Intraday Market Thoughts Archives

CHINESE STRESS ! Worst of times for China's US investments; US Treasury prices plummeting to lowest since November (yields soaring), dollar dumped across the board to 2-month lows to the extent that Chinas ambassador to US expressed concern later Friday "China will continue buying treasuries", "dollar will remain the worlds reserve currency for some time", "the idea of a new global currency was more of a scholarly exploration". When was the last time Chinese officials spoke in such manner. When you hold over $750 billion in treasuries and their price as well as their currency is falling, you have very little alternative to say anything else. The only way for the dollar to recover is to hope for a pullback in stocks.

Dollar battered across the board; EURUSD hits 2 month highs at $1.3620, making its biggest weekly jump since the week of the March 18 when the Fed announced the purchase of LT treasuries. Soaring stocks are driving down USD across the board and JPY down against all currencies except for USD. The plummeting dollar is MAKING CHINA NERVOUS to the extent that Chinas ambassador Zhou remarked China will continue buying treasuries and that the dollar will remain the worlds reserve currency for some time and that the idea of a new global currency was more of a scholarly exploration.

NZDJPY has topped out after failed attempt to take on the 59.50 double top following 8 consecutive daily declines, now looking to start paring those gains. Initial target seen at 58.00 with subsequent losses expected to into Monday Asian session at 57.40. This is a similar looking chart to the AUDNZD HOT-CHART, but used as a hedge (buying NZD in HotChart and selling it on this trade vs JPY) For more frequent trades go to http://twitter.com/alaidi

US April jobs report largely within expectations; payrolls -539K vs exp -663K, unemployment rate rises to 8.9% from 8.5% (highest since Sep 83). Dow futures ease of ftheir highs from +116 pts to +75 pts, with hourly chart on Dow futures signalling further declines towards 8,420 from current 8,500, but these losses are not enough to dampen risk appetite, hence, the broad decline in USD. EURUSD breaks above 200-day MA to $1.35, eyeing 1.3530, followed by 1.3580 (50% retracement of the decline from the 1.4710 high to the $1.2450 low. But any deterioration in equities may drag USDJPY to 98.60 and EURUSD back to 1.3410.

CAD soars across the board after Canada unexpectedly created a net of 36K jobs in April vs expected loss of 50K, while the unemp rate was unchanged at 8%. USDCAD drops to 1.1580 low, eyeing 1.15, 38% retracement of the major upmove from 0.9050 low to the 1.3015. Remain cautious of the expectations element from US jobs report, as a decline of less than 600K and an unemp rate of less than 8.9% would serve to boost risk appetite and further lift EURUSD past the $1.3470 level.

Stocks fell out of cautiousness ahead of the stress tests coming up shortly as well as Fridays US labor report. Canada will also release its labor report 1.5 hour before the release of the US jobs report. Canadian unemployment expected at 8.3% from 8.0%, while net employment change seen -50K from -60K. The employment component of the April PMI did fall after a rebound in March. UK PPI 8.30 am GMT, exp -3.5% y/y from -0.4% and +0.7% m/m from 2.0%. Such a decline could be weigh on sterling but markets unlikely to move excessively ahead of the US jobs.

It's been a while since the euro emerged as the broad a winner in a single day, but today's ECB decision to defer any purchase of bonds until June pushed the currency above the $1.3420 level, drawing bids to test the 200-day MA of $1.3470 (todays high). As tech traders pushed up EUR, the currency gained even against AUD and GBP, both of which had stellar showing during the latest advances in stocks. Todays stocks drop cannot be explained cogently apart from profit-taking ahead of tonights stress test results and tomorrows non farm payrolls. EURCHF extended gains from yesterdays franc-damaging remarks from the SN, eyeing the 38% retrcmt at 1.5180. Those who were long GBPUSD and are reluctant to sell, could look into selling GBP vs EUR (EURGBP eyes 0.9040.

Euro gains after ECB to $1.3363 session high after ECB cuts refi rate by 25 bps to 1.00% as expected, keeps deposit rate unchanged at 0.25% and cuts lending facility rate by a greater 50 bps to 1.75%. Expect further gains past $1.3370 and onto $1.3425. Gold already rallying to $920, eyes $935. Dow futures +62 pts, AUDNZD drops near session lows of $1.27, while AUDUSD hits fresh high of 0.7588, now eyeing 0.7720.

Yen and dollar damaged across the board as Japans return from Golden Week Holiday delivered a 4.6% jump in the Nikkei to play catch up with global equities rally. ECB expected to cut rates by 25 bps to 1.00% but as long as it ONLY announce quant easing and not implement it, then we could see prolonged run-up in EURUSD towards the $1.3370s and onto 1,3400. Key resistance stands at the 200-day MA of $1.3470. Gold and silver rallying along with stocks, which could call up $935 as early as today. Cable eyes 1.5320.

All sorts of unconfirmed reports hitting the wires speculating about the results of bank tests, with various sources saying Morgan Stanley, JP Morgan Chase, Goldman Sachs and MetLife see no need for extra capital under tomorrow nights stress test results. Citigroup reported to need $5 bln, and GMAC needs $11.5 bln. NZD April unemployment due at 22:45 GMT (23:45 London) expected at 5.3% from 4.7%, Aussie unemployment due at 1:30 am GMT exp at 5.9% unemp rate from 5.7%.

FX remains unwilling to participate in the unfolding stocks' rally. Cable unable to breack $1.51 and EURJPY struggles to regain 132.20s. A sample of this morning's appearance on CNBC discussing capital BoA's requirements http://www.cnbc.com/id/15840232?video=1115226620&play=1

JPY and USD weakness return to the fray as risk appetite is boosted by smaller than expected decline of 491K in US ADP payrolls vs expected -645K from previous -745K. This is raising possibilities that Friday's jobs report will show a smaller decline in payrolls than the expected 610K. Does that mean that anything less than -500K will refuel resh a bout of buying? And what about the unemp rate? BoA rebounds after clarification regarding the reports on BoA needing $34 bln in extra capital. CAD rallies on +23.5% rise in building permits vs exp +2.5%. With no more figures from the US left for the day, GBPUSD will retest $1.5160, EURUSD eyes $1.3410.

Just as Barclays sold its I-Shares, Citi is looking into selling Niko and BoA reducing its holdings in CBC. Fore more frequent updates and aggressive trades, visit us on Twiter

http://twitter.com/alaidi

Here's the study I mentioned earlier this morning CNBC about sentiment remaining typical of previous bear market rallies and NOT of bull market rallies.

According to the sentiment index of the Hulbert Stock Newsletter Sentiment Index (HSNSI), which tracks the advice of more than 160 financial newsletters since 1980, both of the last major (more than 25%) bear market rallies (Sep 2001 to Jan 2002 and Nov 08 to Jan 09), the HSNSI jumped 85.8 percentage points, and 62.4 percentage points respectively. That compared to ONLY 29.3 during the first 8 weeks of past BULL markets (not bear market rallies). Sentiment of the current market rally is 53.8, which is as high as thoe previous bear market rallies. Other sentiment indices, such as the American Association of Individual Investors shows that sentiment is at 24.1, which is similar to levels of those 2 bear market rallies (26.6 and 28.2), in contrast to ONLY 9.8 sentiment index in the first 8 weeks of bull markets.

In simple english, sentiment is roughly 3x greater during bear market rallies than it is in bull markets.

Reports that stress tests will show Bank of America requiring as much as $34 bln in new capital are weighing on risk appetite and dragging down currencies against USD and JPY. Even the rallying Aussie failed to react to better than expected 2.2% increase in retail sales as the BoA story takes precedence over global risk appetite. EURJPY hit a 129.87 session in Asia, 17 pips short of the target in yesterdays Hot-Chart from the initial entry point of 132.70. Bearishness remains in most JPY pairs with USDJPY eyeing 97.40, NZDJPY eyeing 56.20.

Today's Hot-Chart on EURJPY is already 10 pips in the green. One of the questions to ponder ahead of the next downturn in sentiment is whether the USD will outperform JPY as risk appetite retreats. There's more downside for NZDJPY and GBPJPY and to a lesser extent a more limited rebound in USDCAD and USDCHF. Recall that the SNB remains preoccupied with excessive CHF strength, so 1.11 in USCHF may prove too strong for the Swiss.

The 5 consecutive daily gains in GBPUSD dissipated at todays $1.5162 high, but the rising trend line from the Mar 24 suggests further gains could reach the $1.5280s. EURGBP looks to drag losses towards 0.8790, a break of which could call up 0.8740. Yen crosses trade near their lows as stocks flirt with negative territory. Aussie retains attempts a revisit towards the session highs, while but this evenings trade balance and retail sales figures (1:30 am GMT) could eventually fuel the currency past the 0.75-cent figure.

Dow futures -12 pts, FTSE-100 +102 pts but gold and silver are both advancing, with the former breaching above its 100day MAs and testing its 55-day MA of 916, which coincides with the 38% retracement of the move from the 1,005 high to the 863 low. Any signs of a retreat in equities is likely to magnify golds momentum towards $929. EURJPY Hot-Chart now up.

Sterling hit a fresh 4-month high of 1.5110 as UK construction CIPS jumps to a higher than expected 38.1 and the FTSE-100 breaks above 4,300, gaining 26% off its March lows. Aussie hit a fresh 7-month high of 0.7465 and 0.7397, right at the 38% retracement of the fall from the July high of 1014.14 to the Jan low of 55.31. The simultaneous release (14:00 GMT) of the speech from Fed Chairman Bernankes testimony to Congress on the economic outlook and the release US April services ISM, could provide a one-two boost for already rising bond yields from their current 3.16% print. While US ISM index could improve to 42.5 from the 40.8 in March, markets will look for a rebound in the New Orders and Employment components after each fell in March to 38.8 and 32.3 respectively.

GBPUSD breaks 1.50, making $1.5330 a possible target in the event of improved sentiment into European trade. The RBA decision coming up at 4.30 am GMT is expected to leave rates unchanged at 3.00%, which may trigger a brief retreat in Aussie before the pair attempts to recover ground as the decision may suggest the worst is over for the Australian economy. 0.7515 stands as the 38% retracement of the move from the 0.9845 high to the 0.6070 low. Although Japanese markets will be shut, Asian indices could feed into the next phase of risk appetite. UK April construction CIPS and US April ISM are expected to show further improvement, which is another source of buying in FX risk appetite.

Stocks hit fresh 4-month highs, with S&P500 and Dow hitting 900 and 8,400 as the better than exp housing numbers added to the optimism triggered by Chinas PMI figure showing the 5th straight monthly rise. While GBPUSD failed again to breach above $1.50, USDCAD broke below the Jan lows of 1.1755 and may set sight onto 1.1680 in the event of a successful close above 900 in the S&P500. EURCAD EYES 1.1560. AUDJPY and NZDJPY already off their highs despite stocks standing at their highs. Closely watch the overbought indicators in JPY crosses.

Better than expected US pending home sales and the first increase in construction spending in 6 months empowers stocks to new 4-month highs. S&P500 looks to test the 902 trend line resistance extending from the week of Oct 23. While S&P500 is now above the 30% rally mark from its March closing low, will it finally close above 880? And will the Dow manage to close above 8,400-8,500? Aussie outperforms, eyeing the 74-cent figure, while 75.09 stands as the 38% retracement of the decline from its all time high to the Nov low.

EUR and GBP pull back to session lows vs USD after an earlier rally in Asia and Europe prevailed along with AUD, NZD and CAD. Today's speech from pres Obama announcing the closure of offshore tax loopholes for US companies will be closely watched, but no elimination of such breaks will take place until 2011. Japanese markets are closed from Monday to Wednesday, while London is closed today. In addition to Thursdays stress test results and Fridays labour report from the US, markets will also await the closely watched press interest rate decision and press conference from the ECB on Thursday, where an announcement on a possible quantitative easing could take place. RBA decision due Tuesday 4.30 am GMT. Rates seen unchanged at 3.00%.