Intraday Market Thoughts Archives

No change from the BOJ; IMF lowers growth outlook; German factory orders fell. Market awaits labor market data from the US and Canada. Latest Premium Insights for Thursday night are out. See link below.

Currencies are trading within narrow ranges ahead of the NPF. European equities are gaining about 1%.

The BOJ unanimously left the overnight call rate between 0 and 0.1% and kept the asset buying program unchanged at JPY 80 trln. JPY rose on the news sending USDJPY to 78.27 but the pair retraced a part of the loss and trades around 78.45.

Reuters quotes EU senior official who said that the EU summit on 10/18-19 will not take any decisions on Greece as the work on reforms and macroeconomic situation will not be ready. Another official said that Spanish request for a bailout is not imminent. EURUSD is trading just a few points above the 1.30 handle.

In other news, the IMF lowered global forecast to 3.3% from previous 3.4% for 2012 and for 2013 to 3.6% from initial estimates of 3.6% and German factory orders fell 1.3% m/m which translates to a deepening decline to -4.8% from -4.6% on annual basis.

The US session will bring the much anticipated NFP report that is expected to rise by 114K after previous 96K while the unemployment rate is seen ticking higher to 8.2% after a solid decline to 8.1% seen in August.

Canadian data will include employment change that is anticipated to rise only 11.7K after rising 34.3K in August and the unemployment rate is expected to remain steady at 7.3%.

Latest Premium Insights for Thursday night include EURUSD, cable, EURJPY, gold, silver and oil. Direct access is found here: http://ashraflaidi.com/products/sub01/access/?a=685 Nonsubscribers can join here: http://ashraflaidi.com/products/sub01

The ECB avoided drama at the monthly meeting but Draghi reiterated a readiness to buy bonds if Spain asks for aid. The euro was the top performer while the US dollar lagged. Todays Bank of Japan is unlikely to deliver any policy changes but may set the stage for action at the end of the month. Latest Premium Insights for Thursday night are out. See link below.

The ECB meeting was refreshing because for the first time in months, expectations for action were low. On that front, Draghi delivered. The status quo remains; there was no discussion of rate cuts and growth risks remain to the downside.

The ECB shot down rumors that it would accept a maturity extension of Greek bonds but the euro continued higher anyway, lifting through 1.30 to 1.3130.

Economic news was mildly positive. Factory orders edged out extremely low expectations and initial jobless claims improved to 367K compared to the 370K consensus. The FOMC minutes noted significant downside risks to growth, including Europe, the fiscal cliff and slowing global growth. None of it was a surprise but the pessimistic outlook tempered risk trades including EUR/USD.

Overall sentiment was buoyant with the S&P 500 gaining 0.7% and the commodity currencies making strong gains ahead of non-farm payrolls on Friday.

The highlight of Asia-Pacific trading is the Bank of Japan decision, which will be delivered around 0345 GMT (there is no fixed time). The BOJ expanded its asset purchases last month and may do so again but the probability of action is minimal. The BOJ meets again on Oct 30 and will deliver its semi-annual forecasts then. The market thinking is that they will wait until the end of the month to act.

Citi notes that USD/JPY has risen following the past seven BOJ decisions.

Latest Premium Insights for Thursday night include EURUSD, cable, EURJPY, gold, silver and oil. Direct access is found here: http://ashraflaidi.com/products/sub01/access/?a=685 Nonsubscribers can join here: http://ashraflaidi.com/products/sub01

-AB

AUD retail sales rose; no change from BOE. ECB decision and press conference, along with jobless claims and FOMC minutes are next. Ashraf is back from Asia and his Live Webinar is tonight at 4 pm EST, 9pm London. Link is below.

Markets are trading within narrow ranges in the ongoing session and the greenback is slightly against most majors. European equities are barely changed.

The Aussie regained part of recent losses after August retail sales rose 0.2% after a 0.8% decline seen in the prior month. AUDUSD trades higher around 1.0215 after falling as low as 1.0181.

The BOE kept the official bank rate unchanged at 0.5% and left the asset purchase facility at GBP 375 bln in line with expectations. Halifax HPI declined 0.4% in September, the same rate of a decrease as in August. GBPUSD trades around 1.6115

The ECB will announce its rate decision at 7:45 am ET. One month after the OMT program was announced the minimum bid rate is most likely to remain steady at 0.75% and there will not be any new easing program announced. The situation in Spain is likely to dominate the press conference that starts at 8:30 am. EURUSD trades around 1.2945

The US session begins at 8:30 am ET with the ECB press conference along with jobless claims that are seen higher at 371K after falling to 359K last week. Factory orders are due at 10:00 am and they are expected to drop 6% in August after rising 2.8% in July. Canadian Ivey PMI that is due at the same time is anticipated to slow to 59.2 from previous 62.5.

The key event of the session is the minutes from the latest FOMC meeting at 2:00 pm. Three weeks after QE3 was announced, the market will search for clues what the FED might do after the Operation Twist is completed and also if other non standard policy measures were discussed.

LINK TO TONIGHT's WEBINAR: https://www1.gotomeeting.com/register/232189049

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Economic data was upbeat but a dive in oil prices led to a US dollar rally. A dive in oil prices helped boosted the US dollar to the top of the leaderboard while the commodity bloc lagged. Australian retail sales will keep the focus on the slumping Aussie dollar. Latest Premium Insights include special technical charts for silver weeklies. See more below.

The US economy showed better signs as ADP employment rose 162K compared to 140K expected. The enthusiasm was tempered by downward revisions to the two prior reports. The ISM non-manufacturing survey climbed to 55.1, beating the 53.4 consensus. New orders were strong but the employment component slipped to 51.1 from 53.8.

USD/JPY was the boosted by the numbers and more jawboning from Japanese politicians. The pair ran as high as 78.58.

Oil priced tumbled to $88 from $92. The fall is a surprise to some given the tensions in the Middle East. The currency crisis in Iran has sparked riots and Syria sparked an international incident after mortars crossed into Turkey, killing 5 civilians. NATA and the US have issued some strong words denouncing Syria.

The S&P 500 gained 5 points to 1451.

Australian data on August retail sales and building permits will be released at 0130 GMT. Yesterdays unexpectedly large trade deficit has weighed heavily on the Australian dollar and a miss from the +0.4% retail sales consensus could do the same. July building permits fell the most in nearly a decade in July; expectations are for a 4.7% rebound.

Latest Premium Insights include charts on silver and strategy for AUDUSD, alongside ideas on oil, gold and EURUSD. Direct Access is found here: http://ashraflaidi.com/products/sub01/access/?a=684 Non clients can log in here: http://ashraflaidi.com/products/sub01/

-AB

UK services PMI weaker; European PMI revisions mixed; Eurozone retail sales rose. Market turns to ADP and ISM non manufacturing. Latest Premium Insights include special technical charts for silver weeklies. See more below.

The greenback continued to gain throughout the Asian session. At the beginning of London trading it gave up its gains and EURUSD pushed from 1.2877 to 1.2936. As NY open approaches, USD is bid again and the common currency fell back to 1.2910.

UK services PMI were below expectations as the index declined in September to 52.2 from August's 53.7. Employment declined for the first time in ten months, operating expenses rose but new business increased at a solid pace. However, it could still be due to the Olympics. GBPUSD fell to 1.6083 and now trades around 1.6115.

European final revisions of services PMI for September were mixed. Some were revised higher, some lower but all of them are now below the 50 level indicating that the service sectors are contracting. Two noteworthy figures are Germany's revision from 50.6 to 49.7 and Spanish services PMI that dropped even below the worst estimates to 40.2 from previous 44.0. Eurozone retail sales rose 0.1% in August m/m and on annual basis improved to -1.3% from previous -1.4%.

The NY session begins a bit earlier today at 8:15 am ET with September ADP report that is expected to decline to 140K from previous 201K. Trying to estimate the NFP based on the ADP result has proven to be a frustrating proposition over the past few months so we will see on Friday whether there is a better correlation this month. ISM non manufacturing is due at 10:00 am and it is seen marginally lower in September at 53.2 from previous 53.7.

Latest Premium Insights include charts on silver and strategy for AUDUSD, alongside ideas on oil, gold and EURUSD. Direct Access is found here: http://ashraflaidi.com/products/sub01/access/?a=684 Non clients can log in here: http://ashraflaidi.com/products/sub01/

The euro climbed as high as 1.2968 but gave back some gains after Spanish PM Rajoy said a request for a bailout is not imminent. On the day, the euro was still the best performer while Australian dollar lagged badly following the RBA decision. The Asia-Pacific calendar is quiet. New Premium Insights have been added with special technical charts for silver weeklies. See more below.

The euro climbed steadily in European trading but Rajoys comments pulled the currency back to 1.2916. A China Investment Corp official also weighed on the euro. He said the CIC will not be investing in periphery debt until fundamental issues are resolved.

Germanys economy minister will be in Spain on Wednesday.

Greece continues to negotiate with the Troika for aid but there is talk of more demands before the next tranche of funds will be released.

The Australian dollar remained on the defensive throughout US trading, falling below 1.0250. It is the lowest since early September and underscores the potential global growth slowdown.

The lone indicator on the Asia-Pac calendar is the Sept AiG performance of services index at 2330 GMT. The prior reading was 42.4. Australian dollar traders will be looking for industry reaction to the RBA cut. Early indications are unclear but if banks fail to pass on the 25 bps of savings to customers, another cut is more likely.

Latest Premium Insights include charts on silver and strategy for AUDUSD, alongside ideas on oil, gold and EURUSD. Direct Access is found here: http://ashraflaidi.com/products/sub01/access/?a=684 Non clients can log in here: http://ashraflaidi.com/products/sub01/

-AB

Silver is undergoing a Golden Cross, a technical pattern seen only twice since 2007, each of which led to sharp advances. In November 2007, the Golden Cross led to a 61% increase over 5 months.In March 2009, the Golden Cross led to a 291% rise over 25 months. Since 2007, Each of the 6 patterns of Golden and Death Crosses successfully predicted declines and rallies respectively. FULL CHART & ANALYSIS: http://www.cityindex.co.uk/market-analysis/market-news/147502012/silvers-golden-cross/

Spain could request bailout; RBA cuts by 25 bps; UK construction PMI rose but sector contracts; Eurozone PPI higher. The greenback is mixed in the ongoing session. It is stronger against AUD, unchanged against JPY and CAD and weaker against the rest of the majors. European equities are gaining about 0.5% and the relative strength winners are NZD with EUR while AUD is the weakest. New Premium Insights have been added with special technical charts for silver weeklies. See more below.

Spain is ready to officially request a bailout as early as next weekend Reuters reports. Nevertheless, Europa Press suggests that Spanish PM Mariano Rajoy said that he would not seek rescue this weekend. Reuters also reported that the EU advisory group recommends legal separation of banks' proprietary trading and derivatives positions from deposit taking. Spanish 10 year yield is lower today, trading around 5.74%

The Aussie declined across the board after the RBA decided to cut rates by 25 bps to 3.25%. The board noted weaker growth outlook for the next year with inflation consistent with the target. Softer labor market, lower commodity prices and higher exchange rate were also noted. AUDUSD fell from 1.0373 to 1.0290 and continues to trade near session lows.

UK construction sector contracted for the second time in a row as September PMI printed 49.5 from previous 49.0. Output and new business levels declined, cost pressures intensified as inflation hit six months high but employment rose slightly. UK Nationwide HPI fell 0.4% in September after 1.1% gain seen in August. GBPUSD trades little changed around 1.6150 and EURGBP around 0.8000.

Eurozone PPI rose sharply in August to 0.9% from 0.3% m/m and to 2.7% from 1.6% y/y. Spanish unemployment rose by 79.6K EURUSD trades firmly above the 1.2900 mark.

There are no reports due during the NY session today.

Latest Premium Insights include charts on silver and strategy for AUDUSD, alongside ideas on oil, gold and EURUSD. Direct Access is found here: http://ashraflaidi.com/products/sub01/access/?a=684 Non clients can log in here: http://ashraflaidi.com/products/sub01/

The RBA cut rates by 25 bps to 3.25% as Ashraf anticipated in the latest Premium Insights edition. Find out the rationale used for anticipating the rate cut when only 7 of 19 economists told Reuters they did not expect a rate cut. 9 new trades are issued (1 EURUSD, 1 GBPUSD, 1 AUDUSD, 1 EURJPY, 2 gold, 1 silver and 2 US crude oil CL_X). 4 trades remain in progress from last weeks edition (filled but neither hit final targets nor stopped out). We are also issuing 2 key charts on SILVER, one of which showing a rate GOLDEN CROSS on the daily chart. Gold has already done so 3 weeks ago. Premium subscribers can have direct access to these trades here: http://ashraflaidi.com/products/sub01/access/?a=684 Non clients can log in here: http://ashraflaidi.com/products/sub01/

The ISM manufacturing index climbed back into positive territory and gold hit the highest levels of the year on Monday. The euro was the top performer while the kiwi lagged. Todays RBA decision is a close call but the market is pointing to a rate cut. New Premium Insights have been added ahead of the RBA with special technical charts for silver weeklies. See more below.

Trading was choppy to start US trading for the week. The dollar initially slumped and that ended with a crescendo following the ISM manufacturing report. The index rebounded to 51.5 compared to 49.7 expected.

The euro reached as high as 1.2939 in the immediate aftermath of the report but fell below 1.2900 shortly afterwards. Gold rallied as high as $1791 prior to the data but drifted back toward unchanged at $1775 later.

Bernanke showed that the Fed is unlikely to have any near-term influence on the markets. In a speech, he said the Fed will keep rates low even as the economy strengthens but his words barely moved the market.

Japanese policymakers tried to jawbone forex moves. The newly-appointed economy and finance ministers said the BOJ needs to do more to fight deflation. The economy minister also said BOJ foreign bond buying was being considered. USD/JPY hit 78.15 but receded to 78.00.

The S&P 500 gained just 0.2% after climbing as high as 1.2% in early trade.

The focus now shifts to the RBA meeting. A decision comes at 0430 GMT. The Bloomberg survey shows 19 of 28 economists expecting no change but the OIS market tells a vastly different story. It is showing a 66% chance of a cut and a sizable chance of a second cut in November.

A drop in AUD will likely be more pronounced because the speculative market remains positioned for strength. Either way, expect a large AUD move.

Latest Premium Insights include charts on silver and strategy for AUDUSD, alongside ideas on oil, gold and EURUSD. Direct Access is found here: http://ashraflaidi.com/products/sub01/access/?a=684 Non clients can log in here: http://ashraflaidi.com/products/sub01/

-AB

Euro stabilizes around 1.29 after post-Stress Test slide to 1.2804. European PMIs revised higher; Chinese manufacturing sector contracts; UK manufacturing PMI lower. Market turns to ISM manufacturing and Bernanke's speech. See the latest on Premium Insights below. A new edition will be posted today.

The greenback is weaker in the ongoing session but it is off its lows. European equities are gaining about 1% and the relative strength winner is

EUR while JPY lags.

Rallying equities along with a slew of manufacturing data helped the common currency to rise to 1.2910 level. The final readings of September manufacturing PMIs from France, Germany and Eurozone all showed slight revisions higher but remain stuck deeply in the contraction zone. EURUSD trades around 1.2895.

Even AUDUSD is higher despite Chinese manufacturing PMI that contracted for the second month in a row as it printed 49.8 in September from August's 49.2.

UK manufacturing PMI weakened further in September to 48.4 from 49.6 which is the 5th sub 50 level reading. Production, new export orders and employment all declined while cost pressures rose sharply giving worrying signs about the months ahead. GBPUSD rose to 1.6164 but it lost a part of its gains and trades around 1.6145 while EURGBP rose to 0.7990.

Other news showed that Swiss retail sales rose sharply in August by 5.9% from previous 2.9% but SVME PMI dropped to 43.6 from 46.7. Eurozone unemployment rate remained steady at 11.4%.

The US session begins at 8:30 am ET with Canadian RMPI that is expected to rise 1.4% in August from previous 0.9%. ISM manufacturing that is due at 10:00 am is seen at 49.8 in September from 49.6 in August.

Focus will also be on the FED chairman Bernanke that delivers a speech on monetary policy at 12:30 pm at the Economic club of Indiana. Q&A session will follow. Moody's did not change Spanish rating on Friday but the possibility of a rating cut persists.

GBPUSD is added to 1 EURJPY and gold as the trades stopped out. 1 AUDUSD and 1 silver hit all targets. Both EURUSD, 1 silver,1 EURJPY, 1 CADJPY are in progress. Direct access to trades, charts and rationale can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

The much awaited private stress test of Spanish banks revealed a EUR 60 bn shortfall. The third quarter wrapped up on Friday with a wave of US dollar buying but it was a rough quarter for the big buck. USD was the worst performer in the past three months, while NZD and CAD led the way. The weekly CFTC data also showed the appetite to sell US dollars. See the latest on Premium Insights below.

Quarter-end flows may have skewed trading on Friday toward US dollar buying but the underlying news continues to point to economic weakness.

Most notably, the Chicago PMI fell to a three year low at 49.7, well below the 52.8 reading expected. The consumption data in the PCE report was in line with expectations but soft income growth ate into the savings rate. Finally, the U Mich consumer sentiment slipped to 78.3 from 79.0.

The much awaited private stress test of Spanish banks revealed a EUR 60 bn shortfall, which was close to expectations. The market also shied away from Spanish debt due to the threat of a downgrade from Moodys which said in August that it would review Spains credit rating by month end.

The regular rumors that Spain would imminently ask for aid also did the rounds.

Asia-Pacific trading may be choppy to start the week as a new quarter gets underway. China is on holiday for the week and Australia is closed for a holiday so the market will be extremely thin.

Weekly CFTC data

The overall US dollar net positioning was the most short since Aug 2011. The dollar lost ground against every currency except CAD, which was pared back from an extreme.

EUR net short 50K compared to -73K last week (best in one year)

JPY net long 21K compared to +15K last week

GBP net long 27K compared to +14K last week

AUD net long 90K compared to +69K last week

CAD net long 105K compared to 112K last week

NZD net long 20K compared to +17K last week

CHF net short 1K compared to -4.5K last week

All data is from the close on Tuesday.

GBPUSD is added to 1 EURJPY and gold as the trades stopped out. 1 AUDUSD and 1 silver hit all targets. Both EURUSD, 1 silver,1 EURJPY, 1 CADJPY are in progress. Direct access to trades, charts and rationale can be found directly in here: http://ashraflaidi.com/products/sub01/access/?a=683 Non subscribers can join here: http://ashraflaidi.com/products/sub01/

-AB