Intraday Market Thoughts Archives

AND SO USDJPY did prove the definite window of opportunity for FX traders yesterday as the disappointing US jobs report pushed USDJPY to a new 15-yr low, 100 pts below the level at which it intervened 3 weeks ago. I still see 80.80 and 79.70 in USDJPY this quarter. BoJ may have to step up its intervention and use of its newly announced easing weapons on Nov 2 to counter the negative USDX effect from the FOMC decision. Traders are aware that no central bank will dare intervene ahead of this weekends G7 meeting in Washington, DC. JC Trichet had the opportunity to talk down the euro in yesterdays press conference, but declined to do so. US jobs were expected +10K, but showed -95K, which cleared another hurdle towards QE. FX TRADERS MUST DISTINIGUISH between the noise (brief counter-trend moves such 50-70 pip bounce in USDX) and the general trend, which remains USDX-negative. Whether it is USDCAD failing to beak above 1.0180 and returning below 1.01 (as alerted yesterday on Twitter right after the disappointing CAD jobs report) or, USDJPY unable to break 83, these are the overall signs helping to confirm USD weakness. In order to TUNE IN FOR LATEST BREAKING NEWS/REMARKS AT THIS WEEKENDS G7 MEETING IN WASHINGTOM for news/statements from central bankers, finance ministers and other politicians, BY FOLLOWING ME ON TWITTER at http://twitter.com/alaidi

THURSDAYs MARKET MOVES were mostly in consolidation zone ahead of the Big Day aka US jobs report, leading markets to retreat from the recent extreme weakness in USD, and strength in equities/fixed income/commodities. Just as we have always seen markets consolidate ahead of FOMC decisions, the same occurs ahead of Non Farm Payrolls, especially after markets had pushed to extremes. But overall levels continue to hold, OIL remains well above the 200-week MA of $78, USDCAD below 1.02 and EURUSD supported comfortably above the $1.38 trendline. Moodys said it is reviewing China for a possible credit rating upgrade, which helped Asian markets at the expense of the USD. Having said, however, Gold finally posed its biggest daily decline since late July. Stay tuned for the key CANADA and US JOBS report, see calendar here http://www.ashraflaidi.com/economic-calendar/ I am in Stockholm for 4 day expo, so updates will be more frequent than usual, but do follow me on TWITTER for faster, easier access to my INTRADAY INSIGHTS http://twitter.com/alaidi as this promises to be a highly volatile day. *** REGISTER FOR MY SEMINARS IN MADRID *** (Oct 14) & BARCELONA (Oct 19) http://bit.ly/dvoXWR

*** ASHRAF IN ESPANA ***; giving 2 seminars; MADRID Oct 14; BARCELONA Oct 19. Register here http://bit.ly/dvoXWR

DOUBLE DIP IS OUT; CURRENCY WARS ARE IN ?? When INTEREST POLICY is exhausted, in comes CURRENCY POLICY aka "currency wars, comp devaluations etcc ". LatAm does it via currency controls + taxes, China does it via intervention and the Fed does it by printing money (but devluation is not Fed's main objective). All of this falls under "protecting national interest" from other nations' parlous policies or other investors' hunger for yield. When the remaining policy tool of major central banks is ASSET PURCHASES , markets have little choice but to join in the fray and buy stocks, bonds, metals, energy and agriculture commodities. That is especially aided by the falling USD, against which major commodities are priced. Im on travel till week's end so FOLLOW ME ON TWIITER FOR MORE FREQUENT UPDATES & ANALYSIS http://twitter.com/alaidi

OIL BREAKS OUT OF 83 RESISTANCE, VALIDATING THE UPWARD BREAK break featured in the DIAMOND CHART in my article of 2 days ago. This not only paves the way for 86.50-87 per barrel but also opens door for 1.0020 and 0.9980 in USDCAD. ****** GBP LOSSES WERE THE RESULT of 3 things :

1) Institute of Directors Asking BoE to Pump 50 bln in Additional QE

2) IMF says UK may have to STOP ITS SPENDING CUTS if these are a danger to growth (something not Credit Rating Agencies want to hear)

3) Leak by UK Treasury to the FT that spending cuts may in fact be delayed.

GBPCAD LOOKING TO TEST 1.6 support and onto 1.5970, while EURGBP BREAKS 12-MONTH TREND LINE of 0.8740s, eyeing 0.8860s. IF UK INDUS PROD data today disappoints, GBP LOSSES should turn ugly. I AM AT THE STOCKHOLM ECONOMIC EXPO til end of week so updates will be less frequent than usual. WIll be Debating Euro with Gavekal's Charles Gave.

AUSSIE LATEST ASCENT is strengthened by another stellar employment report, showing Sept new jobs +49.5K, twice more than expected, while the unemployment rate remained at 5.1%. Particularly positive is the 55.8K increase in full time jobs. AUDUSD has finally regained the 0.9845-50 all time highs from July 2008. Will todays 0.9845 print once again be the peak? Today's jobs report validates the RBAs decision to keep the door open for further tightening but the cenbank is NOT yet ready to tighten without seeing the Q3 CPI data due later this month. The crucial point here is that a pullback from these levels is likely to be limited around 0.94 before renewed gains are driven by expected QE2 from the Fed and fundamental argument for higher metals. It is true that gold and silver are due for a temporary pullback, but again, temporary is the operant word as fundamentals have not changed. Put another way, if there was a time for AUDUSD to hit 0.9890 & 0.9920s, it is these days and not summer 2008. But I dont think we're ready for a proper break thru parity. That GBPAUD call has gone wrong very fast after going right faster due to BROAD STERLING SELLOFF after NY close. Await UK production data for chances of stabilization. Hedging GBPAUD longs w/ EURAUD shorts is one possibility.

1-WEEK-TIME LAG WORKS AGAIN FOR THE 200 PERIOD MOVING AVERAGE IN EURUSD & $USDX. Readers of these IMTs were told for the past 4 weeks about the 1-week time lag between USD INDEX breaking BELOW its 200-DAY (not week) MA, followed by a break in the EURUSD ABOVE its 200-DAY MA. Then the same 10-week pattern happens for the 200-WEEK (not day) MA. Just 1-week after USDX broke below its 200-week MA, the EURUSD today finally regains its 200-week MA of $1.3920, which also marks the 61.8% retracement of the decline from the $1.5151 high. I also did a video presentation for Reuters Thomson last week illustrating this very point. http://bit.ly/deAiPG The road from $1.3150 to $1.3890 was charted thoroughly for my Twitter followers, ever since that fateful FOMC Tuesday last month. Meanwhile, my latest article on the Gold/Oil ratio shows how peaks (bottoms) yet again remain effective in predicting rebounds (pullbacks) in equities. The broken DIAMOND PATTERN in OIL has also helped drag USDCAD closer to parity as repetitively called on twitter last night. G/O article http://bit.ly/bpPRgp I AM AT THE STOCKHOLM ECONOMIC EXPO til end of week so updates will be less frequent than usual. WIll be Debating Euro with Gavekal's Charles Gave.

DJIA & SPX 200-WEEK MA? SEE CHART of both indices http://chart.ly/ljlsiyj As US equities advance higher, its time to give a serious look at those even numbers that everyone likes to quote; 11,000 in the Dow Jones Industrial Average and 1,200 on the S&P500 both present the current 200-week MA. Readers of these column have grasped the importance of 200-moving averages (day and week) as seen in the relevance of the USD Index and EURUSD. Both averages were last above their 200-WK MA in June 2008. Since then, the Dow had several near attempts to break it but failed in all of them. Also watch that in both SPX & Dow, the 61.8% retracement of the decline from the all-time high to the 2009 low lie above these 200-WK MAs. So 11K on the Dow and 1200 on S&PX are legitimate upside targets for technicals during the upcoming earnings season.

OVERALL USD DAMAGE... RUMOURS OF US SERVICES ISM COMING AT 55.8... MARKET EXPECTS 52 from 51.5 (ISM due at 14:00 GMT) . if the ISM truly comes in above 53 and the Employment index regains 55, then we should see prolonged gains in sentiment to the BENEFIT OF THE GOLD, OIL, CAD and EUR. hence USDCAD coudl retest 1.0120, EURUSD could regain 200-WEEK MA of $1.3890 as USD INDEX NEARS THE IMPORTANT 77.00 TRENDLINE SUPPORT (now at 77.95)

RBA SURPRISES WITH A HOLD, BoJ CUTS RATES; Aussie is the biggest loser of the day as the RBA countered 75% of the market by holding overnight rate unchanged at 4.50%. Although the RBA kept the door open for further rate hikes (it always did that in the current cycle) it did sound a tad dovish on the inflation side by indicating " Inflation has moderated from the excessive pace of 2008. The effects of the rise in tobacco taxes aside, CPI inflation has been running at around 2 per cent over the past year. That looks likely to continue in the near term." This in IN CONTRAST to the September announcement in which it stated " Through to mid 2011, underlying inflation is likely to be in the top half of the target zone, while CPI inflation will probably be just above 3 per cent for a few quarters due to the impact of the tobacco tax changes." Readers of my tweets and previous IMT were warned about an RBA hold, which I argued with RBA needing to wait for the next CPI report due later this month and that it would be reluctant to accelerate further Aussie gains. I also emphasized on TWITTER/alaidi and the forum about the bullish prospects in GBPAUD, which is now nearly +170 pips, but I do see further gains towards 1.6650 and 1.6800 ESPECIALLY if today's UK SERVICES PMI emerges higher than 51.5. BoJ slahed its policy rate from 0.1% to between 0% and 0.1%, while creating a temp fund of about 35 trillion yen ($418 billion).to buy various financial assets. Yen declines are seen limited especially if Asian/European markets remain in sell-mode and so USDJPY remains capped at 84.40.

AHEAD OF RBA DECISION. Aussie coming off across the board as US equities retreat ahead of the start of earnings season and Fridays NFP. But what about tonights RBA decision (3:30 am GMT). 73% the market expects the RBA to go for its 7th rate hike, raising the overnight rate to 4.75%. Australias employment figures have added a net 226K jobs this year, with only one negative monthly reading in February. Inflation now stands at 3.1% y/y, above the higher end of its maximum target. Although the Aussie now stands 1 cent away from its record high of July 2008, a time when the RBA intervened to lower the currency, today is different. None of the RBAs recent policy decisions included preoccupations with the currency, which may give traders the green light to take out the 0.9850 resistance in the event of a rate hike. But watch for caveats. The RBA could well wait for the next quarterly CPI release, due later this month before deciding on its 7th rate hike in 12 months. If the RBA does hike, the Aussies resulting rally will depend on the language. The omission of the phrase for the time being at the end of the statement could imply a return go to wait-and-see mode. An omission of the phrase along with a rate hike could generate a sharp pop higher to wards 0.9890s before profit-taking ensues on the foundation of a wait-and-see interpretation. BEST CASE SCENARIO for AUD would be a hawkish rate hikemaintaining the statement phrase for the time being. I see a 40% chance for rates remaining on hold. But even in the event of a rate hike, watch out for the language change. For this reason, selling the bounce will be the more likely outcome, limiting gains at 0.9860s while targeting initial support at 0.9520 and 0.9460. ONLY A RATE HIKE and a HAWKISH language (explicitly allowing door open for more hikes) will extend gains towards past 0.9850 and onto 0.9900s.

GBP GAINS as UK Sep PMI construction hit 18-month highs at 53.8 from 52.1, dragging lifting cable back above $1.58 and halting EURGBP at the 12-month trendline resistance of 0.8750. This was an unusually strong figure from the UK, considering the array of negative data lately. The figure was important in offsetting negative impact from PM Camerons remarks wanting the BoE to maintain the easing (see my entry on twitter/alaidi). EURGBP is NOT ONLY failing the trendline resistance but also showing a daily bearish engulfing pattern, suggesting preliminary losses towards 0.8570. *******TOMORROWs UK SERVICES PMI will be important in extending EURGBP pullback if the figures are better than expected and/or Eurozone services PMI will be disappoint. See the ECON CALENDAR for the release and expectations of these important PMI figures (due Tuesday) http://www.ashraflaidi.com/economic-calendar/ GBPUSD rebound is offset by USD stabilization, with $1.5880 still acting as a resistance.