Intraday Market Thoughts Archives

European officials agreed to dispense bailout funds to Greece, sending EUR/USD above 1.46. The US dollar was broadly weaker after non-farm payrolls badly missed estimates, triggering more mentions of QE3. CFTC data shows yen positioning falling to net short.

The euro surged after the Troika of the EU, ECB and IMF said funds for Greece will likely be released in July. In a statement, they said GREEK FISCAL REFORMS MUST BE STEPPED UP, public sector workers must be laid off and taxes must be raised. The announcement confirmed yesterdays rumours, paves the way for upgraded aid and temporarily removes the uncertainty about Greece.

There was NO SILVER LINING in the non-farm payrolls report. The economy created 54K jobs compared to the 169K expected. The unemployment rate climbed to 9.1% compared to 8.9% expected. The duration of unemployment increased and birth-death adjustments added 206K jobs. Sentiment temporarily stabilized following the ISM services report (54.6 vs. 54.0 expected) but that proved to be short-lived. In the forex market, the bearishness didnt manifest itself into a broad risk off trade as it was mostly centralized to USD and neighbouring CAD.

Perhaps most interesting about late in the session was how stocks and bonds closed right at key levels. The S&P 500 fell 1% to 1300 and 10-year yields closed at 3.02%. Last Friday we noted that EUR/USD rebounded to close at the 55-dma and the pair went on to post huge gains this week, closing at 1.4641.

Ashraf called for long positions in EUR/USD prior to NFP and continues to see upside. For strategy on EUR, GBP, JPY, gold and silver see: http://ashraflaidi.com/products/sub01/access/?a=436

EUR was easily the best performer on the week while CAD and NZD lagged. As bad as USD has fared recently, USD/CAD has now gained for five consecutive weeks. The caveat is that the cumulative rally has only been 340 pips with 200 of those coming in the first three days. Recently, CAD has been trading separately from commodities and more in step with USD.

WEEKLY CFTC DATA showed the euro ending four weeks of shrinking longs as the net position increased to +22K from +19K. The long position is likely to grow further because the data is only accounts up to the close on Tuesday. Yen positioning fell to -1.6K from +8K. Negative GBP positioning increased to -14K from -2K. Longs in AUD, CAD and CHF all increased while overall USD-negative positioning grew to $15.7B from $13.0B.

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Another proof why Europe/IMF will keep Greece funded occurred today. With the latest agreement in place for a second bailout for Greece, poor US jobs data (from 232K to 54K & unemp rate to 9.1% from 9;0%) confirming the dismal ADP & manufacturing ISM, EURUSD rallies on good Eurozone news & bad USD news. We now expect TRICHET to RE-open ...

... expect TRICHET to Re-open the door for a possible summer rate hike before BERNANKE's s FOMC press conference to complete the upward path.

BUT THIS IS NOT ALL ABOUT about FUNDAMENTALS ... We saw last Friday EURUSD jumped 220 pips to close at its 55 dma and meet the technical test. If you are a premium subscriber, you would have seen in yesterday's charts why we mentioned 1.4520 and 1.4940 in EURUSD BEFORE Moody's warned on the US outlook and before markets had a hint about any Greek Troika deal.

All you have to do is TRY OUR PREMIUM OFFERING on how we combine technicals w/ fundamentals to make our case forward. To subscribe, please click here: http://tinyurl.com/3bkel27

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Here is Thursday's EURUSD DAILY & WEEKLY charts with Pre-NFP trading ideas updated TODAY. Premium Subscribers click here: http://www.ashraflaidi.com/products/sub01/access/?a=436

If you are not a subscriber, click here to get your week trial now:

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Ranges are tight in Asia-Pacific trading as the yen leads and sterling lags. The euro regained 1.4500 but was unable to break the US session high of 1.4519 and has now fallen back to 1.4485. The European session should feature more clarity on the Greece and services PMIs for Europe and the UK.

The looming release of non-farm payrolls is keeping the market in check so far in Friday trading. There is a slight risk off tone as the yen makes small, broad gains but the overall moves have been minor. Data flow has been light. New Zealand building consents fell 1.6% in April, far short of the +2.0% expected. NZD edged lower but was buoyed by the seasonally adjusted number of new dwellings, which rose 3.6%. The May Monster.com jobs Index fell 2 points to 143 compared to 145 in April. The change is small but adds another small negative bias to Fridays NFP report. China's industrial output will likely grow 13.5% in H1, according to an official cited in the China Securities Journal. This is a slower pace than the 14.2% expansion in the first four months. The report has helped to elevate global growth concerns.

In the hours before NFP, European traders will be focused on gleaning some clarity on potential Greek bailouts. Reuters on Thursday reported funding plans through mid-2014 while MNI said an agreement is close that could provide Greece with new financing to meet funding gaps expected to arise in 2012 and possibly 2013. There is talk that Greece will unveil new austerity measures and plans to sell state assets more rapidly.

The European session also features the release of the final services PMI data with the main EMU release at 0758GMT and expected to confirm the preliminary estimate of 55.4. At 0830 GMT the UK final PMI is expected to tick lower to 54.2 from 54.3.

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A report suggesting EU officials have agreed on a fresh bailout for Greece boosted EUR/USD above 1.45. US economic data was once again on the soft side and the low-yielding USD, JPY and CHF lagged. The Asia-Pacific session will be quiet with no major releases scheduled.

The euro jumped on a Reuters report that EU officials have agreed in principal to a bailout for Greece. The story cites an anonymous source who is close to the discussions saying the plan will run until mid-2014 and replace the first scheme launched in May of last year. The bailout will include a fresh austerity plan that Greeces PM will present tomorrow.

The EU Commission official later denied the report but the market is not questioning Reuters reporting. If true, the mid-2014 term would be hugely helpful for Greece as it gives the country a great deal of time to bring its deficit under control before heading back to markets for funds.

The euro earlier gained when Trichet endorsed a unified European finance ministry and said he wants EZ countries to have the power to veto their neighbours budgets if they go harmfully astray.

Ashraf recommended long positions with EUR/USD trading at 1.4420 in Thursday's earlier Premium Piece and EUR/USD rallied as high as 1.4514 before pulling back just below 1.4500 at the NY close. For strategy on where EUR is headed next, see: http://www.ashraflaidi.com/products/sub01/access/?a=436

US economic data continued to disappoint. Initial jobless claims were at 422K exceeding the 417,000 median forecast. Claims have now been above the 400K level for the eight consecutive weeks. Factory orders fell 1.2% in April, the biggest decrease since May 2010. A 0.3% decline was expected.

The USD came under pressure when Moodys joined S&P in warning about the vulnerability of the United States top credit rating. They said failure to forge a credible agreement on substantial deficit reduction would prompt them to change their outlook to negative.

Aside from the large moves in EUR, however, it was a fairly straightforward pre-NFP trading day as market moves were small. Volatile trading for gold as it fell to $1519 from $1544 but then bounced back to $1536. Silver fell 4%. Oil, stocks and most commodities were flat.

The following EURUSD Daily and Weekly charts show some important dynamics, into the short & medium term. The technical dynamics in reaction to Friday's US jobs report maybe crucial but do not forget the fact that Friday afternoon US sessions have often shown 180 degree turns from the morning session after the London close.

Subscribers to our Intermarket Insights click here for direct access to today's piece: http://tinyurl.com/69bzvq9

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Markets are trading as if somebody had a risk switch. After risk off day yesterday, London traders see a complete reversal and trade with risk on sentiment. Stronger than exp UK construction PMI did not prevent further GBP declines following comments from BoE member.

The only news released during the London session today was May Construction PMI from the UK that came slightly ahead of expectation at 54 from previous 53.3. Short sterling futures contract pushing to highest since Oct after BoE's FIsher said he would consider voting for another round of quantitative easing if the economy deteriorated.

New York session will start with unemployment claims due at 8:30 am EDT that are expected to increase slightly from 424K to 427K. Since the first week of April, claims have stayed above 400K which confirms an ongoing, poor situation in the US labor market. 10:00 am April factory orders are expected to drop from previous 3.4% to -0.3%.

CAD traders will want to pay attention to crude oil inventories data due at 11:00 am that is expected to decrease from 0.6M to -1.7M barrels. Over the past few months, inventories mostly surprised to the upside. Even though USD is being sold across the board it held up against the CAD.

Given that EU, IMF and ECB inspectors will issue a joint statement on Greece on Friday and the important NFP report, markets are unlikely to break out significantly out of the recent ranges. However, considering that the ADP report disappointed and that expectations for the NFP continue to be lowered, USD negative bias is likely.

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Ranges have been narrow so far in Asia-Pacific trading after Australian data on the trade balance and retail sales failed to spur significant moves. NZD and CHF are lagging while AUD and USD lead. Thursdays European session features the UK construction PMI.

Australias April trade surplus fell short of expectations at A$1.6B compared to the A$2.1B expected. The report was overshadowed by a 1.1% rise in retail sales compared to the +0.4% expected. Sales hit the highest in 17 months, lending credence to theories that the consumer will spur growth and generate inflation. The reports were released simultaneously and provided a strong initial lift to the AUD that faded as broader risk aversion took hold. AUD/JPY hit 86.60 following the report but pulled back to 85.97 as Asian stocks extended the selloff that started in the US.

Politics remain at the forefront in Japan as PM Kan faces in non-confidence vote today. He asked to be allowed to lead the nation until the Fukushima crisis stabilizes and said he will then step down. If the vote succeeds, Kan will be forced to resign or call an election within 10 days. The newsflow hurt JPY in early trading but it rebounded on risk aversion.

Looking back at Wednesdays session, we have to wonder what value an economist has to a forex trader. We cant help but shake our heads as economists scramble to knock down estimates for Fridays non-farm payrolls and Q2 GDP in the midst of a 120 pip fall in EUR/JPY and the worst percentage drop in stocks since August. The consensus is now around +100k after estimates were pulled down from +200k after ADP and ISM. For traders, however, the bulk of the risk averse trade is over and its time to position for an upside surprise or to look past NFP. This is why we offer real-time strategy and trading ideas here and on twitter for Premium subscribers.

For the latest trading ideas see: http://ashraflaidi.com/products/sub01/access/?a=435

The lone data point on the European calendar is the UK construction PMI for May. It is expected to edge lower to 53.3 from a 53.5 prior. After Wednesday's disappointing UK manuf PMI and record low mortgage lending, the odds of a BoE rate hike have now fallen drastically. GBP has been especially sensitive to recent economic data as market participants wrestle with growth and inflation uncertainty. Another event is a 0915 GMT speech from Trichet as he accepts an award. We doubt anything will come from the speech, especially with the ECB meeting one week away on June 9.

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More disappointing US data on manufacturing and employment combined with a downgrade to Greece sparked the largest one-day decline in US stocks since August. JPY and CHF were the top performers while NZD and CAD lagged in a classic risk off pattern. Coming up, Australia will be in focus with May retail sales and trade balance.

The ADP jobs report and ISM manufacturing data missed badly and Moodys became the first agency to downgrade Greece to C-level territory. Ashraf covered todays US economic data in more detail in the prev IMT below but the market moves essentially speak for themselves. The S&P 500 closed down 2.3% to 1315, which is at the days lows and below the 100dma. US 10-year Treasury yields fell 12 basis points to 2.94% in a sign that inflation worries are evaporating.

FX moves were not as dramatic as equities because with Greece uncertainty continuing to rise, the US headed toward further fiscal or monetary stimulus, Japan in crises and China set to tighten, market participants are once again in a position where virtually nothing looks attractive. In the past, this sentiment has benefitted precious metals. Today, gold gained $2.40 while silver fell 4%.

For more see todays Premium Piece: http://ashraflaidi.com/products/sub01/access/?a=435

Australian Data Preview

The focus will be on Australia in Asia-Pacific trading. Yesterday, AUD rallied despite soft Q1 GDP but was later pulled down by the collapse in risk appetite. At 0130 GMT, the ABS releases retail sales (exp: +0.4%) and trade balance (exp: A$2.13B) figures for May. These indicators paint a much clearer picture of the current situation and are much more forward looking than yesterdays GDP. Expect AUD to be more sensitive to downside surprises rather than strong data given the climate of the US session. Retail sales have been relatively flat for the past year and anything +/- 0.3 pp is a fair sized miss. The trade balance would tend to overshadow retail sales for an export-driven economy like Australia but we caution against trading the headline because it could be skewed by the Japanese disaster (Japan buys the second most Australian exports) or by mining/agricultural backlogs. Aside from that, a miss of +/- $0.5B will leave a mark on AUD.

Moody's has just downgraded Greece to Caa1 from B1, taking the country to a new level of JUNK status saying there are increasing risks that will fail to stabilize its debt problems. S&P500 down 1.8% trading at 1320, below its 55-dma of 1326, after risk appetite took a double hit from poor US ADP (38K vs exp 175K) & disappointing US manufacturing ISM (53.5 in May vs exp 57.6 from 60.4 in April). The bulls will need S&P500 to hold above its 100 dma (now at 1317). Last time the index CLOSED below its 100 dma was in March but that coincided with the bottom of the latest ...

... but that coincided with the bottom of the latest cyclical run-up. As for the 55dma, the S&P500 closed below it for 3 consecutive days but NEVER closed the WEEK below it (yes, we can emphasize WEEKLY closes relative to DAILY moving averages).

Wednesdays Premium piece was posted AFTER the disappointing ADP but BEFORE the dismal ISM. As a CAUTION ahead of the ISM, we warned subscribers of a potential disappointment in the survey, by taking short positions in AUDJPY and FTSE100, both of which were hit (FTSE was hit at the futures value after the close of the cash market). Our longs in equity indices and yen pairs remain intact (stops not hit), while our protective shorts (short FTSE100). See Wednesdays Premium Intermarket Insights piece here: http://ashraflaidi.com/products/sub01/access/?a=435

AL

GBP is the worst performer after falling manufacturing PMI & record low mortgage lending. CHF surges higher across the board after Swiss April retail sales come at 7.5% y/y from previous -0.2%. This is the highest print since April 2008 and the impact is likely to last as traders expected only a slight improvement to 1.9%. Market shift interest to US ADP & manuf ISM.

London sessions relative strength loser is GBP after May manufacturing PMI printed 52.1, down from previous 54.4 and below expectations of 54.2. Today marks four consecutive monthly declines and the worst reading since December 2009. April mortgage approvals also disappointed when they came out at 45K vs. exp. 48K and this reading is the worst since December 2010. It seems that market got a little ahead of itself when it started to price in early rate hikes.

New York session will kick off at 8:15 am EDT with May ADP which is expected to decrease slightly from 179K to 177K followed at 10:00 am by ISM Manufacturing survey that is also expected to worsen from 60.4 to 58.4. Both indicators have shown three months of straight declines.

Should ADP shock the market either positively or negatively it is reasonable to assume lasting impact for the rest of the week as traders will expect Fridays NFP to show similar weakness. While the correlation between ADP and NFP is not perfect (over the past 20 observations the correlation is 0.6), the direction of ADP usually correctly predicts the direction of NFP.

Premium subscribers to our Intermarket Insights will see that +70 pips gain was realized on our 87.20-60 target in AUDJPY longs from yesterday's entry btwn 86.50-86.90. The stop was at 86.10. Here is the link to yesterday's premium piece: http://ashraflaidi.com/products/sub01/access/?a=434

& Patrick Urban

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Date : 7th of June 2011

Time: 17:45

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The Australian dollar surged higher despite a lower-than-expected report on Q1 GDP. The New Zealand dollar is lagging after Q1 terms of trade rose just 0.9% compared to the +2.2% consensus. The focus now shifts to manufacturing PMIs for Europe, the UK and US.

Australias economy contracted 1.2% q/q compared to the -0.3% expected. We warned that the market was pricing in a weaker-than-consensus reading and some late forecasts were as low as -1.7%. Still, it appears as though traders were waiting to get past the report before buying on the belief that growth will rapidly accelerate in the months ahead. Temporary factors due to flooding and the Japanese disaster were negative factors with 6.1% fall in mining output, and 8.9% slump in agriculture, forestry & fishing.

Before and after the GDP report, Ashraf continued to recommend long positions in AUD/JPY. For more see Tuesdays Premium Piece and get access to Ashrafs premium twitter account: http://ashraflaidi.com/products/sub01/access/?a=434 for the latest positions in US Crude, Silver & EURJPY.

Another example of where the economist consensus might not reflect market pricing is the ISM manufacturing report coming up in US trading. Soft regional readings including yesterdays Chicago PMI mean the market is priced 2-3 points below the 57.5 consensus.

In Japan, the yen got a modest lift after BOJ Gov Shirakawa maintained the recent policy stance as he said predicted a moderate recovery path in fiscal H2 on inventory rebuilding and a rebound in exports.

The official Chinese PMI for May beat the 51.6 expectation to come at 52.0 though the index fell from 52.9 in April. Similarly, HSBCs Chinese PMI was revised to 51.6 in the final reading versus the earlier 51.1 estimate and April reading of 51.8. The upshots to manufacturing have helped to underscore AUD gains and have helped build on positive risk sentiment.

One report that threatens to dampen sentiment came from the China Securities Journal, which is reporting that May inflation could rise to 5.4% or 5.5% from the 5.3% level in April. This means more tightening from China, which should dampen global growth.

The focus in the upcoming session will remain on manufacturing as Europe and the UK are set to release manufacturing PMIs for May. Europe is expected to remain steady at 54.8 while the UK is forecast to slow to 54.2 from 54.6. Look for these reports along with the US ISM to set the tone for trading for the rest of the week.

Euro rose above 1.44 as Germany backed off the idea of restructuring Greek debt and Fitch affirmed Greeces rating. The Canadian dollar led G10 currencies after the BOC warned of eventual rate hikes. The key release in the upcoming session will be Australian GDP.

As Ashraf noted on Friday, the 55-day moving average was key in EUR/USD and the close at that level prompted a full cent rise today. The S&P 500 gained 1% for the fourth consecutive climb despite disappointing US economic news. The Chicago PMI confirmed the recent slide in regional manufacturing data as it fell to 56.6 from 67.6 (exp: 62.5). This is something we have been warning about for a number of weeks and puts a definite downside risk in Wednesdays ISM manufacturing report. The Conference Boards consumer-confidence index fell to 60.8 in May from a revised 66 in April (exp: 67.5). Another data point that pointed to risks ahead for the US was a 3.6% y/y decline in the Case-Shiller house price index (exp: 3.4%).

For more trading ideas including EUR/USD, silver and CAD/JPY, see today's Premium piece: http://ashraflaidi.com/products/sub01/access/?a=434

The Bank of Canada held interest rates at 1.00% in todays meeting and policymakers said low rates will eventually be raised. Market pricing now suggests a 59% chance of a hike in October compared to 54% pre-announcement. CAD was the strongest G10 currency but the strength is more of a reflection of broad risk appetite and a 2% gain in oil than anything the BOC said.

Asia-Pacific Preview

Australia releases Q1 GDP data at 0130 GMT with the consensus estimate at -0.3% q/q. The market is undoubtedly priced for something weaker after Treasurer Swan warned yesterday of a large drag due to the Queensland floods and Japanese disaster. Given this, AUD may gain on a reading as low as -0.5% as markets price in stronger growth and rate hikes later in the year.

There are also new trading analysis on AUDJPY, EURJPY, CADJPY and US Crude. To get your subscription today, click here: http://www.ashraflaidi.com/products/sub01/

Positive sentiment supports riskier assets started at the beginning of the Asian session, continuing to weigh on USD across the board with the exception of AUD, CHF and JPY. Canada Rate Decision Exp unchanged at 1.0%

Euro support came largely from news that Germany is willing to drop its push for an early rescheduling of Greek bonds so new aid package could be delivered before Greece runs out of cash in mid July.

CHF is the relative strength loser after Q1 GDP came out at 0.3% which is the worst reading since December 2009. Market expected 0.7%. Yearly growth slowed from 3.0% to 2.4%.

News from the EZ did not provide any element of surprise when German unemployment change for May came out at -8K, worse than expected -30K and unemployment rate that came in line with expectations at 7.0%. EZ CPI y/y in May was slightly lower at 2.7% vs. expected 2.8%. EZ unemployment in April came unchanged and as expected 9.9%

The upcoming session will bring Canadian consumer inflation data from April in form of RMPI (Raw Materials Price Index) released at 8:30 am EDT which is expected to moderate to 3.7% after jumping to 5.7% month earlier. The impact is likely to be limited as CAD traders will be waiting for 9:00 am EDT when BOC announces their decision on the Overnight Rate. BOC is expected to keep rates unchanged at 1%. The overnight rate has been at 1% since September 2010.

Recent US fundamental releases largely weak. Todays releases include Chicago PMI for May released at 9:45 am EDT expected to mark fourth decline in a row, this time to 63.8 from previous 67.6 and May Consumer Confidence, released at 10:00 am EDT expected to improve slightly to 66.3 from last 65.4. Given the improved sentiment, if US data does disappoint, the risk of prolonged USD pulbacks remain considerable.

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Tuesday markets open on a high note-- the equivalent of those typical risk on Mondays involving short-term longs ahead of key data releases (Wed-Fri). FTSE-100 hits our 5985 target mentioned in Friday longs for +70-80 pts depending on what part of the entry range was taken. Subseq target stands at 6010.

Yen pairs rallying across the board after Moodys warns of its latest outlook on Japan. The combination of rising appetite and weak yen is catapulting even EURJPY, which is testing its important 55-dma of 117.50, calling up 188.70. Mid-week kicks off with Eurozone & UK services/manufactruing PMIs as well as US services/manuf ISMs, followed by US ADP survey and the all important US jobs report. Our premium analysis for Tuesday is coming up in late EU morning w/ the latest trades in FX, equity indices, metals & energy. Access to our Fridays trades are here: http://www.ashraflaidi.com/products/sub01/access/?a=433

Euro starts Tuesday Asia above its closely-watched 55 dma, which was alerted in Friday morning. The UK and US were shut down for holidays but the upcoming session promises to be much busier with a full slate of economic data (UK, Ezone & US PMIs as well as US Jobs data).

Monday featured Q1 Canadian GDP. The report showed the economy expanded 0.3 per cent compared to the 0.2 expected. CAD made small gains following the report and traded right alongside USD as the top performer.

A pair to focus on in the day ahead will be NZD/USD. The brief rise to a record high has been rejected and the pair is now 70 pips below the 0.8219 high. As volume returns to the market we are likely to see another push higher. A second break to a fresh record would offer a solid buy signal.

Gold is also in focus as it nears a record high. It last traded at 1538. Safe haven demand due to worries in Europe have helped to fuel a rally. Slowing growth in the US is another reason to buy as it increases the likelihood of low rates for a long period, further QE or more government spending -- all factors that may cause a USD deterioration and help boost gold.

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The lack of news flow will change abruptly once markets open in the Asia-Pacific region. Japan will release employment, industrial production, the manufacturing PMI and household spending. Australia releases current account figures and New Zealand has business confidence.

Trading during the London session has been calm as prices continue to hover around levels seen at Fridays close. Traders in the UK are enjoying a long weekend in observance of the Spring holiday and US banks will be closed today in observance of Memorial Day. Liquidity will therefore be poor and prices are likely to remain within narrow ranges with unexpected and erratic bouts of volatility. The only economic releases today are GDP and current account balance data from Canada.

Under the weight of weak US data, USD started to slide against most currencies last week. It seemed as if the market became tired of Greek problems and needed something new to focus on. However, headlines describing dire situation in Greece continue to appear frequently and

the risk of yet another sentiment reversal is high. Latest news from Greece describe the possibility of an outside intervention in the economy, including tax collection and privatization of state assets in exchange for new bail-out loans.

March Canada GDP expected to improve to 0.2% from that surprisingly poor reading in Feb 0.2% and current account deficit is expected to narrow from previous 11B to 2.9B. Both news come out at 8:30 am EDT.

During the past week, USDCAD was stuck in narrow 9750-9810 range. Even

when the greenback was being sold against all other majors, it held up against the CAD. Break and close below 9750 would open a way to area around 9670 which is not only a support given by previous highs but also by 38.2% fib. ret. of the rise from 9443 to 9813. Should price break above the recent range, key target would be resistance at 9975.

Technical picture would suggest higher probability of a break lower as

Stochastic (9,3,3) and Williams %R (14) are both in an overbought

territory with MACD converging and about to give a bearish crossover

signal.

The New Zealand dollar climbed to a record high after a stronger than-expected trade surplus but disappointing Australian data and broad market worries helped to cap the rally. The euro is lagging in early trading on worries about Greece but overall moves have been small. Market closures will mean low liquidity for the remainder of the day.

NZD/USD gained a quarter cent and climbed as high as 0.8219 in the first hours of trading after New Zealands trade surplus hit NZD$1.11 billion in April compared to the $600 billion expected. The gains pushed the pair through the 0.8214 record set in 2008 and to the highest since the kiwi dollar was floated in 1985. We caution that the pair quickly fell back below the record mark so the technical breakout has not been confirmed.

News from Australia weighed on NZD after Treasurer Wayne Swan said Wednesdays Q1 GDP report will likely show a dramatic hit on growth due to floods in Queensland and Japans disaster. He said it probably cut more than 1 percentage point from growth. The consensus estimate is for a -0.3% q/q reading.

Economic data also weighed on the Australian growth picture with Q1 company gross operating profits falling 2.0% compared to the 2.0% rise expected. Despite the downcast news, AUD has held its ground in early trading.

The weakness in the forex market is in Europe where the euro is modestly lower after Greek PM Papandreou vowed to press ahead with austerity. More importantly, the FT is reporting that European leaders are making some harsh demands in exchange for further bailouts that include: selling of state assets and international involvement in Greeces ineffective and corrupt tax collection system.

PREMIUM SUBSCRIBERS can view our latest monthly technical charts of EURUSD, USDX, Dow-30, S&P500, Gold & Silver in the Friday Premium edition. Click here to subscribe: http://ashraflaidi.com/products/sub01/

A reminder that the UK and US will be on holiday on Monday, so volumes will be light and volatility high. There is no top tier economic data from Europe or the United States but Canada will release Q1 GDP (exp: +4.0% annualized).