Intraday Market Thoughts Archives

Markets anticipate the 17:30 GMT join press conference by German Chancellor Merkel and Greek PM Papandreou after their meeting in Berlin. German made it clear it will only give political support and not make any promises for financial aid to Greece. Yen weakness extends across the board on better than expected US jobs report and the subsequent rallies in US equities. The key resistance levels of gold (1140) and oil (81.40) have been tested but have yet to show a close on the week. AUDUSD made an intraday break of the 100-day MA 0.9070 as was the case on Wednesday but it will have to close the week above it for the bull run to extend beyond this key resistance levels. GBPUSD faces next obstacle at 1.52

US Jobs report widely better than expected (-36K, unemp. rate unchanged at 9.7%) boosting Dow futures by 50 pts while giving brief lift to the USD. YEN is the biggest loser on the news as USDJPY could regain 90.50s, but stay away from chasing yen weakness into rest of the trading session as stocks risk losing their gains. Similar dynamics occurred at the release of the Dec 4 report when better than expected figure fuelled USD strength to the extent of weighing on equities and commodities. US 10 year bond yields gain 8 bps to 3.68% but seen capped at 3.75%. Gold remains capped at 1140 and GBPUSD seen retesting $1.4970, while capped at $1.5120 AUDUSD nearing the elusive 100-day MA of 0.9065-70, which may call for fresh shorts back 0.9010 and 0.8980 (NOT 0.8880)

NFP DOLLAR BIPOLARITY? With forecasts for Fridays US jobs report ranging from -150K to -40K and unemp. rate expected +0.1% to 9.8% + the price effect of the previous revisions, the multitude of factors weighing on the report will undoubtedly cause wild swings in the 30-60 mins after the release. USD will likely rally on NFP bipolarity i.e. with the overall report either very disappointing (big NFP decline + big rise in unemp rate OR big NFP increase and unemp rate decrease). Weve already seen the June 2009 jobs report (released in Jul) when a rare consistency in the jobs report (declining NFP losses and falling unemp rate) caused a $USDX rally along side a short-lived rally in stocks. A more recent & memorable case was the Nov jobs report (released in December 4th) which showed the smallest NFP decline in over 2 years. A strong report would spike up fed funds futures and make USDJPY among the biggest winners of the day. All $USDX pairs would rally with the opposite case being for JPY. A gloomy report would help USDX to the extent of a sell-off in equities, as it stands, THE AUDUSD DEJA VU ALERT IS STILL ON and EURUSD RESISTANCE still holds as in here http://chart.ly/d4mscs

Daily VIX chart http://chart.ly/xv36e3 shows signs of a possible rebound from an oscillators perspective, which are consistent with previous rallies (4 green circles). A rise in the VIX implies a pullback in the S&P500 along with most equity indices. Integrating the peaking signs in the Aussie and the CRB as well as the bottoming process in the VIX, these dynamics may just be suggesting a deterioration in risk appetite emerging from Fridays US jobs report, which would refuel USD longs at the expense of equities, energy, metals and all European currencies.

USD EXTENDS GAINS across the board, dragging EUR to 1.3580 and cable back towards the 1.5030 lows. AUDNZD continues to rally beyond 1.31 but AUDUSD deepens losses towards 0.8990s, eyeing 0.8950s. Worse than expected pending home sales weighing on risk appetite. Gold hits 1127 target in previous tweet, now looking to extend losses towards 1117 in Asia. AUDCHF target stands at 0.9580. GBPUSD eyes 1.5020 from current 1.5060. Key WATCH ASHRAF's GOLD PRESENTATION on CANTOS CHARTS http://bit.ly/4Un1wP

Bank of England keeps makes no statement at its interest rate decision. Preliminary demand orders for Greeces 10-year bond offering reached 16 bln. It is not clear when the bond offering will actually take place. France says a Franco-German aid for Greece is NOT on the agenda, which fuels speculation that Greece will seek assistance from the IMF, in which case would be a positive for the euro. We stick with the $1.3770 interim resistance followed by key ceiling at $1.3850, while renewing our call for the $1.32 target before end of quarter. AUDUSD failure to breach above the 100-day MA of 0.9065-70 level (did not close above it) is consistent with our alert for emerging risk aversion (as was the case in the week of Dec 1). Watch Ashrafs Video Presentation on Gold at Cantos Charts http://cantos.com/charts

EURO's UPCOMING resistance standing near $1.3820-30 in the event of improved risk appetite, SEE CHART http://chart.ly/d4mscs Neither tomorrow's BoE nor ECB interest rate announcements are expected to show anything new, but do allow for the small possibility of any dovish remarks from the BoE (Noon GMT). Theres also talk about Greece using its austerity plan to bypass the sceptical German and go to the IMF for assistance. Ashraf noted in todays CNBC interview that Greeces austerity plan was strict to the extent that it appeared to be from the IMF

http://bit.ly/bX3LVl . Expect more speculation about whether Germany will provide loan guarantees and, which of the next credit rating agencies will praise todays plan (as did Moody's).

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Ashraf's interview earlier today on CNBC-US (Power Lunch) discussing the Greek Austerity Plan, Spain, the Fed & Sterling http://bit.ly/bX3LVl (4:58 mins)

Yesterday's appearance on CNBC-Europe http://bit.ly/bV3NTY (1:32 mins)

US Feb services ISM hits 53 (exp 51) highest since Dec 2007, while Employment component rises to 48.6 (highest since April 2008) from 44.6. The report pushes 10-year yields to 3.65%, while EURUSD remains capped at the $1.3670 resistance mentioned in previous IMT (61.8% retracement of the 1.3785-1.3442 decline). EURUSD REMAINS WELL IN ITS 3-MONTH DOWN CHANNEL, whose validation can only be eroded by a breach above $1.3820. GBPUSD downtrend also intact, with any extended rebound seen capped at $1.5134. With ADP coming in line with expectations at -20K (previous revised to -60K from -22K) we warn about the possibility for a positive surprise in Fridays job report. AUDNZD shorts may consider short positions in NZDJPY especially as AUDUSD and AUDNZD continue to fail those important resistance figures addressed in this IMT http://chart.ly/d9v4r2 *** WATCH ASHRAF ON CNBC-US (Power Lunch) at 12:25 EST (17:25 GMT) ***

GREEK SHOOTS FOR EURO? Euro holds firm and Greek bond spreads fall to 2-week lows as Greece announces 4.8 bln austerity plan to help it meet its fiscal targets this year. These measures are not only a way to prevent credit rating agencies from hitting out with another downgrade, but also part of the Greek govts progress report that will be submitted in mid March. EURUSD remains capped at 1.3660s 61.8% retracement of the 1.3785-1.3442 decline. Watch the 4-hr stochastics for a potential negative crossover. Gold stuck at the 1135037 level, which is BOTH the 50% retracement of the 1226-1044 decline & neckline of Rev H&S formation.

Influential banking analyst RICHARD BOVE Bove CUTS his GOLDMAN SACHS' 2010 EARNINGS VIEW to $18.04/s from $18.75/s based on disappointing trading activity. Watch equity futures after these news. AUDUSD awaits Q4 GDP figures at 00:30 GMT, expected to accelerate to 0.6% q/q from 0.2% q/q (2.0% y/y from 0.5% y/y) but will it be enough to lift AUDUSD back above 0.9070 (100-day MA)? We may reach towards those levels but is a close above it possible? Refer to previous IMT for more detail. SEE JOHN AUTHERS Video report on stocks-forex correlations http://bit.ly/SedU mentioning Ashraf's take on $USD & LIBOR rates

A PRICELESS CASE OF DEJA VU maybe emerging this week: AUDUSD fails at the 100-day MA of 0.9065, which we WARNED IN OUR PRE-RBA IMT yesterday by indicating: any subsequent break-out has to face the 100-day MA at 0.9070 (100-day MA not broken since late January). Today AUDUSD continues to fail these CONFLUENCE LEVELS (100-day MA & 61.8% retracement at 0.9038). **** FLASHBACK TO TUESDAY DECEMBER 1st when the RBA hiked by 25 bps to 3.75% only for the Aussie to peak at 0.9326 before being dragged down 2 days later along with ALL RISK ASSETS and CURRENCIES on that INFAMOUS FRIDAY Dec 4th when the stronger than expected US Nov jobs report (released Dec 4th) proved to be an extremely USD-positive event to the extent of UNWINDING THE USD-CARRY TRADE (dragging down gold, silver, oil, stocks all against USD and JPY). And Yes YOU've GUESSED IT: This coming Friday is the Feb US jobs report, only this time we may have a SNOW-FILLED DISAPPOINTMENT that could drag down equities & commodities to the benefit of the USD & JPY. Here's another thing; GOLD HIT a new record high against EUR on that week ending in Dec 4th, the same as TODAY (gold hit new record in EUR terms). And if that is not enough, today's YEN strength PRECEDED the eventual retreat in US stocks. Markets are losing steam as S&P500 approaches 1120 (previous 50% retracement of 2007-2009 move). CONCLUSION: A new round of strength in USD + JPY emerging later this week against all major FX, alongside a protracted pullback in equities + metals.

GOLD HITTING NEW HIGHS vs. EUR at 837.08 which could be another classic topping formation in the metal as the case proved 2 weeks ago vs. EUR and against JPY in Dec 2nd. Gold vs. USD extends gains towards 1134, facing key resistance at 1135--50% retracement of the decline from the 1225 high to the 1044 low. Dollar gets a brief lift after Kansas Fed's Hoenig (lone hawkish dissenter at FOMC) reiterates his opposition to the Committee's "low rates...for considerable period" mantra; adding that zero rates are not sustainable. $GBPUSD drops from $1.4990s to $1.4930s, but renewed USD capping interest supports GBPUSD and EURUSD at $1.4880 and $1.3470.

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RBA PREVIEW (we also got AUD Retail Sales at 00:30 GMT): Hardly anyone is speaking about tonights RBA interest decision (03:30 GMT) because most economists expect a 25-bp hike to 4.00%. Although we expect the RBA to make its 4th rate hike of the current tightening cycle, we deem this probability to be at 70%. More importantly, AUDNZD and AUDUSD could enter a lose-lose situation, whereby a decision to hold steady would be a punishing surprise for the Aussie, while rate hike may signal the end of the current tightening cycle. SEE AUDNZD HOT-CHART for more on RBA RATIONALE http://bit.ly/b9DCb9 We have seen in the past how strong Aussie jobs figures (November) and an RBA hike (December) occurred at the same week the Aussie ended lower. We could see AUDUSD retest 0.9030-40s61.8% retracement of the decline from the 0.9316 high to the 0.8580 low; but any subsequent break out has to face the 100-day MA at 0.9070. (100-day MA not broken since late January). An Aussie rate hike may be better capitalized upon vs. JPY than vs. USD, with 80.70 a possible target.

While we continue to deem the recent rebound in EUR as a temporary retracement before renewed erosion towards $1.32; 0.922 (vs. GBP) and 1.4550 (vs. CHF); the accelerating losses in GBP face no immediate floor until $1.4590 and $1.4334 (76% retracement of the rally from the $1.35 low to the $1.7006 high.

We mentioned GBP in each of the our last 3 IMTs for a reason (Fri-Sat). sterlings collapse continues as GBPUSD drops 2.9% in a single day to $1.4784 (lowest since April), which is weighing on EURUSD. Lloyds bank latest losses (Friday); HSBCs eroding profits, renewed political doubts over a possible hung parliament in the wake of this years UK elections and the cusp of a double dip recession in the UK have led to massive cascading of stops in GBP. A renewed test of $1.4840s (61.8% retracement) remains in the cards, but rebounds could extend as high as $1.4970s especially as traders reposition ahead of this weeks busy econ calendar (ISM, PMIs ADP, Payrolls). USDCAD GDP next exp +0.4%; USDCAD eyes 1.0630 but support remains underpinned at 1.0470. Watch Feb US pers spending 13:30; Feb US ISM 15:00 See calendar http://www.ashraflaidi.com/economic-calendar/