Intraday Market Thoughts Archives

While the dollar is expected to accumulate further gains in Q3, these are likely to be sporadic and choppy at best. Such gains are seen more of a reflexive bouts emerging from extended pullbacks in global bourses, rather than a proactive strategies to build long term USD positions. $1.3750 vs EUR, $1.62 vs GBP remain key resistance levels for the US currency to breach. Meanwhile USDJPY upside faces more substantial pressure at 97.50-98.

Dollar remains generally firm despite smaller than expected losses in Asia and low volume activity in Europe. With US markets out for a long weekend, market activity to start unwinding in a couple of hours. Weaker than expected UK services PMI and disappointing Eurozone retail sales may signal the beginning of the next consolidation in data following the phase of slowing deterioration-which was zealously cheered by the markets. GBPUSD looks to test 1.6270 while recovery cpaped at 1.64 and EURUSD gains seen limited at $1.4070. Trades, Links & Ideas on http://twitter.com/alaidi

Very little suspense in todays market action as the US jobs report deteriorated across the board, allowing USD and JPY strength to emerge throughout the day as stocks stuck at session lows during the course of the session. Our calls pro-USDCAD of more than 100 pips to 1.1620s and going negative JPY crosses (including vs the USD) and pro-USD vs AUD, NZD and GBP have accumulated over 800 pips. We called oil to decline towards 66.50s. Nikkei-225 closed -63 on Thursday but futures are currently calling for -215 pts at the open to 9670, which could extend selloff in JPY pairs.

Although both USD and JPY gaining vs all other currencies, we may see further upside for JPY as USD longs are increasingly short-lived in cautiousness of the next bout of jawboning from Chinese officials regarding reserve currencies. NZDJPY, CADJPY eye 59.70, 82.30 respectively. More updates on http://twitter.com/alaidi

As we warned the risk-based dollar rally is emerging after US June jobs figures show a more straightforward story this time, with the unemployment rate rising to 9.5% from 9.4% and payrolls -467K after May was revised to -322K from -345K. Dow futures extend losses to -120 pts from -50, boosting USD vs all currencies with exception of JPY, which risks testing 96.00 and 95.80 support. Cable risks testing 1.6270, EURUSD eyes 1.3920, USDCAD eyes 1.1620. USDJPY eyes 95.80 after the expected failure to breach above 97.20.

ECB press conference and US jobs due at the same time (12:30 GMT), with Trichet expected to talk more about last weeks 1-yr auction (EUR-negative. We expect payrolls at -425K, worse than the expected -375K and unemp rate at 9.3%, which could end up further propping the dollar on deepening risk aversion. Oil falling for the third straight day (longest string of losses since Apri), risking to breach below $66 and onto 64.90. USDCAD seen regaining 1.1580 and 1.1620. EURUSD seen testing 1.3880 and cable at 1.6270,

LAST MONTH's REACTION to the JOBS REPORT: June 5, 2009 10:09 ET: FOREX GETS IT RIGHT before equities and bonds. Forex initially curtailed its risk appetite trade before equities joined in by sending stocks from +1.2% to -0.1%. The initial reaction in forex, bond and equities markets to the jobs report focused on the smallest job loss in 8 months (-345K vs expectations of -530K), while shrugging the 0.5 jump in the unemployment rate to 9.4%--highest since 1983. But FX later cut dollar losses by 200-pts in minutes, by dragging down EUR, AUD, GBP and CAD. Some analysts are stating the payrolls wqere erroneous according to the BLS birth-death model. USDCAD regains 1.11, GBPUSD tests below $1.60 and EURUSD eyes 1.3970.

SEE THE LINK IN THE ARCHIVE OF OUR INTRADAY MARKET THOUGHTS http://www.ashraflaidi.com/forex-news/archives/2009/06/w01/

Latest sell-off in the dollar is being attributed by traders to Reuters says the euro's jump 20 mins ago was due to sources saying China demanded G8 to discuss new global reserve currency at next week's G8 meeting. Euro usually rallies sharply on such anti-dollar news. Thin trading volumes increasing the choppiness of trading, but oil is refusing to rally on the news and testing the 68.80s. Traders watch out from renewed clash between the unemployment rate and the payrolls. Last month, markets cheered the smaller than exp decline in payrolls, prompting US equity futures higher, only to reverse all gains on focus towards the jump in unemp rate to 9.4%. As stocks fell, dollar pushed higher along with the yen. if payrolls come in within expectations of -345K and unemp rare rises from 9.5%, then we cannot expect any further gains in equities. S&P500 resistacne remains at 930-933.

Weakness in the yen and sterling dominate trading. Bigger than exp decline in US ADP jobs, bigger than exp decline in construction and negative pending home sales weighed on risk appetite temporarily. ISM was w/in expectations. NZD, GBP and JPY among the big losers. USDJPY fails to break above the right shoulder of 97.10 (some charts have the high at 97.18), but we could see a renewed attempt. 96.20 support holding firm. Weekly Crude oil stocks show a draw of 3.7 mln bbs vs forecast of a draw of 2 mln.

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This section is dedicated to contributions by traders, analysts and consultants focusing on foreign exchange, commodities, equity indices and fixed income. Cable reaches our intermediate $1.6380 target, while USDJPY pushes higher, testing the 97 resistance in thin trading. European bourses cheer China's PMI while oil retests $71.

HOW TO TRADE THE TANKAN: The upcoming quarterly tankan survey on Japanese business sentiment (23:50 GMT 19:50 EST) is expected to show a recovery from the record lows registered in the April survey (Q1). Large manufacturers’ SENTIMENT index seen improving to -43 from -58, large manufacturers OUTLOOK seen at -34 from -51, Large non-manufacturers index seen at -27 from -31. Historically, however, the more INFLUENTIAL component of the tankan survey has consistently proven to be large manufacturers’ plans for capital expenditure (Capex), which last time was slashed by 13.2%--the worst since the survey began in 1975. Thus, the more important components are the forward-looking indicators, such as capex, and diffusion indices. If markets interpret the survey as leaving the worst behind, risk appetite in Asian session could stabilize from the NY session and dollar could weaken, including USDJPY. Yen, however, may weaken against non-USD currencies.

The writing is on the wall for a well telegraphed sell-off in the Wednesday Asian session, looking for the NY selling to feed into the Nikkei and the Shanghai Composite (which in fact ended lower unlike Tokyo). Although Nikkei ended +175 pts (correction not -) at 9,958, futures currently calling for a -140 pts at the Wednesday open, suggesting more risk aversion trades in forex particularly dragging against CAD, AUD and NZD vs USD and to lesser extent against USD. USDJPY resilience partially explained by robustness in both currencies and broad reversal of USD shorts from previous sessions, but resistance stands at 97 right shoulder. USDCAD rose +100 pips from 1.1510, looking to breal 1.1640 trend line and onto 1.1740 top of channel. Extent of Asian sell-off depends on depth of selling in last 30-45 mins of NY session.

Stocks deepen selloff, offering fresh boost for USD and JPY. Oil extends losses by nearly $2 to 69.40s, lifting USDCAD to 1.1640 trend line resistance. Expect a breach and prelim target to 1.1670, followed by top of June channel at 1.1740s. Cable extends sell-off beyond our $1.6470 target to $1.6420s, suggesting $1.6375-80 as next goal. Gold is vulnerable to $905, while key support stands at 890. 200-day MA at $877.00. S&Ps high profile failure to close above the 930 right shoulder could give in to 55-day MA of 903, followed by med term support at 880.

Dollar shakes-off previous selling and regains ground as equities pare gains, with oil breaking below $71. USDCAD lifts off 1.1510s onto 1.1578, looking to test prelim 1.1590, followed by key trend line resistance at 1.1635-40. Cable extended sell-off from 1.16744 to 1.6515 and looks like our $1.6470 could be hit as early as in the Asian session today especially after bigger than expected revision in UK GDP contraction. Whether cables daily candle is a shooting star or a gravestone doji, downside is the name of the game. As AUDNZD recovers off its 1.2378 lows, expect aggressive NZDUSD downside towards 0.6420s. More updates on http://twitter.com/alaidi

Low volumes rising markets and robust volumes during falling markets continues to be the pattern, suggesting lack of conviction in the latest rally in equities. Dow futures +27 pts before ahead of S&P/Case Shiller home price index (13:00 GMT) expected -0.7%, previous -1.9%, followed by June Chicago PMI (13:35 GMT) expected at 39 from 34.9 and June consumer confidence exp 55.1 from 54.9. Cables sharp run-up to $1.6744 was quickly reversed partly due to bigger than expected revision in Q1 GDP decline. If cable closes between $1.6550s and $1.6580 then a shooting star candle would be validated, suggesting a retreat into Thurs and Fri towards $1.6470 and 1.6380. Ashraf's insights on the Madoff scandal on CNBC earlier today. http://tinyurl.com/metl6z.

930 on the S&P500, 4,380 on the FTSE-100, and 8,600 on the Dow are the levels to watch for any accumulation in risk appetite. Also watch the US 10 year yield and whether it will test below 3.45%. Our latest article expects yields to reach as low as 3.20s% but maintain the current uptrend intact. Final Q1 UK GDP reading due at 8:30 am GMT and Canada's April GDP due at 12:30 GMT. Watch Ashraf's appearance on CNBC Squawk Box at 5:15 am GMT - 6:15 BST.

The pound joins all other risk currencies in rallying vs USD and JPY, shrugging news of the smallest mortgage lending in history. Lending to businesses also dwindled, supporting claims by some bank CEOs instructing their lending officers simply not to lend. Forex risk appetite responded to a broad yet ultra-volume run-up in equities, but remains unable to break key resistance levels ahead of Thursday's US payrolls. just as SP500 has failed to close above the 930 right shoulder, cable has yet to close above 1.66.

Stocks push higher in vacuum of econ data, but will S&P500 succeed in breaking above the 930, representing the right shoulder of the H&S pattern. CAD is the weakest performing currency against top-traded 11 currencies, thus, highlighting CAD losses despite strong oil prices $71.90s. Aussie follows as the next weakest currency, underperforming NZD and EUR. Considering CAD's positioning, any retreat in stocks off their highs may boost USDCAD regain 1.1610.

Aussie losing across the board in late Asian/early European trade after the Nikkei dropped 0.95%, while all major emerging market bourses were in the green (Russia, India & China). There was talk about an upcoming interest rate cut from influential commentators in Australia, who were said to communicate the intention of the central bank. AUDNZD losing ground at 1.24, looking to test the 1.2375 support, which if broken would be lowest since April). While both AUDJPY and AUDNZD appear bearish (as are all high yielders vs USD and JPY) AUDJPY appears the more vulnerable, especially given our negative stance on USDJPY.