Intraday Market Thoughts Archives

Federal Reserve to hire former Enron PR wizard to confront Congressional Act demanding more transparency from the central bank. Click on Link for full story http://tinyurl.com/qq6e2z More links, updates and trades on http://twitter.com/alaidi Also, more rumblings about Chinese officials expressing to Geithner their opposition against the Fed's purchases of US treasures, which have corroded the dollar's value.

FX markets lean towards risk-reduction trades as S&P500 struggles to hold in positive territory (although Dow outperforming a bit). USDCAD tests 1.1170 high, Cable dragged down below 1.60, while both AUDUSD and NZDUSD nearing session lows. Look for NZDUSD to retest 0.6220 low of earlier in the week. JPY also gradually firming up as S&P underperforms the Dow. The latter seeks to make the second daily close above the 200-day MA and to close positive on the year. AUD outperforming NZD, suggesting more downside for NZD against JPY and USD. EURUSD probing the 1.3970 trend support of the 8-week channel.

Rising gold channel risks being broken on the downside as it tests the 955 support, closing down on the week after 4 straight weekly gains (longest since Dec 2008). Oil down $1.50 from its $70.31 high, with a close below $68.70 likely to trigger prolonged losses into next week. UK PM Brown reshuffles govt after 5 resignations. Cable drops to $1.5960 low, with sterling eyeing prolonged losses vs AUD and NZD. JPY remains weakest currency as equities stand in the green at NY lunch break.

FOREX GETS IT RIGHT before equities and bonds. Forex initially curtailed its risk appetite trade before equities joined in by sending stocks from +1.2% to -0.1%. The initial reaction in forex, bond and equities markets to the jobs report focused on the smallest job loss in 8 months (-345K vs expectations of -530K), while shrugging the 0.5 jump in the unemployment rate to 9.4%--highest since 1983. But FX later cut dollar losses by 200-pts in minutes, by dragging down EUR, AUD, GBP and CAD. Some analysts are stating the payrolls wqere erroneous according to the BLS birth-death model. USDCAD regains 1.11, GBPUSD tests below $1.60 and EURUSD eyes 1.3970.

STERLINGs POLITICAL CRISIS unfolds as the third member of PM Gordon Brown submits his resignation, further highlighting the fragility of an already scandal-laden Labour Party. Sterling traders were already doubting GBPUSDs sustainability at the high $1.60s and the political crisis provided ideal catalyst for the downturn. GBPUSD Weekly chart shows SHOOTING STAR candle, which is a classic bearish pattern occurring at the top of the market, suggesting reversal for next week. GBPAUD breaks out of inverse Head&Shoulder formation, which is AUD positive. EURGBP soars past 0.8840, looking to target 0.8950 into next week.

The dollar-impact of treasury-buying from the Fed wanes as USD stabilizes on peaking equities. Markets are unlikely to extend fresh gains ahead of the highly anticipated US labour report. Loonie traders will get Canadas jobs report 1.5 hrs earlier. Charts on Global Yield Curves, US-EU yield spreads and USD index are all updated in the website.

http://www.ashraflaidi.com/charts/gbp-trade-weighted-index.asp and http://www.ashraflaidi.com/charts/us-dollar-index.asp and http://www.ashraflaidi.com/charts/us-eu-bond-yield-spreads.asp and http://www.ashraflaidi.com/charts/global-yield-curves.asp

Dollar drops across the board as Fed buys 2 and 3-year treasuries--reports just hitting the wires. We may see the same thing again later today if Fed buys other maturities later in the day (US afternoon) as it did 2 Thursdays ago, with purchases of 7 and 10 year treasuries.

Sterling fluctuates wildly on rumours of PM Brown resignation and subsequent denials, leading to +(-)100-pip swings. GBPUSD posts its first back to back daily losses since April, now eyeing 1.6080 target, followed by 1.59, while resistance capped at 1.6440. EURUSD remains within the channel of this weeks Hot-Chart. Bank of Canada makes no change in its view of extending current policy to Q2 2010. USD strength overtakes gains in JPY. Keep in mind todays release of the monthly ICSC store sales index for May, which will be released WITHOUT Wal-Marts sales. ICSC ex Wal-Mart sales expected - 2%y/y in May after -2.7%y/y in April.

ECB press conference at 12:30 GMT (8:30 am EST) will signal whether the 60 bln asset purchase program will be implemented. Any signs ECB will further delay the purchase of covered bonds may be positive for the eurespecially if the US jobless are better or in line with expectations for 620K. European markets started on a positive note after relatively tempered losses in Asia. FTSE-100 slips into the red after BoE leaves its 125 billion quantitative easing program unchanged. Dow futures +9 pts. USDCAD was capped at 1.1143 o.night, while supported at 1.1030. Bank of Canada decision at 13:00 GMT will reveal whether inflation downside risks remain a major worry. If so, then negative for CAD.

NIKKEI SEEN FALLING towards 9,650 level, which is a loss of at least 100 pts on Thursday, thus likely to extend gains in CAD vs USD (1.1180 and 1.1230) and JPY (85.50). Oil losing $4.50 to $65.68, eyeing interim target at $64.50. JPY and USD seen extending rally into Thursday European trading. NZDUSD seen at 0.6220--already lost 300 pips. As we warned, last hours of trading seeing sharpening losses in equities and accelerating bids in JPY and USD.

Reports of further reshuffling in UK govt add to sterlings losses across the board, eyeing $1.6120 and 0.57 vs EUR. Cable has had only 2 losing days over the last 14 trading days. Again, be aware of accelerating losses in the yen pairs (AUDJPY, EURJPY, NZDJPY and CADJPY) in the last 45 mins of NY trading. Oil, gold and silver all down, with Gold/Silver dropping to 62. USDCAD hits 1.1030 target, now eyeing 1.1130.

Markets extend retreat on worse than expected ADP payrolls, sending bids into USD and JPY against EUR, AUD, NZD and GBP. Dow's failure to close above 200-day MA proved material. CAD seen losing further against USD ahead of Canadian jobs report. EURUSD uptrend remains intact but interim downside stands at 1.4120, followed by 1.4070, while AUDJPY and NZDJPY eye 76.80 and 60.80 respectively, especially as Asian equities respond negatively to todays negative close in NY. USDJPY continues to fail at 96.50, eyeing 95.30, followed by 94.80. Oil inventory showed unexpected builds, which is negative for prices

Dollar gains on supportive remarks from China, Japan, South Korea and India stating there are no alternatives to the USD as a main reserve currency. Dollar also supported by equities inability to rally after stronger than expected PMI figures from the UK. FTSE-100 remained well in the red despite UK PMI services regaining the 50 level for the first time since April 2008. US May ADP on private payrolls (12:15 GMT) expected -530K from -491L, while May services ISM (14:00) expected at 45 from 43.7. Bernanke to speak at 14:00. HOTCHART on EURUSD now up.

Financials lagging behind as the equity rally comes to a pause and the Dow unlikely to close above its 200-day MA (8,765) as was the case with the S&P500 yesterday. Perhaps markets are scaling down positions ahead of tomorrows US ADP report on private payrolls (exp -530K from -491K) and Fridays US payrolls (exp -530K from -539K). The unemployment is expected to break towards 9.2% from 8.9%. The same negative forecasts are expected for Canadian jobs (exp -42.5K from +25.8K and unemp rate seen at 8.3% from 8.0%). Short yen positions seen curtailed ahead as Asian is expected to take profits in the Wed session.

SWEDISH KRONE CRISIS: An alternative to selling the dollar against AUD, EUR, GBP and NZD is the Swedish Krone, which has been pummelled as of late following Swedish banks emergency measures to raise funds following $23 billion in loan losses resulting from exposure to Baltic banks. Over a quarter of these estimated losses are related to lending to the Baltics. Swedish interest are already at 0.5%, while GDP fell by over 5%. Long opportunities in AUDSEK and EURSEK ought to be considered.

The Head & Shoulder formation in USDJPY developing since January remains intact with todays failure to break above 96.65 further validates the trend line resistance extending from the May 7th high of 99.74. The trend line was tested without success on Monday, Friday and Thursday. This sets up the path for renewed downside towards 95.40, followed by 94.60, while resistance remains capped at 96.40.

By hitting new 5 month highs yesterday, US equities have broken the 2-month cycle of up and down trends prevailing since March 2008. Yesterdays close above the 200-day MA was the first since December 2007. Also key, is that equities have posted 3 monthly consecutive gains, which is the longest uninterrupted monthly rise since October-December 2001. A positive close in June would make it 4-straight monthly gains, which is the longest bear market rally since 1933. As these technical developments suggest less bearishness for equities, the foundation for the dollar is looking increasingly bleak.But do keep in mind that yesterday the VIX closed HIGHER despite a rally in equities, AUDUSD tests 0.82. EURUSD eyes $1.4380, with support climbing to $1.4170.

Bigger than expected decline in Canadian Q1 GDP reduced CADs gains and gave support to USDCAD at 1.0778 before bouncing to 1.0918. There are now differing views regarding the US dollar and US bond yields, with one camp suggesting that the dollar is nearing the end of its weakness before regaining some upside as rising yields reflect an improved economy. An opposing view (ours) holds that the latest wave of dollar weakness is to remain intact (except for minor retracements) as long as equity markets make no substantial pull-back and US and global bond markets remain under pressure (rising yields). The 4.30 am GMT decision from the Reserve Bank of Australia is widely expected to keep rates unchanged at 3.00%. Interestingly, the VIX rallied despite a rally in stocks.

S&P500 on its way of posting its 4th consecutive monthly gain, which would be the best winning monthly streak since 2006-07. Recall that during the 2000-2 bear market, the longest uninterrupted recovery in both the S&P500 and the Dow went on for 3 straight months. S&P500 faces 12-month trend line resistance at 965, followed by 1,1015, while Dows 200-day MA stands at 8,765. Key resistance follows at 9,160. EURGBP enters 3rd straight mo, testing 0.8615 support, a break of which could trigger prolonged losses towards 0.8450.

S&P500 probes through its 200-day MA for the first time since May 2008, while the Dow yet to do so. EURUSD tests top of its rising channel (see latest article) at 1.4250 resistance and rising support at interim $1.4170, backed by $1.380. Yen weakness dominates across the board as USDJPY pushes to session highs, eyeing 96.30. AUDNZD breaks below 1.25 to 1.2460, seeking to test 1.24 and 1.2380.Gold struggles to break above 987. ISM and consumer spending broadly better than expected,further extending YEN weakness. GBPJPY and USDJPY are biggest gainers vs YEN,while NZDJPY falls closely behind. Look for 159 and 63.45 in GBPJPY and NZDJPY respectively.

Relentless Dollar Selling Underway. USD net shorts vs EUR, AUD and CAD fall to fresh 10-month lows, reflecting deteriorating sentiment in the US currency as emerging markets and commodity currencies continue to deliver rising yields at the expense of the greenback. Yen fares as the next weakest currency after USD, followed by CHF. US March consumer spending (due 12:30 GMT) seen -0.1% from -0.3%, while annual core PCE price index (Feds favourite inflation measure) seen unchanged at 1.8%, which is below its preferred 2.0% target. 1.5 hrs later, US May ISM seen at 42 from 40.1, but will the report surprise on the downside as did the Chicago PMI on Friday (to 34.9 from 40.1).