Intraday Market Thoughts Archives

What's the best way to find the strongest and weakest currencies in forex? How to use forex crosses? Examples of trading fractals in Nasdaq Full Video 

كيف نحدد أقوى و أضعف عملات لتداول الفوركس. ما هو تداول التنلظريات الفنية في الناسداك و المؤشرات الفيديو الكامل

The dollar chopped sideways Wednesday in a sign of a market that's waiting for a catalyst like non-farm payrolls. The Canadian dollar was the top performer while the kiwi lagged. We look at why jobs are the critical metric right now. GBPNZD longs, Nasdaq shorts are among the several trading ideas for the WhatsApp Broadcast Group. From a tactical standpoint, GBPNZD was an optimal choice as GBP is the strongest currency and NZD the weakest of the day. 

All the talk is on inflation at the moment, but the Fed's Clarida offered a hint on the FOMC's thinking last month. He indicated that because inflation data will be so noisy in the months ahead that they will be focused on jobs as their key tapering metric.

It's a high bar to overcome with Brainard this week saying the economy is missing 8-10 million jobs that would exist if not for the pandemic. Those certainly won't be recovered before Jackson Hole in August but they will want to see rapid progress towards that goal.

The consensus for Friday's non-farm payrolls report is +655K but estimates range from 335K to 1 million jobs with plenty of implications on any miss. We will get some of the clearest pre-report indications on employment on Thursday with a trio of reports: ADP employment, initial jobless claims and ISM services.

Those could considerably swing market pricing for non-farm payrolls. At the same time, jobs numbers are also suffering from the same cloudiness as inflation. The uneven expiry of jobless benefits, hesitancy in returning to the workforce and raw materials shortages mean hiring is slower than it might normally be.

Outside of the fundamentals, the market's psychology may be growing increasingly risk positive. Shares of AMC doubled on Wednesday on a renewed bid in mem stocks. Bitcoin and Ethereum are also showing some success in forming a base. The stability in bonds is adding to the level of comfort and the so-far smooth reopening in the US is cause for optimism generally.

Crude oil broke out as OPEC+ confirmed it will follow its script to slowly return production but the Canadian dollar failed to follow. Much of that may have been the result of a strong bid in the US dollar to start the month but the June seasonal trends aren't great for USD. With regards to Ashraf's latest Video on gold, some have misunderstood its conclusion, thinking Ashraf is predicting gold will repeat the crash of 2011-2013. That is false. Ashraf is basically explaining that in order for gold to repeat such a crash, a few things have to happen (laid out in the video), which Ashraf does not expect to happen. Below is the performance of CAD vs metals and currencies Year-to-Date. 

Oil challenged the March highs five times in May before finally breaking through on the first day of June, rising more than 3% to crack $70 in Brent and $68 in WTI. The OPEC+ decision was no surprise but the commentary from oil ministers was also constructive and cohesion appears to be strong.

OPEC, like everyone else in the oil market, is now waiting to see what happens with Iran nuclear discussions. We tend to think that a return of that oil is fully priced in but how fast supply ramps up is a wild card. For now the market is signaling that crude is destined to follow other commodities much higher.

So why then didn't the loonie follow it? USD/CAD touched a marginal new two-year low at 1.2005 but couldn't break through the figure and climbed to 1.2075. The answer is that a broad US dollar bid hit that was likely flow driven. ISM manufacturing data was close to expectations as supply bottlenecks continue to cloud the clarity around the numbers but the underlying metrics are strong. The numbers likely weren't behind the dollar bid, which was also counterintuitive to a dip in yields.

For USD/CAD it may only be a matter of time. The 1.20 level is a key psychological level but is also the 2018 low, making it doubly important. If oil can hold at these levels through an Iran deal, it would be an incredibly powerful buy signal for crude and sell signal for USD/CAD.

Seasonally, there is also some good news for commodity currencies. June is the 2nd strongest month for CAD, AUD and NZD over the past 20 years. It's also a stronger month for oil.

In general, it's a soft month for the US dollar, with USD/CHF particularly soft, falling in 10 of the past 11 years. It's also the third best month for EUR/USD.

In equities, there's an interesting divergence were it's a solid month for the Nikkei 225 but the second worst month over the past 20 years for the S&P 500.