Intraday Market Thoughts Archives

Aside from a stronger CAD, RISING USD BOND YIELDS (30yr yield at 2 week high 4.20%) are the main mover of the day following yesterday's weak 30-yr auction and Bernanke's remarks about tighter monetary policy. Market News Intl reports China and ME accounts selling metals overnight. We might also be seeing a scaling down of USD shorts ahead of the IMF/WB meetings, which could involve much USD-supporting remarks from global policymakers. EURCAD down 80 pips to 1.5320 from earlier IMT, GBPUSD hits $1.5880, eyeing 1.5820, while AUDCAD eyes 0.9380, followed by 0.9330. WATCH ASHRAF on CNBC's Street SIgns at 2:45 pm EDT (6:45 pm GMT).

CAD continues to lead across the board, extending gains vs. AUD and EUR, while GBPUSD risks breaking below 1.59 as equities meander in positive territory. CAD shrugged the biggest trade deficit on record while an unexpectedly decline in US trade deficit is further helping USD, especially following USD-supporting remarks overnight (directly and indirectly) by Fed Chairman Bernanke, Kansas Feds Hoenig and White House economic advisor Summers, whether directly or indirectly. Although statements from Fed officials are a mere reiteration of the obvious Fed ready to tighten when economy improves, the officials are seizing every opportunity to state their intention to normalize interest rates when the time is right. AUDCAD seen accelerating losses towards 0.9330 into next week.

As we warned last night, Canadas jobs report triggered sharp gains in CAD -- main reason why CAD is the highest performing currency today, with a net creation of 31K jobs in Sep (first back-to-back monthly increase in over 12 months and equivalent of about +300K jobs in the US). Also key was the decline in the unemployment rate to 8.4% from 8.7%, the first decrease since July 2008. USDCAD has usually extended losses into the following week after strong jobs figures, which paves the way for a possible retesting of the 1.0320 low seen in September 2008. Considering Trichets comments about intervention, we could see further declines in EURCAD into 1.5300.

US and CAN trade figures due at 13:30 GMT. US exp -$33 bln from -32 bln. Can balance exp C$ 1bln from C1,4 bln, USDJPY capped at 89.30. EURJPY capped at 131.95.

CANADA's Sep EMPLOYMENT report (7:00 am EDT 11:00 GMT) will be highly scrutinized for whether it will produce a net increase of jobs following the unexpected net increase of 21K jobs in August. Markets expect a net decline of 7K jobs and 8.8% unemployment rate from 8.7% in August. Last time Canada jobs showed 2 monthly net creations was in summer 2008. Considering the current positive risk environment, an increase of at least 3K jobs could well drag USDCAD towards 1.0470, especially if the unemployment rate remains unchanged, or declines. EURUSD still fails to regain $1.4860s. WATCH ASHRAF'S CNBC APPEARANCE http://bit.ly/19iPoe

Dollar positioning is increasingly shifting towards a 2-tiered approach, with the longer term view expecting prolonged USD weakness in terms of the escalating borrowing schedule of the US Treasury and the unfolding yield differential weighing on the USD (tightening in commodity economies). But there is a shorter term view that is more dollar positive, based on expectations of reduced global liquidity, unsustainably high oil prices, emerging from correcting global equity markets. USDJPY facing increased resistance at 88.70s, with centre of gravity increasingly dragging it down towards the mid 80s. EURUSD has yet to break the 1.4860s. Watch Ashraf on CNBC at 2:45 pm EDT (6:45 pm GMT)

EURUSD, GBPUSD struggling to regain the $1.48, $1.61 levels despite a strong start to US stocks and bigger than expected decline in weekly US jobless claims. USDX continues to find support at the key 75.85 level, which successfully held up on September, December and late last month, the same time that EURUSD failed to regain $1,4860s. The USDX is a basket against 6 currencies (EUR, JPY, GBP, CAD, CHF, SEK), of which the euro has the biggest weight at 58%. USDCAD still holds at 1.0525equivalent of 95 cents in CADUSD terms. WATCH ASHRAF on CNBC's Street Signs at 2:45 pm EDT (6:45 pm GMT, 7:45 pm BST) today w/ Erin Burnett.

Bank of England left current quantitative easing program unchanged. GBP rose across the board yesterday after Lloydss second attempt to avoid entry into the Government's asset protection program. Lloyd, which is 43% owned by the govt is proposing a 15bn capital issue to enable it to withdraw entirely from the governments sponsored asset protection scheme. The Financial Services Authority is reviewing the proposal and will decide by end of month. GBPUSD remains capped at the 3-week trend line resistance of 1.61.AUDUSD breaks above the 0.90 after a broadly strong jobs report (increased employment, falling unemp rate). 0.9095 stands as the next resistance, while AUDJPY remains capped at 80. Watch Trichet's press conference and any remarks on the USD 12:30 GMT.

Ashraf's soundbites on Bloomberg TV alongside Tim Geithner & JC Trichet

http://bit.ly/mWV6A

Ashraf's Video Analysis on punishing yield differentials on USD, Fed strategy, Gold, Oil, EURUSD, EURCHF, AUDUSD, AUDJPY, USDJPY:

http://bit.ly/6OIyH

Textbook bearish outside day in Oil. Look for 68 as early as tomorrow, as Asian bourses move into negative territory.

Oil sheds +$1.00 despite an unexpected drawdown of 1.0 mln barrels in EIA crude inventories, as USD gains across the board. Chatter of a possible collaborative effort by the G20 to talk up the US currency as well as an actual intervention by the BoJare doing the rounds. The White House confirms a meeting between Pres Obama and House Speaker Pelosi, thus raising the possibility of a supplemental stimulus package (not necessarily spending-oriented but jobs-oriented). USDJPY continues to show lower highs AS ARE ALL YEN CROSSES, eyeing a retest of 88 from the current 88.80. EURUSD retreat could lead to a 129.70. The probability of yen jawboning is increasing but the likelihood of success for such action is relatively weak i.e. any resulting yen weakness is seen shortlived. LINK TO THE RECORDING OF SATURDAY's WEBINAR with Ashraf Laidi and Chris Lori. http://bit.ly/ Ln0cM This Link can ONLY BE ACCESSED by those who purchased the webinar before Saturday. (use your username and password). Those who have YET TO PURCHASE the recording will have to wait later in the week.

Under the shadow of all the talk about fading USD hegemony, GBP continues to rise to the occasion by extending its fall, losing even against the weak USD. $1.5870 and 0.9270 targets in GBPUSD and EURUSD have been hit, and expect EURGBP to extend gains towards 0.93 after a slight retreat to now less than 0.9240. GBPUSD next target stands at 1.5825-30, while any prospects for a bounce are limited at 1.5990. AUDUSD rises above that key 0.8930s resistance but a close above 0.8945s is necessary to validate the uptrend. Selling USDJPY remains a decent hedge for long USD positions against GBP and CAD. USDCAD retests 0.95 Canadian cents (1.0525).

LINK TO THE RECORDING OF SATURDAY's WEBINAR with Ashraf Laidi and Chris Lori. http://bit.ly/Ln0cM Link can ONLY BE ACCESSED by those who purchased the webinar before Saturday. (use your username and password).

Those who have YET TO PURCHASE the recording will have to wait later in the week

ASHRAF's INTERVIEW ON BNN delving deeper the Independent's story, USD Hegemony, state of US consumer, Fed's exit strategy and yield differentials

http://bit.ly/wmBpX

Golds surge to a new record high of $1,043 is a result of renewed concerns with the USD hegemony (Independent article), RBA rate hike and stocks rally and. GOLD MONTHLY chart shows second monthly gain, not seen since Jan-Feb. Any retreat from gold will have to emerge on a risk aversion during earnings season. AUDUSD breaks above 0.89, eyeing 0.8935-40 resistance76% retracement of the move from the Jul 2008 high to the Oct 2008 low. AUDJPY has yet to regain 80, while USDCAD probes the 1.0570 support, but 1.0525 may emerge as the next support--equivalent of 95 Canadian cents,

WATCH ASHRAF's INTERVIEW on Bloomberg TV earlier today discussing FX reserve diversification, USD hegemony and China's currency http://bit.ly/2Sfwa1 Targets of EURGBP, GBPUSD hit at 0.9260, 1.5880 respectively. GBP remains the ONLY CURRENCY UNDERperforming against the USD. No major US data releases today, which could help maintain current strength in stocks. CANADIAN buidling permits due at 12:30 GMT, Ivey PMI 9exp 56.6 from 55.7) due at 15:00 GMT

The RBA decision to raise interest rates by 25 bps to 3.25% boosted the Aussie across the board, along with commodity currencies against USD and JPY. The story from the Independent about Arab Gulf states launching secret moves with China, Russia and France to move away from USD for oil trading. Neither such a story nor the immediate denial from Saudi Arabian officials is new. But the oil exporters element certainly adds to the China element in highlighting the structural weakness of the US currency. GBP DROPS ACROSS THE BOARD on the unexpected decline in UK manuf output (-1.9% m/m and -11.3% y/y biggest since Jan). Cable eyes 1.5920, 1.5870. EURGBP eyes 0.9260. We did warn in yesterdays IMT over the possibility of data disappointment and its impact on GBPUSD. WATCH ASHRAF ON BLOOMBERG TV at 9:15 am GMT (10:15 am BST) discussing the China-Arab States story.

Dow closed +112 pts almost like last Monday when it closed +126 pts on low volume before selling ensued into the rest of the week. Despite the rally, EURUSD was capped at $1.4655-60, AUDUSD gave in at in at 0.8780s and GBPUSD continues to scrape the $1.59 support. The RBA decision coming up at 3:30 am GMT (4:30 am BST) is expected to leave rates unchanged at 3%, but the extent to which the policy statement leaves the door open for a Nov rate hike would boost AUDUSD towards 0.8840s. But beware of the prevailing risk environment during Asian trade. Get the AUDJPY techs from the latest HotChart.

View Ashraf's latest Video Analysis on EURUSD, GBPUSD, ISM, RBA and tomorrow's UK manufacturing/IP figures.

http://bit.ly/3v55Il

Latest HotCHart

http://www.ashraflaidi.com/hot-chart/?a=1040

US equities extend gains after a hesitant reaction to the services ISM, which managed to eke out a +50 figure for the first time in 12 months. The 14% plunge in the prices paid index below 50 maintains worries over disinflation, thereby, to explain oils struggle to break above 70. EURCHF rallying from Fridays 1.5090s amid the combination of broadening gains in EUR and CHF resulting from improved risk appetite. But because these gains are not a result of SNB intervention, additional strengthening is seen tapering off near $1.5145. NEW HOTCHART POSTED on AUDJPY http://bit.ly/Xv9p8

ISM SERVICES SCRUTINY. The 15:00 GMT release of the US services ISM is expected at 50 from 48.4, which would be the first figure at or above 50 since Sep 2008. IN THE EVENT OF A DISAPPOINTING figure (such as last week's services ISM) or a tepid increase to a figure less than 50, markets could see gradual JPY strength and emerging USD stabilization once stocks extend losses, with GBP likely to add losses towards $1.5870 and EURUSD eyeing 1.4520. AUDUSD and AUDJPY are seen as the biggest beneficiaries in CASE OF STRONG ISM report, eyeing 0.8770 and 79.10. Also watch the employment and new orders components.

GENERIC G7 STATEMENT: USD broadens weakness after the G7 issued the usual FX statement about excessive currency moves being undesirable without specifying USD weakness or JPY strength. Although this was no surprise, traders must watch out for the POST-G7 comments by individual policy makers, such as European officials reiterating the importance of USD strength. Monday may produce the usual risk bounce, but CAUTION OVER Mondays UK data on services PMI, which could trigger fresh GBP weakness in the event of a disappointing figure (exp 54.1 from prev 54.1) just as last weeks manufacturing PMI fell unexpectedly. But if UK data are w/in expectations and stocks have a solid Monday session, then remember what we said about GBP intraday patterns in Saturdays webinar. A recording of the webinar will be posted early this week. GBPUSD gains seen limited at 1.6130, GBPJPY eyes 144.90-00.