashraflaidi.com/products/sub01/

-AB