Intraday Market Thoughts Archives

As the improvement in China's economic data further allays fears of a hard landing and copper prices disprove fears of that head-&-shoulder formation, will the Australian currency to show its part resilience? Click here for chart & analysis

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New Premium Insights wered added for EURUSD, USDJPY, GBPUSD, AUDUSD, EURJPY and CADJPY, while USDCAD and AUDJPY remain in progress. Both silver longs remain in progress from last week and so does the lone oil long (the other was stoped out). No update on Gold after both were stopped out. See new Premium Insights here

ECB announced a 3^rd repayment round of LTRO-1, with €145 bn out of the total €489 bn-- € 5 bn to be repaid in Feb 13, €3.5 bn this week & €137 bn 2 wks ago. Better than expected Chinese figures did not prevent JPY surging following remarks from Japanese Finance Minister Taro Aso stating “The yen's sudden move from 78 or 79 to 90 was not something we anticipated”. Market players are interpreting the comments as a type of intervention, which is far from the truth. The same applies for Draghi's comments yesterday. US trade is expected to be quiet ahead of the upcoming bilzzard in the NorthEast. The yen rally allowed 3 of our unfilled yen cross Premium trades to be filled. A new batch of Premium Insights is due within 90 mins from now.

Dip buyers rescued the yen crosses from declines in US trading once again. The pound was the best performer on the day while the euro lagged. The highlight of the Asia-Pacific session will be Chinese CPI. A new set of Premium Insights will be released at the start of the US Friday session. 

Draghi put on his dovish hat on Thursday and cut the euro down by as much as two cents as Ashraf mentioned earlier.

Broader markets were in a risk averse move. That partly came due to a comment from the Fed's Evans who said there was a possibility QE could be halted before unemployment fell to 7%. Evans is one of the most dovish members of the FOMC and his comment caused a sharp drop in gold (that later recovered).

It was interesting that USD/JPY wasn't able to rally on Evans comment but it came at the same time as Draghi's press conference and that caused cross-currents in markets. As stock markets sold off, USD/JPY fell to 93.10 and the yen crosses declined deeply.

However the dip buyers emerged once again after European markets closed and USD/JPY bounced to 93.70. Patient traders continue to hope for a retracement to 90.00 but that is unlikely unless some harsh fundamental news crushes risk appetite.

The main indicator on the calendar is Chinese CPI at 0530 GMT. The CPI is expected up 2.0% year-over-year, much slower than the 2.5% rise in December but officials have shifted to a more hawkish bias and warn that inflation is likely to accelerate in the months ahead.

Japanese current account data is also on the calendar at 2350 GMT but it rarely riles markets.

Euro drops more than 1.5 cent after Draghi maintained a largely dovish tone, stating that growth risks remain on the downside and anticipating inflation to fall below 2.0% in coming months. Please click here for more.

Euro edges higher ahead of the ECB press conference due at 8:30 ET, 13:30 GMT. We added 2 charts on EURUSD (4hr & Daily) to the Premium Insights as well as a  comment about EURUSD ahead of the ECB press conference due in 40 mins from the writing of this note. Both EURUSD trades remain in progress from the latest Premium Insights

Ashraf Laidi & James Chen will discuss their latest take on FX, equity indices and commodities in this evening's webinar 18:00 - 20:00 GMT. City Index Account Holders click here

Price action was tame on Wednesday as markets took a break following weeks of major volatility. The yen was the best performer while the Aussie lagged. The kiwi dollar fell hard early in the session and Australian employment is up next. Latest EURUSD CHART from Ashraf is here

It was a day of minimal news and economic data. The highlight was the Canadian Ivey PMI which rose to 58.9 compared to 53.9 expected. The surprise weighed on USD/CAD as it rejected parity once again and fell to a two-week low.

In European trading, BOC governor Carney will speak to UK parliament about his upcoming role as leader of the Bank of England. The risks are primarily to GBP and the market may be prone to overreacting as traders feel out the new governor.

Trading in Asia got off to a fast start as the New Zealand dollar dropped a half cent to 0.8375 following the Q4 jobs report. Although the unemployment rate dropped to 6.9% from 7.3%, the market focused on the overall level of employment, which fell 1.0% in the quarter compared to a 0.4% rise expected.

The next risk event is the Australian January employment report at 0030 GMT. The consensus is for 6K new jobs after 5.5K were lost in December. The unemployment rate is expected to tick up to 5.5% from 5.4%.

AUD/USD is in a precarious position after falling to a 10-week low on Wednesday. A decline below the mid-November low of 1.0287 (which is a near certainty on a weak report) could send the market scrambling to dump Aussie dollars.

Less than seven months after ECB president Draghi vowed to “preserve” the euro and make it “irreversible”, he is highly unlikely to hint at thwarting its appreciation any time soon. Here is more on this argument and the latest weekly chart of EURUSD.

Heading into today's release of the Jan Canada PMI survey due at 10:00 ET, 15:00 GMT, (exp 53.9, prev 52.8), questions are raised about the loonie's next move vs USD. The importance of today's figure is its implications for Canada's jobs figures due on Friday. CADJPY may seem straight forward, but USDCAD and EURCAD continue to show attempts of further rebound (CAD weakness). We noted our rationale for this week's USDCAD trade in the latest Premium Insight. EURUSD is expected to consolidate around 1.3520/30s ahead of tomorrow's ECB press conference, where each market player shall await Draghi's handling of the questions regarding the euro's recent appreciation. More on this later in the next piece to follow today.  3 trades hit all targets, 6 in progress, 4 unfilled and 7 stopped out.  2 of 2 EURUSD in progress. 1 of 2 USDJPY hit all targets, the other 1 long missed the 92.10 entry by 2 pips. 2 of 2 GBPUSD stopped out. 2 of 2 AUDUSD stopped out. 1 of 1 USDCAD in progress. 1 of 2 EURJPY hit all targets, the other 1 long unfilled. 1 of 2 CADJPY longs hit all targets, the other long unfilled. 1 of 2 AUDJPY longs hit all targets, the other long unfilled. 1 of 1 EURGBP was not filled. 2 of 2 Gold stopped out. 2 of 2 SIlver in progress. 1 of 2 oil in progress, he other stopped out.

More positive signs on the US economy emerged with an upbeat ISM non-manufacturing index on Tuesday. The euro was the top performer while the yen lagged badly. The highlight of Asia-Pacific trading is Australian retail sales.2 of 2 EURUSD in progress. The latest status on the current Premium Insights is seen below:

1 of 2 USDJPY hit all targets, the other 1 long missed the 92.10 entry by 2 pips 2 of 2 GBPUSD stopped out 2 of 2 AUDUSD longs in progress 1 of 2 EURJPY hit all targets, the other 1 long unfilled. 1 of 2 CADJPY longs hit all targets, the other long unfilled 1 of 2 AUDJPY longs hit all targets, the other long unfilled 1 of 1 EURGBP was not filled 2 of 2 Gold stopped out 2 of 2 SIlver in progress 2 of 2 oil in progress

The euro jumped higher on an MNI report saying the euro hasn't risen enough to prompt action from the ECB. The report cited ECB sources and added that the majority of the ECB sees little risk to the economy from recent euro strength.The report prompted a quick move to 1.3598 from 1.3525.

Overall risk sentiment was boosted by the ISM services report. Although the headline number was only slightly stronger than expectations at 55.2, the employment component leaped to a nearly 7 year high.

USD/JPY climbed higher throughout European and US trading. From 92.10, the pair steadily climbed to 93.74 – the highest since May 2010. Yen crosses similarly broke recent highs as risk appetite improved and the S&P 500 gained 1%.

The Australian dollar was choppy after holding rates unchanged but tilting dovishly. The next meeting is on March 6 and the OIS market is pricing a 36% chance of a cut. The global macro scenario will help determine whether they cut or not but the main factor will be domestic data.

The first important release will be December retail sales at 0030 GMT. The consensus estimate is for a 0.3% rise in the month.

Another event to watch will be comments from BOJ member Sato at 0130 GMT. BOJ leader Shirakawa announced Monday that he will end his 5-year term a few weeks early.

10 days after we charted those central bank balance sheets, we get news today that the ECB's balance sheet hit an 11-month low. So here's the latest in those charts vs their own currencies' performance with regards to gold. Click here for full charts & analysis

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As we await for the US Jan services ISM, expected at 55.0 from 55.7 (due at 15:00 GMT), we just added 2 new Premium trades on gold, 1 new on silver (in addition to the 1 in progress) and 1 new oil (in addition to the 1 in progress). These are combined with the 13 new Premium trades added on Monday night. Latest yen damage is caused by reports that BoJ governor Shirokawa will leave office earlier than scheduled, which paves the way for more aggressive easing earlier than anticipated. See below for latest Premium Insights.

The euro fell hard to start the week on worries about periphery politics. EUR was the laggard on the day while the pound was surprisingly strong. The focus now shifts to the RBA decision in the hours ahead. A new edition of the Premium Insights ahead of the RBA has now been added. USDCAD and AUDJPY are added back to the Premium trades after a long absence.

Spanish yields rose more than 20 basis points on Monday as an illegal donation scandal threatens Spain's ruling party. Concerns about a hung parliament following Italian elections at the end of the month also weighed.The euro grinded steadily lower from 1.3625 to 1.3500.

USD/JPY also sank to 92.00 after touching 93.00 in European trading. The reversals on Monday beg the question whether it's yet another buyable dip or the start of a deeper retracement. We believe the trends will eventually continue higher but will be mindful of the risks.

The highlight of Asia-Pacific trading comes at 10:30 pm ET when the RBA makes its latest interest rate announcement. Economists are one-sided in expecting no change but the OIS market is on guard and pricing in a 33% chance of a surprise cut.

If the RBA holds, the focus will shift to comments about the economy and the potential for rate cuts in the month's ahead.AUD/USD is near the top of its recent range at 1.0440 and a large move (more than 50 pips) in either direction is probable.

Less than 10% of the market expects the RBA to cut rates today tonight (22:30 ET, 03:30 GMT). Remember last month, the Aussie rose despite the RBA cut. Click here for Ashraf's AUDUSD and AUDJPY charts ahead of tonight's decision.

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Europe's political woes  is being blamed for today's selloff in equity indices and non-USD currencies as Spain's PM Rajoy and his Popular party are embroiled in a corruption scandal.  Rajoy's denial failed to convince. EURURSD drops towards the 200-WMA after having broken above it last week for the 1^st time since Oct 2011. EURJPY is also on the decline after EIGHT consecutive weekly gains in the pair, which was the longest run since 2008.  We will issue a Premium piece later tonight ahead of the RBA decision.  Status on Wednesday's Premium Insights is: 5 trades are in progress, 3 hit all targets, 5 unfilled and 4 stopped out. 1 EURUSD long hit all targets, 1 in progress, 1 unfilled. 2 of 2 USDJPY unfilled, 1 of which missed the 90.80 fill by 6 pips. 1 GBPUSD (long) hit all targets , 2nd (short) stopped out by 17 pips before tumbling towards projected target. 1 of 2 AUDUSD in progress, 1 stopped out. Both CADJPY unfilled, 1 missed 90.0 fill by 7 pips. 1 of 2 EURGBP longs hit all targets, the other unfilled (missed 0.8520 entry). 2 of 2 Gold stopped out. 1 silver in progress, 1 stopped out by 8 pips. 2 of 2 oil in progress.

More positive signs on the US economy helped yen crosses carve out fresh cycle highs on Friday. On the week, the Swiss franc was the best performer while the yen lagged. Weekly positioning data shows that speculators have been wrong-footed on cable. Here is the AUDIO/VIDEO recording of Ashraf's Thursday webinar making explaining his rationale for his recent calls on FX, gold and oil. Direct link here:  http://www.hamzeianalytics.com/Educational_Webinars.asp

Over the weekend, Japan's Fin Min Aso said this weekend the govt isn't manipulating the yen, "The recent fall in the currency is a result of our efforts to beat deflation"

Non-farm payrolls rose 157K in January, which was very close to expectations but benchmark revisions to led to an additional 127K jobs in Nov and Dec.

The initial reaction was to sell the euro and USD/JPY as the unemployment rate rose to 7.9% from 7.8%. That reaction quickly reversed, in part, due to the Fed's Bullard who hinted at tapering bond buys if unemployment fell to the 'low 7s'. That's a higher threshold than the Fed's stated 6.5% rate.

USD/JPY continued to rise after the ISM manufacturing index hit a seven-month high at 53.1 compared to 50.6 expected.USD/JPY marched relentless higher in late US trading to close at 92.83. The euro broke above 1.37 but a round of profit taking late in the day sank the pair to 1.3639.

Commitments of Traders

Weekly futures positioning data from the CFTC, as of the close on Tuesday. JPY -71K vs -64K last week EUR +27K vs +21K prior AUD +85K vs +97K prior CHF +4K vs +6K prior GBP +10K vs +18K prior NZD +22K vs +24K prior CAD +35K vs +58K exp

The main takeaway is that speculators haven't taken part in the recent cable declines. If cable continues to fall and positioning switches, it could add to GBP/USD pressure in a potential test of 1.50.

Another takeaway is that the market remains highly committed to AUD longs despite four weeks of near-zero gains. Impatient traders may quickly clear out if AUD/USD begins to decline.