Intraday Market Thoughts Archives

EUR/USD will succeed in avoiding a 6th consecutive losing week by having to end the week above $1.2417. The last time EUR/USD posted six straight falling weeks was in February 2010 at the start of the Greek debt woes. The trading week ends on Friday, but market participants will keep an eye on the outcome of Spains aid request for its ailing banks as well as a flurry of key Chinese data following Thursdays surprise rate cut. Both are expected on Saturday. See more below on Gold, EURUSD, OIl-UK impact & those China data figures.

Wire reports that Madrid will request aid for Spanish banks remain unconfirmed. A conference call to discuss the request is said to take place on Saturday, followed by an official announcement on Saturday afternoon. The bailout chatter follows last nights decision by Fitch Ratings to downgrade Spain by three notches from A to BBB, while retaining a negative outlook. The downgrade took Spain out of the A basket by two rating agencies. The Fitch rating is now two notches above junk status.

The overnight slide in EUR/USD alongside other risk currencies emerged after the latest Fitch downgrade as well as market disappointment with Fed Chairman Bernankes testimony.

EUR/USD is fighting to avoid posting its 6th consecutive negative week. A close below $1.2400 would dampen chances of further extension in the current rebound. We continue to expect a recovery towards $1.26-1.27 ahead of the Greek elections and FOMC meeting before the downtrend is re-established gradually towards $1.23 and $1.18.

Particular attention shifts to Chinas weekend data following Thursdays decision to slash lending and deposit rates for the first time since the 2008 crisis. The data include reports on PPI, CPI, industrial production, retail sales and fixed-asset investment tomorrow. There is a concern that the interest rate cut was a pre-emptive action ahead of poor data showing.

Chinas May CPI is expected to slip back from 3.4% to 3.2%, a figure last attained February, which was the lowest since June 20102. Thus, a reading below 3.2% would reflect continued decline in food prices and open the door for further interest rate cuts ahead.

Chinas May retail sales are seen at 14.2%, from Aprils 14.1%, which was the lowest since January 2010. Further weakness among consumers would throw cold water on the need for China to step up consumption and help re-balance growth.

Falling oil blamed on plummeting UK input prices. May UK input prices grew by a mere 0.1% y/y, the weakest since September 2009 as input prices fell 2.5% m/m. The decline is attributed largely to the 15% decline in Brent prices in May. The downtrend in UK input prices and UK CPI is appearing eerily similar, which is another factor justifying fresh QE from the BoE as CPI eventually reaches the 2% target.

Gold shows more signs of posting its first losing year since 2000. The yellow metal is no longer advancing on eurozone woes, while rallying hesitantly during any hints of QE3. Golds hesitant gains despite falling bond yields reflects the ongoing fear factor (selling holdings to counter losses) as well as eroding confidence that any new quantitative easing may not be sufficient, hence the notion of diminishing returns voiced by Bernanke last year ahead of Operation Twist.

Golds recurring inability to surpass its 55-day moving average since mid-March highlights the lack of confidence among gold bulls. Gold broke below its four-year trendline support in early May below $1620, and is eyeing the next key support near $1525 (100-week MA), a technical level last breached in May 2008. A weekly close below $1520 risks extending losses towards the next major foundation, which lies at the 200-week moving average, now near $1260.

EURUSD longs and oil longs were stopped out, while AUDUSD longs remain in progress. FOR a FREE 1-WEEK TRIAL click here: http://ashraflaidi.com/products/sub01/

Ashraf Laidi

Spain to request aid on Saturday, hours after Fitch latest downgrade of Spains long term debt, German trade balance rose, UK PPI input and output prices declined. US trade balance and Canadian labor market data is next. The latest on our Intermarket Insights is below.

USD trades higher across the board except JPY. European equities are losing nearly 1% and the relative strength winner is JPY while NZD is the weakest.

This weekend could provide some relief to Spain induced market tensions as Reuters reports that Spain is expected to request European aid for its ailing banks. A conference call to discuss the request should take place on Saturday and the announcement is expected Saturday afternoon. This news comes one day after Fitch downgraded Spanish credit rating to BBB from A with negative outlook. Spain is now only two notches above the junk level.

German trade balance was above expectations as it rose in April to EUR 16.1 bln from upwardly revised March's EUR 14 bln. Exports rose 3.4% while imports declined 1% y/y. On monthly basis, exports fell 1.7% while imports dropped 4.8% which puts the growth outlook in question. EURUSD trades around 1.2460.

PPI input prices in the UK rose in May by 0.1% from previous 1.0% on the back of sharpest monthly decline in crude oil since 12/2008. The output prices inflation eased to 2.8% from 3.2% y/y which is the lowest level since 11/2009. Consumer inflation expectations for the next 12 months rose in May to 3.7% from 3.5% much higher compared to Aprils 3% CPI and significantly above BOE 2% target. EURGBP is trading slightly lower around 0.8075.

US data is limited to trade deficit that is due at 8:30 am ET and is expected to narrow in April to USD 49.4 bln from previous 51.8 bln.

CAD traders will ignore housing starts that are due at 8:15 am and are seen lower in May at 226K from April's 245K as they will wait for 8:30 am when labor market data is due. The employment level is expected to rise only 10K after 58.2K growth seen a month earlier. The unemployment rate is seen steady at 7.3%. Trade surplus that is due at the same time is anticipated to decline in April to CAD 0.2 bln from previous CAD 0.4 bln.

EURUSD longs and oil longs were stopped out, while AUDUSD longs remain in progress. See rest of Insights here: http://ashraflaidi.com/products/sub01/access/?a=644

The Fed Chair said more stimulus may come but did not indicate whether that threshold had been crossed. See Ashraf's thoughts below on why Bernanke may have backtracked. The euro was unable to break above 1.2625 on a day where the pound led and the yen lagged. Japanese final Q1 GDP and April trade data is due; RBA Governor Stevens also speaks. Out of last nights 12 Intermarket Insights (aggressively biased towards risk-on), 4 it all targets, 7 in progress, 1 unfilled. See which trades did what in final paragraph.

Bernanke focused on risks from Europe in his testimony and also hinted at emerging deflation potential. The market was looking for a strong hint about forthcoming QE but he was coy, saying only that the Fed would act if the European crisis escalates.

Ashraf says: "Bernankes relatively guarded testimony towards giving any policy signals reflects the possibility that Fed economists are in the process of determining their latest forecasts post-May NFP and Chicago PMI in the face of stable ISMs and housing figures. Since markets have concluded that any further Fed QE would be principally aimed at containing a Eurozone event risk, the US central bank may be waiting for the final plan of action from ECB/IMF/EU before working out its part of the coordinated action".

The euro challenged the recent highs at 1.2625 prior to Bernankes testimony but faded to 1.2550 afterwards.

The Chinese rate cut sparked fears about a deeper slowdown rather than optimism about future strong growth. Economic data was not a factor with initial jobless claims in line with estimates at 377K. Ashraf had warned about the path to BRICs policy rates in these 4-in-1 charts in May 30 Premium Insights http://www.ashraflaidi.com/content/images/p_sub01/LIBOR%20BRICS%20ECON%20CONF%20May%2030.JPG

Merkel created a stir when some headlines were misinterpreted to indicate she was in favor of Eurobonds. She only said that Germany is ready to use existing instruments to end the crisis.

Hopes that Spanish banks would be able to directly tap the ESM have been dashed due to treaty and legislative concerns. Any bailout will need to go through the Spanish government with an estimate from the IMF at 37B euros but private estimates as high as 100B and growing.

At 2350 GMT, Japan releases final first quarter GDP figures. The blockbuster quarter is expected to be revised upwardly to 4.5% from 4.1%. At the same time a trade deficit for April of 451B yen is expected.

At 0130 GMT, April Australian home loans are expected flat after a 0.3% rise in March. At 0330 GMT, RBA Governor Stevens speaks to the American Chamber of Commerce in Adelaide.

In last nights Premium Trades, 4 hit all targets (1 EURUSD long, 2 GBPUSD longs, 1 gold short), while 1 gold short was unfilled. USDCAD missed our 1.0210 target by 1 pip (low was 1.0211), therefore remains as in progress. See rest of our trades on AUDSD, USDCAD and US crude here: http://ashraflaidi.com/products/sub01/access/?a=644 Non=subscribers can join here for a 1-week trial http://ashraflaidi.com/products/sub01

-AB

Ashraf on CNBCArabias Alhaseela (w/ English Synopsis) discussing Moody's downgrade of German banks and the latest in Spain http://bit.ly/KRLa8o

Ashraf on Dubai TV (no English synopsis) discussing the various scenarios for Spain. http://bit.ly/MqUcW2

PBOC cut lending/deposit rates for the 1st time since 2008, joining the rest of BRICs into easing cycle. BoE keeps rates and QE steady; Australian employment improves but unemployment rises; UK services PMI unchanged; Swiss CPI eases m/m; Spanish auction. Jobless claims, Canadian PMI and Bernanke testimony is next. All but 1 of last nights Intermarket Insights are in progress. See below for detail

Commodity currencies leading the way higher after Chinas 25-bp rate cut and Australian data bested expectations for the second day in a row. Australian employment rose by 38.9K in May from previous 7K which is the best result since January. However, the unemployment rate ticked up to 5.1% from 5.0%. AUDUSD trades around 0.9970.

London traders sold the buck initially but the trend reversed and the greenback regained ground. It trades near opening levels. European equities are higher by about 0.6%.

The MPC left the official bank rate unchanged at 0.5% and the asset purchase facility remained at GBP 325 bln. GBPUSD trades higher around 1.5550.

UK service sector continues to expand at a solid pace as services PMI remained at 53.3 in May which was above market expectations of a decline to 52.6. Business confidence declined to a five month low but employment rose and new business accelerated to a four month high. Halifax HPI rose 0.5% in May after falling 2.3% in April.

In other news, Swiss CPI eased in May to 0.0% from previous +0.1% m/m but remained steady at -1% y/y. The unemployment rate declined to 3% from 3.1%.

Spain was able to sell EUR 2.074 bln worth of various bonds which is above its 1-2 bln target range. The average yields rose but bid to cover improved on all. According to MNI calculation, Spain has completed 58% of its gross funding needs. France nearly reached a full take up as it sold bonds totaling EUR 7.84 bln out of EUR 7-8 bln target.

The NY session starts at 8:30 am with jobless claims that are seen marginally lower at 381K from 383K followed by Canadian Ivey PMI at 10:00 am ET that is expected to rise in May to 53.5 from 52.7.

The key event that also starts at 10:00 am is the FED chairman Bernanke's testimony before the Joint Economic Committee in Washington DC. While any signs of additional stimulus would send the USD lower, remarks of the "wait and see" approach could support the buck as yesterday's beige book was not as gloomy as expected.

All of our longs in EURUSD, AUDUSD, GBPUSD are in progress, so is our USDCAD short (40 pips away from final target). One gold short in progress, the other unfilled. Both US crude positions are in progress. We're using CL_N (July contract). Click here for direct access to these Premium trades & charts: http://ashraflaidi.com/products/sub01/access/?a=644 For a 1-WEEK TRIAL, click here: http://ashraflaidi.com/products/sub01/ Click here for direct access to todays edition:

Markets turn to Fed Vice Chairwoman Janet Yellens comments about the economy due at 20:00 EST (1:00 London Time), which could open the door for further Fed stimulus. Speculation about a deal to bailout Spanish banks with European money stole the spotlight from the ECB and Fed. The Australian dollar was the top performer while the yen lagged as US stocks posted their largest gains of the year. The highlight of the Asia-Pacific session is the Australian employment change but comments from Yellen will also be eyed. Wednesdays Intermarket Insights include trading ideas and charts on EURUSD, AUDUSD, GBPUSD, USDCAD, US crude and gold. See below for detail.

Reports about a deal that would recapitalize Spanish banks with ESM funds continue to circulate. The loans will not come with fresh austerity conditions attached except for banking reforms. Reports suggest Spain will still carry the liability to repay these loans but officials are in a battle to manage the message so not to upset the bond market.

The greater development might be signs Germany is softening and showing flexibility.

The ECB held rates at 1.00% but pressure to cut is growing. Draghi conceded at the press conference that some members wanted lower rates.

The Feds Beige Book surprised market participants by hiking the assessment to moderate growth from modest-to-moderate growth. Only 1 of the 12 districts reported that growth was slowing. Comments from Lockhart and Williams were fractionally more dovish but nothing to indicate QE3 or a fresh Operation Twist on June 20.

At 0130 GMT, Australia will release May employment data on the heels of yesterdays upbeat GDP report. Expectations are modest with a consensus estimate of no change in jobs and a rise in the unemployment rate to 5.1% from 4.9%. The Aussie has been driven by better sentiment about Europe but this report could easily move AUD/USD 50 pips.

Another event to watch is a speech from Fed vice chair Yellen in Boston. She is speaking on the economy in what is a likely preview of Bernankes testimony on Thursday. The absence of a tilt toward more QE would rule out a hint about QE3 from the Fed chief and could reverse the recent USD selling.

WILL JANET YELLEN EXTEND THE BOUNCE IN RISK APPETITE? Tonights Intermarket Insights provide the trading ideas and charts on EURUSD, AUDUSD, GBPUSD, USDCAD, US crude and gold. Click here for direct access to todays edition: http://ashraflaidi.com/products/sub01/access/?a=644 Click here to subscribe: http://ashraflaidi.com/products/sub01/ Click here for direct access to todays edition:

-AB

The current bounce in risk appetite at the expense of USD is here to stay, but for how long? And will it be followed by a 100-pt consolidation until the next barrage of policy solutions? Tonights Intermarket Insights provide the trading ideas and charts on EURUSD, AUDUSD, GBPUSD, USDCAD, US crude and gold. Click here for direct access to todays edition: http://ashraflaidi.com/products/sub01/access/?a=644 Click here to subscribe: http://ashraflaidi.com/products/sub01/

مقا بلتي مع تلفزيون دبي، تحليل3 السيناريوهات لإسبانيا بعد40:33 Ashraf's 10 mins interview in Arabic to Dubai TV about the 3 possible scenarios for Spains debt troubles. (after 40:33 mins) http://vod.dmi.ae/media/video/60889/??????????????_4__????????????_23 Ashraf will also be on CNBCArabia at 17:40 GMT, 21:40 Dubai Time at Al Haseela

We look at the ECBs 3 options as we head into todays decision (11:45 GMT); Australian Q1 GDP rose; UK construction PMI declined; Eurozone GDP revised lower y/y; German industrial production fell; JPY weakens. Market turns to the ECB rate announcement and press conference and later in the session to the FED's Beige book. The latest on our Intermarket Insights is also found below.

Markets are aware of Draghis desire for further centralized supervision & unified banking, but most of all aware of the central banks remaining bullets, which include:

1) Slashing the refinancing rate to 0.5% from 1.0%-- could be used for a new round of LTRO at lower rate & but not necessarily 3-year period (seen as among last remaining solutions & unlikely at this time unless liquidity deteriorated further) ;

2) Renew its bond purchases, which have been inactive since late January (could begin gradually before more LTRO);

3) Extend Emergency Loan Assistance to Spanish banks (highly unlikely without formal IMF assistance).

EURUSD came under pressure at the beginning of the Asian session after Moody's downgraded several German and Austrian banks but later moved higher as sentiment improved. AUD rallied after Q1 GDP bested expectations and rose 1.3% from 0.6% q/q and 4.3% from 2.5% y/y.

London traders were able to push the buck slightly below yesterday's lows but it was able to gain back a portion of its losses. Major European equities are gaining about 1.75%.

UK construction PMI fell in May to 54.4 from previous 55.8 marking continued expansion. However, the pace of growth reached three month low and the confidence in business outlook dropped sharply compared to previous month. GBPUSD trades around 1.5465.

Q1 Eurozone GDP remained unrevised at 0% q/q but was revised lower to -0.1% y/y. German industrial production April dropped 2.2% after growing 2.2% a month earlier.

JPY continues to weaken across the board following yesterday's finance minister Azumi's comments that G7 agreed to counter extreme fx moves. However, no other G7 member was able to confirm. USDJPY trades above 79.00 support.

The ECB rate announcement is due at 7:45 am and the minimum bid rate is expected to remain at 1.00%. Unless the market gets a surprise 25 bps cut, the impact will be limited as traders will wait for the ECB press conference that starts at 8:30 am ET. The ECB president Draghi is likely to deliver dovish comments and signal more easing in months ahead.

The key US release will be the FED's beige book that is due at 2:00 pm. It is likely to repeat that the economy grows modestly but it could be more cautious as several indicators have deteriorated.

Three speeches on the US economic outlook could also impact the market. FOMC member Lockhart speaks at 9:30 am, FOMC member Williams delivers his speech at 3:30 pm and FOMC member Yellen speaks at 7:00 pm.

GBPUSD longs hit all targets, AUDUSD shorts stopped out, while shorts in EURUSD, USDCAD longs and gold shorts remain in progress. For direct access to today's Intermarket Insights, click here: http://ashraflaidi.com/products/sub01/access/?a=643 ; Non Subscribers can join here: http://ashraflaidi.com/products/

Ashraf talks to CNBC about latest Aussie GDP figures, Bank of Canada policy decision, previewing ECB announcement, Bernanke's speech & the outlook for EURUSD as well as risk currencies. He also distinguishes between mudding policies & real solutions. http://youtu.be/3ZHS_0EFcIw

Jawboning from Japans Minister of Finance weighed on the yen on Tuesday while the Australian dollar as the top gainer in a session that saw some sizable moves but little overall change. The commodity bloc were the best performers. The focus remains on Australia in the upcoming session with the release of Q1 GDP data. Long GBPUSD & USDCAD are among the Intermarket Insights in progress. See more below.

USD/JPY climbed to 78.95 from 78.25 after Fin Min Azumi said that a G7 conference call confirmed an agreement to counter extreme FX moves. The strong market reaction to the comments was a bit puzzling because every G7 communique contains a pledge to combat disorderly movements in exchange rates.

Still, Japanese officials have now uttered nearly every threat in their playbook so a quick 150 pip drop in USD/JPY would likely prompt intervention. Another telltale sign to watch out for is a statement that MOF staff are ready to act. That would likely be the final warning before intervention.

In US fundamental news, the ISM non-manufacturing index rose 53.7 compared to 53.4 expected. It was only the second upside surprise in economic data in the past week, with 20+ reports below expectations.

In Europe, scattered reports continue to spill out about Spanish bank recapitalization and a European banking union. The EU is expected to outline a blueprint for banking reform on Wednesday.

Other fundamental news came from Canada where the BOC held rates at 1.00% and retained a hawkish bias. Some market watchers expected a neutral or dovish statement but officials retained a rate-hike bias while noting it was dependant on continued economic expansion.

The Asia-Pacific calendar is quiet until 0130 GMT when Australia releases Q1 GDP. The consensus is for a healthy 0.6% q/q rise following the +0.4% reading in Q42011. The impact will be slightly muted because the RBA has already lowered rates. Expect the market reaction on a negative miss to be slightly larger than an upside surprise because the market mode is to sell AUD rallies.

Long GBPUSD & USDCAD, short EURUSD, AUDUSD and gold are among the Intermarket Insights in progress. For direct access to today's Intermarket Insights, click here: http://ashraflaidi.com/products/sub01/access/?a=643 ; Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB

You can listen on this link: http://bloom.bg/cxnlGz as Ashraf chats with Bloomberg's Kathleen Hays of Bloomberg Radio on the "Hays Advantage"

RBA cuts 25 bps; Eurozone retail sales decline and services PMI revised higher; German factory orders drop; G7 to set up conference call regarding European bank recapitalisation. Market turns to Bank of Canada decision and ISM non-manufacturing. Latest on last Mondays Intermarket Insights is below, including longs in USDCAD.

Despite the fact that UK banks remain closed in observation of Queen's diamond jubilee, the FX market has not been quiet as one could anticipate. USD is higher across the board except the JPY and major European equities are trading between -0.2% and 0.4%.

AUD had nasty whipsaws after the RBA lowered the cash rate to 3.5% from 3.75% noting weakening global growth and market sentiment deterioration. AUDUSD initially fell from 0.9755 to 0.9720 only to soar to 0.9790 just a moment later. The rate later rose to 0.9805 but throughout the London session fell back to 0.9730.

EURUSD was already trading lower when Eurozone retail sales were announced. They declined in April 1.0% from 0.3% m/m and dropped 2.5% from -0.2% y/y. Eurozone services PMI was revised slightly higher to 46.7 from the initial estimate 46.5 and the composite output rose to 46.0 from initial 45.9. Despite the revision, PMI remained near three year lows in May.

German factory orders dropped 1.9% in April from upwardly revised 3.2% in March which brought the annual figure to -3.8% from previous -0.2%. The reason why EURUSD rate has not responded to the disappointing figure is twofold: positive revision of the previous month and also unwillingness to open new positions ahead of the G7 conference call.

The US session starts at 8:30 am ET with Canadian building permits that are anticipated to drop 0.3% in April after rising sharply in March by 4.7%. The impact is likely to be limited as the BOC will announce its rate decision 30 minutes later. Most analysts expect rates to remain unchanged at 1%, but the statement will be key in whether the bank will reverse its hawkish outlook in the prior meeting.

ISM non-manufacturing is due at 10:00 am and it is expected to rise marginally in May to 53.6 from previous 53.5.

G7 conference call to discuss the escalation of the EZ crisis could bring preliminary ideas for next week's G20 meeting. The call was scheduled to start at 7:00 am ET.

USDCAD longs are part of Monday's Intermarket Insights as these remain in progress. Mondays Intermarket Insights titled "Euro Rebound or Consolidation?" include trading ideas on EURUSD, USDCAD, GBPUSD and gold. For direct access to today's Intermarket Insights, click here: http://ashraflaidi.com/products/sub01/access/?a=643 ; Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

Small signs of compromise from Merkel and growing speculation about QE3 boosted EUR/USD to 1.25 on Monday. Euro bounce ignored Standard & Poor's announcement that there is "at least a one-in-three chance of Grexit in the coming months, following this months elections The yen was the laggard in a relatively quiet session. All eyes shift to tonights RBA decision with the possibility of a 25 bps cut a 50 bps cut or no change. Ashraf expects a 25-bp cut, due to the deepening deterioration in all of the Aussie's PMI surveys well below the 50s, with an announcement to keep the door open for further easing this year. See more on this below.

The German press reported that Merkels coalition is prepared for some type of burden sharing in Europe. Officials appear to be moving toward making the ESM available for direct bank recapitalizations as a solution to the credit crunch in Spain. The ECBs Nowotny endorsed this type of arrangement, which has been called a banking union.

The euro climbed marginally above 1.25 from 1.2440 at the start of US trading on the signs of compromise.

USD/JPY made a small gain to 78.40 from 78.20 despite the downbeat news. The rebound was likely a function of a bounce in Treasury yields after a deep fall late last week.

Pre-RBA Analysis

An exciting week of central bank decisions begins at 0430 GMT with the RBA decision. The market is pricing in a 63% chance of a 50 bps cut and a near certainty that rates will be lowered 25 bps. Economists arent as convinced. Bloomberg surveyed 27 forecasters and 11 call for no cut, 12 for 25 bps and just 4 for 50 bps.

The knee-jerk reaction to a 50 bps will be to sell AUD while no cut would spark a rally. Those moves are likely to be lasting. A 25 bps cut may spark a small initial AUD bounce but the rest would rest on the statement. Look for commentary on China and inflation to be the drivers.

AUDUSD shorts from last weeks Intermarket Insights remain in progress. This mornings Intermarket Insights titled "Euro Rebound or Consolidation?" include trading ideas on EURUSD, USDCAD, , GBPUSD and gold. For direct access to today's Intermarket Insights, click here: http://ashraflaidi.com/products/sub01/access/?a=643 ; Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB

UK trading quiet; German continues to oppose euro bonds; Chinese non manufacturing PMI declines; Eurozone sentix confidence falls and PPI eases. Market turns to factory orders. Details of today's Intermarket Insights (charts & trades) are in the final paragraph of this IMT.

The London session has been quiet as UK banks are closed today and tomorrow in observance of the Spring Bank holiday and Queen's diamond jubilee. The USD trades slightly weaker against most majors and major European equities are gaining about 0.75%.

The battle for euro bonds may be harder than the French president Hollande hoped as evidenced by chancellor Merkel's yesterday comments that under no circumstances she would agree to the idea of euro bonds. Instead of equal interest rates, the uncompetitiveness of the European economy has to be addressed, she added.

Over the weekend we learned that Chinese non manufacturing PMI declined to 55.2 in May from previous 56.1 which is the slowest pace of expansion in over a year. The Aussie, which is the currency that usually responds the most to Chinese data trades higher as traders react to Friday's NFP result and prepare for the upcoming cash rate decision.

Eurozone Sentix investor confidence declined further to -28.9 in June from previous -24.5 and reached nearly three year lows. Nevertheless, this was still better than anticipated -29.1. Eurozone PPI remained unchanged in April m/m and declined to 2.6% from 3.5% y/y.

The US calendar is limited today to factory orders at 10:00 am ET that are expected to rise 0.3% in April after dropping 1.9% in March.

Today's Intermarket Insight titled "Euro Rebound or Consolidation?" highlights the key macro surveys helping to deteremine NFP lead eleme several US surveys. We issue the latest trading ideas in EURUSD, USDCAD, GBPUSD. AUDUSD and gold. For direct access to today's Intermarket Insights, click here: http://ashraflaidi.com/products/sub01/access/?a=643 ; Non Subscribers can join here: http://ashraflaidi.com/products/sub01/

While it may have been a stroke of luck that our NFP prediction of 70K was close to the 69K outcome, our forecast for such a decline (which surpassed all official predictions in the market) was based on the 2nd chart in todays Intermarket Insight, titled Euro Rebound or Consolidation?, illustrating key lead elements of several US surveys.The first chart illustrates the relationship between NFP & equity indices. US manufacturing attempts to save the day, but the case is far from it in retailing. We issue the latest trading ideas in EURUSD, USDCAD, GBPUSD. AUDUSD and gold. Direct access to todays Intermarket Insights, click here: http://www.ashraflaidi.com/products/sub01/access/?a=643 To subscribe to todays Intermarket Insights, click here: http://ashraflaidi.com/products/sub01/

Early indications are toward modest positive sentiment as markets open for the week but Fridays non-farm payrolls report leaves no doubt that a small shock could tip developed economies into recession. Last week, the yen was easily the best performer while GBP lagged. Ahead of Tuesdays RBA decision, the market and economists are evenly split on 25 or 50 basis points of cuts so some minor releases today could tip the balance. Our latest Intermarket Insights are due later tonight.

EUR opens the week slightly higher with the yen on the defensive but it is sure to be another volatile week as markets assess the damage from the ongoing sovereign crisis. On the weekend, Merkel continued to drive a hard line, saying that Europe needs reform not collective bonds.

The mood was sour on Friday after non-farm payrolls rose just 69K and April was revised 77K lower. The market is looking for a lifeline from politicians and central bankers. Speculation about further Fed action hurt the USD but action from other central banks is looking increasingly likely. In the week ahead, the market will be extra sensitive to hints about easing.

The final Greek polls ahead of the pre-election blackout show a race that is too close to call. New Democracy leads most pools by 1-2 points but one showed Syriza with a 6-point lead.

The Asia-Pacific calendar to begin the week focuses on Australia. At 0030 GMT, the TD Securities inflation expectations report for May will be released after Aprils relatively benign +1.9% reading. A lower number will weigh on AUD and give the RBA more room to cut rates on Tuesday. An hour later, Q1 Australian inventories and corporate operating profits are expected at +0.7% and -2.5%, respectively.

CFTC Commitments of Traders

Net short EUR 203K vs 195K prior (fresh record)

Net short JPY 11K vs 18K prior

Net long GBP 1.5K vs 11K prior

Net short CHF 31K vs 35K

Net short AUD 36K vs 17K prior

Net long CAD 34K vs 38K prior

Net short NZD 5K vs -1.5K prior

To subscribe to our Intermarket Insights, click here: http://ashraflaidi.com/products/sub01/

-AB