Intraday Market Thoughts Archives

Better than expected US jobs report (-11K & 10% from 10.2% unemployment) and a powerfully strong creation of Canadian jobs (+79K unemp drops to 8.5% from 8.6%) gave an initial jump to oil, but could be one of those rare days when we see a RALLY IN BOTH US STOCKS & USD. The fact that both the unemployment and payrolls revealed positive developments for the US economy and consumer can end up being a positive for the US currency despite rallying equities. This was ALREADY SEEN IN THE JULY JOBS REPORT when the unemployment rate fell to 9.4% from 9.5%, registering the first decline April 2008. CAD is the only currency outperforming the USD, thus instead of simply shorting USDCAD, it is preferable to go long CAD vs. GBP, AUD and NZD.

Nikkei-225 closes above the 10K level for the first time since Oct 30, rallying for the 5th consecutive day. The last time the index rallied for 5 straight days was in July. The Dow/Nikkei ratio extends declines after having hit a 14-month high last week. Canadian jobs due at 12:00 GMT and could be expected to show stabilization after the 43K decline in October. But the lasting impact will likely be influenced by the US jobs report, whose bar of expectations may have been set too high with a consensus for a decline of 120K. USDCAD faces interim support at the 1.05 trend line, backed by 1.0470. CADJPY still capped at 84.50. EURUSD & GBPUSD bulls will have to contend with the 1.5145-50 and 1.6740 resistance levels in the event of a market-friendly US figure.

YEN & DOLLAR TAKE TURNS: As reports of more possible action from the BoJ filter through the markets, USD benefits from the latest dosage of risk aversion. We hate to sound like a broken record on the SP500's inability to break above 1120, but the latest data disappointment on services industries from Eurozone, UK and particularly the US (ISM fell back below 50) boosted USDCAD above the 1.0530 target, dragged GBPUSD back below 1.6550 and sent AUDUSD back towards the initial 0.92 target of the latest HotChart. Markets quickly tempered their excitement from the +457K reading in US weekly jobless claims after the employment component of the non-manufacturing ISM remained at a dismal 41.6 in November from 41.1 in October, which raises the possibility of a payrolls loss greater than the 120000 consensus. Ashraf is on travel schedule so updates will be less frequent than usual.

Markets await the ECB press conference and latest forecasts from the ECB, which we do not expect to move the markets. An already strong EURUSD pair will not cause the central bank to signal any new hawkishness. US jobless claims and Bernankes testimony are the more important events of the day, as US jobs and the US currency re-emerge as the key focus. Japans efforts to weaken the yen may give the global carry trade an important boost, and further drive up metals. But a decent US jobs report will have to help in order for US equities to sustain their momentum. Key resistance levels in YEN CROSSES: USDJPY 88.25, AUDJPY 82.90, CADJPY 84.50, EURJPY 133.50. DUE TO ASHRAF'S TRAVEL SCHEDULE UPDATES WILL BE LESS FREQUENT THAN USUAL.

GOLD FINALLY BREAKS to new record high vs. the JPY at 106,386, which had been holding since Jul 2008. We argued in the latest piece that gold had yet to break its previous highs vs. EUR, JPY & AUD last week, despite a daily break vs. EUR. But only today, the metal pushed up to new highs, including the JPY (but not yet Aussie), meriting scrutiny whether this is maintained til end of week. SEE OUR LATEST HOTCHART ON AUDUSD http://bit.ly/7kFjHQ

Bigger than expected build in EIA crude inventory drags down oil below 77, cable fails to break $1.67, AUDJPY never succeeded in closing above the 81 resistance and risk appetite remains unconvinced until a broadly positive US jobs report comes in the pipeline. USDCAD eyes 1.0530, while CADJPY eyes 62.70. Markets raising the bar of hope, expecting US payrolls to drop by 120K, following -190K, while unemp rate seen unchanged at 10.2%. Beige book unexpected to be a market mover. Tomorrows services ISM will be key as its expected at 51.5 from 50.6. Shorts could look into 81 on AUDJPY, 64 on NZDJPY and 146.50 on GBJPY as starting points for new positions. MORE TRADES ON TWIITER twitter.com/alaidi

US Nov ADP -169K vs. expected -155K but previous figure was revised down to -195K from -203K. Dow futures drop from +12 to -8. Overall impact on risk appetite may not be clear, but the markets will keep a close watch on whether the S&P500 will close above that 1,120 resistance. The index did close above its 100-week MA 3 sessions ago but has yet to close above 1120. GBPUSD now faces next major resistance at $1.673576.4% retracement of the decline from the $1.6874 high to the $1.6271 low, coinciding also with the Nov 16 peak. Markets await the EIA INVENTORY REPORT (15:30 GMT), expected to show a rise of 800K barrels in crude stockpiles, a rise of 700K barrels in gasoline and a 300K drop in distillate stocks. Yesterdays release of the American Petroleum Institute showed a RISE in oil inventories of 2.9 million barrels. CADJPY 4-hr coudl extend further losses towards 82.80 if oil is dragged down to 77.00

A rise in UK Nov construction PMI to 47 from 46.2 and Hawkish comments from BoEs Dale about the UK recovery being on track did help sterling recover from its session lows. GBPUSD hit the 1.6560 target and now looking to break above the 1.6630-40 trend line again. Only a close above 1.6660 would be deemed successful break. WATCH ASHRAFs INTERVIEW on FX, oil, Dubai fallout and equity indices. http://bit.ly/5hhYMU

WATCH HOW JPY holds off most currencies, preventing them from regaining their earlier session highs, despite rebounding risk appetite and higher oil. AUDJPY unable to regain 80.40s despite AUDUSD hitting 0.9260s is among the many examples translating into renewed pullback in USDJPY. This confirms the thesis that USD remains the preferred (if not only) short during rising equities despite the BoJs emergency meeting to inject liquidity and indirectly cap the currency. This means that it takes more significant advances in equities in order for JPY to lose further ground. US ADP tomorrow will be key.

Net-Net, the trifecta of the US data releases was on the positive side as US Nov manufacturing ISM fell to 53.6 from 55.7, employment index fell to 50.3 from 53.1, while new orders rose to 60.3 from 58.5. Oct pending home sales +3.7% after +6% in prior 2 months. US stocks still hold in +0.9% territory, while oil stands above $78 but initial pressure seen at $78.60s remains the next barrier before the key $79.50 trend line emerges. AUDJPY still unable to break above 80.30, but a close below 79.65 trend line support could call up fresh losses towards 79.10. EURUSD capped at $1.5090.

The RBA raised rates by 25 bps to 3.75% and shows no signs of stopping next year. The fact that the RBA still deems its tightening process a stimulus-reducing operation, suggests that as much as 125-bps of tightening could be added next year, Although the BoJ announced fresh liquidity measures to weaken its currency, it has not reversed its decision to stop buying corporate debt. As US equity futures rally, both USD and JPY are dragged lower, with AUDJPY facing initial resistance at 80.40, followed by 80.90. Oil will attempt 78.70-80, but the main challenge is a weekly close above 80.30. USDCAD eyes 1.0415. US Nov ISM expected at 55 from 55.7. Oct Pending Home sales exp -0,8% from +6.1%. Disappointing figures could prove more positive for USD than JPY following BoJ decision. GBPUSD trend line resistance stands at 1.6640.

RBA PREVIEW (decision due 3:30 GMT): The Reserve Bank of Australia led the industrialized world in raising rates by hiking in October and November. We agree with the market consensus expecting the RBA to raise rates by 25 bps to 3.75%. Not only have RBA members spoken recently in favour of further moving away from emergency-low interest rates and pre-empting bubbles, but the RBAs next meeting wont be until February 2nd. Had US stocks fallen by say 2-3% on Monday in reaction to the Dubai fallout, the RBA would have had to think twice. But considering the ongoing strength in the Australian housing market, the RBA is expected to hike. We expect the AUSSIE REACTION to be more significant on the downside (in the unlikely event of a rate hold, than on the upside in the likely event of a rate hike. The AUDUSD DAILY CHART has broken the March 2009 trend line support last week, making 0.9240-45 a new resistance. AUDJPY may rally back towards 80.60 resistance in event of a rate hike at which point key resistance emerges.

IMPROMPTU WEBINAR: Here's the link to the recording of Ashraf's impromptu webinar, hosted by Hamzei Analytics blog last night. Ashraf was supposed to speak for 10-15 mins to share his thoughts on the latest FX/Equity/Oil/Gold dynamics ahead and after the Dubai fallout, but ended up speaking for 50 mins

http://stk.ly/5QqsJu

GBP is the biggest loser in Monday trade, with falling UK lending prompting the damage. Lingering doubts over UK banks' exposure to the Dubai fallout remains a question mark. Dubai's statement that it will not guarantee Dubail World's $59 bln in debt was offset by positive comments from the major credit agencies. USDJPY remained confined at 87.00-85.80. Cable now capped at by new resistance at $1.6520. All eyes shall fall on the Aussie and the RBA decision due 3:30 am GMT. RBA preview coming up in next IMT.

The rift between Japans MoF and BoJ we mentioned in Friday's article is resurfacing as the finance ministry pressures the central bank on further easing monetary policy. The yen lost ground in early EU trading after Japan's strategy minister Kan says govt agrees on measures to stop the yen rise. But As European stocks extend into negative territory and FTSE-100 drops 50 pts, yen strength resurfaces across the board. USDJPY 4-hr stochastics suggest downside to call up 85.70, while 87.00 still acts as robust resistance. AUDJPY capped at 91.30, and is vulnerable to further losses towards 78.20.

Ashraf will make a 15 mins appearance in a webinar hosted by Fari Hamzei (Hamzei Analytics) coming up at 19:00 EDT (0:00 GMT). We apoologize for this was a short notice decision. Ashraf will be discussing FX and the crossroads in equity indices. LINK TO WEBINAR http://bit.ly/7Ebx4n