Intraday Market Thoughts Archives

Net speculative shorts in EUR vs USD have reached 85K contracts, the highest since mid June 2010, when EURUSD hit those cycle lows at 1.1870, coinciding with the 1st Greece bailout and the bottom in equities following the May Flash Crash. But the latest patterns merit another look. http://ashraflaidi.com/hot-chart/?a=2968

Ashraf Laidi

Ashraf compares the current turmoil with the 2008 financial crisis and how it impacts the Middle East and North Africa. ENGLISH SYNOPSIS on the oil, currency and China elements is provided to the video below the clip. http://youtu.be/H5QeTdI9pAY

Eurozone members to sign a new treaty; ECB weekly bond purchases capped at EUR 20 bln; Bundesbank open to IMF loans; UK producer inflation slowing; UK trade deficit narrows at the fastest pace. Market turns to US and Canadian trade deficit and UoM consumer confidence.

USD weakens across the board as EU summit progresses and risk appetite returns to the market. The relative strength winners are GBP, EUR and NZD. Major European equity indices show about 0.5% to 1% gains.

All 17 members of the Eurozone and 23 out of 27 members of the European Union agreed to a new treaty that assures deeper integration and stricter fiscal rules. The UK did not sign the proposed amendments to the EU treaty while three other EU members are still considering participation. Chancellor Merkel said that this new treaty would become the foundation of a fiscal and stability union. EURUSD reached 1.3430 after it fell to 1.3282 earlier during the session.

One factor that significantly contributed to the improving sentiment was a report published by Dow Jones that said that the BundesBank was "fundamentally open" to bilateral loans to the IMF. The loans could not be marked for the Eurozone but as crisis loans.

Also noteworthy was a report that the ECB purchases of sovereign bonds would be capped at EUR 20 bln per week. Italian 10 year yield jumped back above 7% and the German-Italian spread widened to over 5%.

In the UK, PPI input prices rose 13.4% in November y/y which is lower from previous 14.3% while output prices rose 5.4% y/y down from October's 5.7% confirming that inflation pressure is easing. UK trade deficit narrowed at the fastest pace on record in October to GBP -7.6 bln from previous GBP -10.2 bln as exports soared which could help to at least partially offset declines in manufacturing, industrial and construction output in Q4 GDP calculation. October construction output declined sharply -2.5% m/m and +2.7 y/y. GBPUSD trades firmly above 1.57.

The NY session starts at 8:30 am ET with a trade deficit that is expected to widen slightly to USD -44 bln in October from previous USD -43.1 bln. Preliminary December UOM consumer confidence due at 9:55 am ET is seen higher at 65.8 from previous 64.1.

Canadian data will include trade balance due at 8:30 am that is anticipated to show a surplus of CAD 0.7 bln in October, somewhat lower compared to September's CAD 1.2 bln. Labor productivity which is due at the same time should grow 0.4% in Q3 after -0.9% contraction in Q2.

ES, Gold, US crude, USDCAD and silver shorts remain in progress. Oil shorts missed target by 5 cents, while all EURUSD shorts are done. Direct access here: http://ashraflaidi.com/products/sub01/access/?a=567 Non Subscribers can click here: http://ashraflaidi.com/products/sub01/

EU leaders agree on bolstering IMF funding, China CPI sees fastest slowdown in over 2 years, UK trade deficit narrowed by its fastest pace on record down in October, more EU press conferences are due around the US open. all Premium EURUSD shorts hit targets

The latest from EU talks is that leaders have agreed to make EUR 200 bln available to the IMF coming in the form of EUR 150 bln in bilateral loans through national central banks, with the remaining EUR 50 bln from non-Eurozone EU nations.

It seems Europe has found a loophole. Although the ECB was opposed to the idea of national central banks lending to Eurozone via IMF, the ECB said a workaround would be to send central banks funds to the IMFs general resources account, designed to deploy funds to crisis loans.

There is also word from Japan, Brazil and China to bolster the Eurozone financing to the IMF via matching Eurozone funds. This could mean raising the total contribution to EUR 400 bln, but nothing is yet confirmed.

Regarding the EFSF, there is a preliminary agreement (according to leaked documents) that the existing EUR 440 bln EFSF will continue operating when the new EUR 500 bln fund (ESM) kicks in next year. Germany, however, remains opposed and insists that the current EFSF is operational.

German Nov CPI remained was unrevised at +2.8% y/y from Octobers +2.9%.

UK Oct Trade deficit narrowed by its fastest pace on record down to 7.6 bln from 10.2 bln

China November CPI slowed to 4.2% y/y from 5.5% y/y in October, posting its biggest monthly decline February 2009. Such a sharp decline in prices increases the possibility of reduction in Chibas benchmark interest rate on lending as early as this month. The PBOC could well deliver a rate cut on Christmas day, as it raised rates last Christmas. Some say Chinas focus on growth may be positive for overall risk appetite, but it could also be argued that the quick shift of focus means a panic by the worlds fastest growing economy, which could have negative demand implications to other Asian engines.

ES, Gold, US crude, USDCAD and silver shorts remain in progress. Oil shorst missed target by 5 cents, while all EURUSD shorts are done. Direct access here: http://ashraflaidi.com/products/sub01/access/?a=567 Non Subscribers can click here: http://ashraflaidi.com/products/sub01/

A spike reversal in the euro on the absence of ECB bond buying made for a messy day of trading. USD and JPY were the top performers while AUD and CAD lagged. A series of major data releases are scheduled in Asia, including Chinese CPI and Japanese GDP. Our latest euro charts show the consolidation could be turning into an impending selloff.

EUR/USD jumped to a session high of 1.3459 at the outset of Draghis press conference then tumbled as low as 1.3290 when no bond buys were unveiled. The announced liquidity measures were positive (see Ashrafs note) but were far outweighed by inaction on bonds. A report the ESM will be given a banking license was also denied by Germany, causing further EUR volatility.

With the EU Summit now only hours away, expectations are rapidly declining and the effect has been an outsized drop in risk currencies. AUD and CAD posted textbook reversals on the daily charts.

US economic data was encouraging with jobless claims falling to 381K from 404K (exp 397K) and wholesale inventories rising 1.6% versus the 0.4% climb expected.

ES, Gold, US crude, EURUSD, USDCAD are some of the trades in our Thursday Premium Trades w/ charts on EURUSD 1 month volatility and EURUSD/SPX Correlation. Direct access here: http://ashraflaidi.com/products/sub01/access/?a=567 Non Subscribers can click here: http://ashraflaidi.com/products/sub01/

Japan GDP Preview

A busy finale to the Asia-Pacific week starts with Q3 Japanese GDP at 2350 GMT. The Q2 6.0% annualized rate is expected to slow to 5.2%, or 1.2% q/q. There is considerable mystery about the numbers and the possibility of a large upside surprise because the government has changed calculation methods to include interest rate spreads and will tally in-house corporate software as a capital expenditure. Second quarter GDP will also be recalculated. In light of this, the market will eye all the numbers with skepticism and there may be an opportunity to fade any large initial yen move.

China CPI, Industrial Production and Retail Sales

China reports on November CPI and PPI at 0130 GMT. The emphasis will be on how large the decline will be compared to the 5.5% y/y CPI reading in October and 6.5% reading in July. The consensus forecast is for a slide to 4.4% and a -0.1% monthly fall. If the PBOC and govt believe slowing inflation is sustainable they may hint at easing borrowing rates/restrictions in a move that would pump up risk assets.

At 0530 GMT, China releases industrial output, which is expected to slow to 12.8% y/y from 13.2%. At the same time, retail sales are forecast at 16.9% y/y compared to 17.2% in October. These numbers will have large implications for commodity FX and pre-date apprehension partly weighed on AUD Thursday.

Adam Buton

ECB's Mario Draghi fired his bazooka in terms of: i) duration of funding (extending long term refinancing ops to 3 years from the current 1 year at the lower rate of 1%), ii) pool of collateral used by banks borrowing in these LTROs and iii) reserve ratio reduced to 1% from 2%. But there are 4 clear signs that the measures are failing to sustain market confidence, See the LATEST EURUSD volatility chart in our Thursday Premium Trades w/ charts on ES (S&P500 futures) and EURUSD/SPX Correlation. Direct access here: http://ashraflaidi.com/products/sub01/access/?a=567 Non Subscribers can click here: http://ashraflaidi.com/products/sub01/

The ECB cut its main refinancing rate to 1.00% from 1.25%, dragging down EURIBOR-OIS spreads (positive for liquidity), while the BoE held unchanged without increasing asset purchases. The ECB announcement on LTROs and liquidity follows next at the 8:30 am EST press conference. NY session will bring jobless claims, wholesale inventories and Canadian housing starts.

Markets have been trading within relatively tight ranges throughout the Asian and London sessions as traders positioned themselves for the BOE and especially the ECB rate announcements. Main European equities are in red but only marginally.

Ashraf is telling followers to keep an eye on the EURIBOR-OIS spread, which is falling to 0.97% from 1.00% earlier today and from 1.04% last week attained prior to the coordinated central bank interventions to inject liquidity. The ECB announcement could well keep the spread down to the benefit of gold. But EURJPY is continuing to lose along with all YEN crosses.

Separately, French banks are estimated to need 7 bln in fresh capital according to Le Monde newspaper.

Despite worsening fundamentals, the BoE chose the wait and see approach and kept rates steady at 0.5% as expected and did not increase the Asset Purchase Facility that stands at GBP 275 bln. Two weeks ago, the OECD noted that further QE by the BOE is warranted and projects that the APF will be increased to GBP 400 bln. The next MPC meeting is on January 12th. The BoE is widely expected to resume fresh round of purchases in February or March.

On 11/30 MNI reported that sources within the ECB had claimed that the central bank is ready to be more flexible with respect to possible rate cuts, collateral framework and bond purchases. Reports also suggest that the ECB could offer 2 or even 3 year loans.

The big event of the day is the ECB press conference due at 8:30 EST, 13:30 GMT. Keep in mind that the EU summit ALSO STARTS TODAY and any remarks about the likelihood of an approval of reforms leading to a fiscal union might underpin the common currency.

EURJPY is the only trade to have hit all targets. All other trades are in progress. The Premium trades published Wednesday evening include DUAL trades in EURUSD & US crude, w/ trades in EURJPY, USDCAD, GBPCAD, gold & silver. For DIRECT ACCESS, pls click here: http://ashraflaidi.com/products/sub01/access/?a=566 Non-sunbscribers can click here: http://ashraflaidi.com/products/sub01/

The NY session data will include Canadian housing starts due at 8:15 am EST that are anticipated lower in November at 200K from 208K, US jobless claims are due at 8:30 am and are seen lower at 397K from previous 402K and wholesales inventories that are expected to rise 0.4% in October from previous -0.1%.

CAD traders should also note that the BOC will release its Financial System Review at 10:30 am so the volatility is likely to increase.

European Central Bank expected to cut rates, Bank of England expected to hold pat on rates and asset purchase scheme, AUD unemployment ticks higher. Last nights premium Intermarket Insights lays out the possible options to the ECB as well as new trades in FX, gold, oil and silver.

The last European Central Bank meeting of 2011 is eagerly awaited by markets today, ahead of this weeks EU summit, not because the market expects another 25bps rate cut but because they are looking to see what new ECB President Mario Draghi will announce with respect to supporting the European banking system. Most of the measures were flagged up yesterday including two year loans for banks as well as relaxing collateral rules on loans and uncovered bonds.

If the markets are expecting the new ECB President to announce measures to cap bond yields on sovereign bonds or increase the amount of buying from the SMP program they could well be sorely disappointed.

Just before the ECB takes centre stage at 12:45 GMT, the Bank of England will go through the motions with respect to their last meeting of 2011 at Noon GMT. It is likely that despite yesterdays awful October manufacturing and industrial production data that policy will be left unchanged with rates at 0.5% and the asset purchase scheme total at 275bn. The Bank has come under pressure this week to announce an increase to its program of asset purchases, however it remains likely that they will resist until February.

BoE policymakers have already publicly stated that they dont want to pre-empt anything and should know by then how much inflationary pressure has dropped out of the consumer price index, as Januarys VAT rate rise will have dropped out.

The Premium trades published Wednesday evening include DUAL trades in EURUSD & US crude, w/ trades in EURJPY, USDCAD, GBPCAD, gold & silver. For DIRECT ACCESS, pls click here: http://ashraflaidi.com/products/sub01/access/?a=566 Non-sunbscribers can click here: http://ashraflaidi.com/products/sub01/

Aussie still holds firm despite the unexpected decline in Australias November by 6.3k against expectations of a 10K rise. The unemprate rose to 5.3% from 5.2%. The premium shorts in AUDNZD remain in progress.

Rumors of IMF help in Europe helped the euro recover in USD trading. On the day, GBP and AUD were broad outperformers with the rest of the majors virtually unchanged. In early Asia-Pacific trading, the kiwi climbed after the RBNZ held rates. Aussie jobs are next. See Our AUDNZD Premium trade in the backdrop of those Aussie jobs.

Pre-ECB Premium Trades are below.

Journalists and market participants are scrambling to get the scoop ahead of the EU Summit on Friday leading to rumors, confusion and denial. The euro fell on reports Germany is not considering a parallel ESM and EFSF, countering earlier reports. The euro then rebounded on a report that the IMF is considering a $600B European lending program, but that was also denied. The day ended with EUR/USD just above 1.34.

The pound outperformed, hitting a one-month high against the euro despite soft domestic data. Flows appear to be a driver so stay on guard for a pullback.

RBNZ Holds

New Zealands central bank held rates at 2.50% as expected and said it will stay on hold for now, in a decision that was widely expected. At the same time, growth estimates for the next three years were lowered due to slowing in European and a modest downturn in Asia. The OIS market is pricing in a rate cut earlier next year but economists forecast no change. The market was on guard for more dovish decision and NZD/USD has climbed 30 pips since the decision.

Aussie Jobs Next

At 00:30 GMT, the focus shifts to Australia with November employment. The consensus is for 10.6K new jobs but no change in the 5.2% unemployment rate. AUD will be extremely sensitive to this data point, with a rise of 15K or more highly likely to push AUD/USD to 1.0350 and beyond.

Japan releases data on core machinery orders fell 6.9% m/m vs. expected decline of 0.5%.

Here are the latest Premium Trades ahead of Thursday's events, including new trades on USDJPY, EURUSD. EURJPY and US crude. Also watch AUDNZD ahead of this afternoon's RBNZ rate decision. DIRECT ACCESS here: http://ashraflaidi.com/products/sub01/access/?a=566 Non-sunbscribers can click here: http://ashraflaidi.com/products/sub01/

All eyes will be on Thursday's ECB interest rate announcement due at 7:45 EST, 12:45 GMT, 13:45 Frankfurt, followed by Mario Draghi press conference at 8:30 EST, 13:30 GMT, which will announce the widely anticipated new operations, extending the duration and quantity of funding to local banks. Here are the latest Premium Trades ahead of Thursday's events, including new trades on USDJPY, EURUSD. EURJPY and US crude. Also watch AUDNZD ahead of this afternoon's RBNZ rate decision. DIRECT ACCESS here: http://ashraflaidi.com/products/sub01/access/?a=566 Non-sunbscribers can click here: http://ashraflaidi.com/products/sub01/

German official pessimistic about EU summit; UK manufacturing and industrial production decline; German industrial production increased. Market turns to UK NIESR GDP estimate, crude oil inventories and later to RBNZ rate announcement. See status on last night's Premium trades below.

USD edges high as risk appetite wanes, with the biggest losers being EUR, NZD and CHF. CAD & AUD are holding steady. European equities are higher by 0.1% to 0.5%.

Market sentiment reversed and risk aversion increased after MNI reported that senior German official expressed more pessimism on a chance of a EU summit deal. EURUSD sold off from around 1.3440 to 1.3369.

In the UK, manufacturing production declined -0.7% in October from previous +0.1% (0.3% from previous 1.3% y/y). Industrial production fell -0.7% from unchanged print in September (-1.7% from -1.5% y/y). Manufacturing sector provides more than 10% of UK GDP (industrial production over 15%) so the probability that Q4 GDP will contract is high. GBPUSD trades slightly weaker around 1.56.

German data surprised to the upside second day in a row as industrial production rose in October 0.8%, significantly higher from previous -2.7%.

The NY session starts at 8:30 am ET when FED governor and FOMC member Sarah Bloom Raskin gives a speech in Baltimore.

GBP volatility could increase at 10:00 am EST when the NIESR GDP estimate is due and is expected at 0.5%, unchanged from a previous reading. Given the weak manufacturing result from earlier today, GBP will be more sensitive to a disappointment.

Crude oil inventories due at 10:30 am are expected to decline to -0.8M barrels from previous +3.9M which could underpin oil and consequently the CAD.

At 3:00 pm, the RBNZ announces its rate decision. In a Bloomberg survey, all 15 economists expect the official cash rate to remain at 2.5%. Nevertheless, the NZD could weaken as the policy statement is likely to express that rates are likely to stay at record low due to continued market distress and the ongoing crisis. The fundamentals also point to a slowdown which further suggesting no rate increases in the near future. The unemployment rate ticked up to 6.6% in Q3 from 6.5% seen in Q1 and Q2, the annual CPI declined to 4.6% from previous 5.3% and Q2 GDP fell to 0.1% from 0.9% in Q1.

Those holding our PREMIUM SHORTS in AUDNZD, bear in the RBA has cut rates yesterday. Both of last nights premium trades in EURUSD were done. USDCAD shorts are nearing their target, while our US crude longs were filled. EURJPY, EURGBP and GBPCAD remain in progress. And do not forget gold, which is charted on Daily & weekly charts in last nights Premium piece. For direct access to the latest Premium Intermarket Insights, click here: http://ashraflaidi.com/products/sub01/access/?a=565 Non-members can get a free 1-week trial here: http://ashraflaidi.com/products/sub01/access

UK Industrial and Manufacturing production (Oct) German and Italian industrial production, German bond auction, Greek parliament votes on new budget to get next bailout tranche, AUD Q3 GDP remains robust. Last night's Premium trades are up.

Sterling awaits the October industrial and manufacturing data, which are expected to disappoint further. Septembers numbers werent great with output stagnant, but Octobers are expected to be worse with a decline of 0.3% on both measures expected. The outcome is is likely to increase the calls for the Bank of England to announce an increase to the asset purchase scheme in Thursdays meeting tomorrow.

Yesterdays unexpected jump in German factory orders by 5.2% has raised expectations that the German economy may not be as stagnant as it has been feared. This has raised hopes in some quarters that todays October Industrial production data could well similarly surprise to the upside. Expectations are for a rise of 0.3% against the decline of 2.7% in September, however expectations are rising that the number could surprise to the upside.

Todays German bond auction of 5bn of five year notes will be closely watched given the failure of the 10 year auction a few weeks ago.

Industrial production in Italy is expected to continue to shrink in October, though by not as much as September, when it slumped 4.8%, but still by 0.3%.

See our latest positioning in gold, silver, US crude oil, USDCAD, EURUSD and GBPCAD. DIRECT ACCESS to these Premium Trades is found here http://ashraflaidi.com/products/sub01/access/?a=565 Nonsubscribers can get a free 1-week trial here http://ashraflaidi.com/products/sub01/

Last nights decision by the Greek parliament to pass the latest austerity budget in the face of further civil unrest, appears to ensure that the country will get its 8.8 bln aid tranche and enabling it to meet the next bond redemption payment.

Despite concerns about a slowdown in the global economy reflected in yesterdays decision by the RBA to cut interest rates by 25 basis points, the Australian economy appears to be ambling along quite nicely with Q3 GDP coming in at 1% Q/Q with the annualised figure jumping from 1.9% to 2.5%. The Australian dollar looks to be once again retesting towards the 1.03 level.

Ashraf on AlArabiya with Nadine Hani & Carina Kamel discussing S&P's latest warnings on the Eurozone and Gold's underpeformance despite its safe haven nature:

http://www.youtube.com/user/ashraflaidi?feature=watch#p/u/0/DoFHsKB6lvU

Last night, we issued fresh longs in EURUSD as well as risk appetite trades (short USDCAD) despite the noise and panic emerging from S&Ps announcement to place 15 Eurozone nations on negative watch. After a brief pullback, EURUSD ended up consolidating around 1.34. We remain cautious in EURUSD short-term despite remaining long term bearish. Our broadly bullish stance in CAD is paying off against USD and GBP, while our AUDNZD short is playing along nicely after the RBA rate cut. Finally, we offer 2 GOLD CHARTS in the latest Premium Intermarket Insights, with technical and fundamental rationale. DIRECT ACCESS to these Premium Trades is found here http://ashraflaidi.com/products/sub01/access/?a=565 Nonsubscribers can get a free 1-week trial here http://ashraflaidi.com/products/sub01/

Expectations of EURCHF floor lifting likely to reemerge after Swiss CPI declined again; German factory orders surprise to the upside; Eurozone Q3 GDP confirmed at 0.2% q/q. Market turns to Canadian rate decision, building permits, Canada's Ivey PMI and US IBD TIPP economic optimism index.

Financial markets are recovering losses incurred after yesterday's surprising S&P mass downgrade warning. Riskier assets were first bought when London session started but started to give up their gains. Relative strength winners are EUR, NZD and AUD. Major European equities are higher by 0.3% to 1%.

Deflationary pressures in Switzerland are increasing as CPI declined -0.2% m/m in November and 0.5% y/y from previous -0.1%. The Franc weakened sharply to 1.2416 against the Euro but has since gained some losses back. Stronger deflation is likely to bring back calls from labor unions and other parties for a higher EURCHF floor. However, considering the ongoing Eurozone crisis, previous calls for EURCHF floor at 1.40 seem exaggerated as it would become expensive to defend. Next SNB meeting is on 15th of December.

German factory orders grew solid 5.2% in October, significantly above expectations of +0.9%. September orders were revised lower from -4.3% to -4.6%. Export oriented German economy could benefit in the months ahead from 8.9% growth in foreign orders within the Eurozone and 7.9% rise in orders from the rest of the world. Eurozone Q3 GDP was unrevised at +0.2% q/q and +1.4% y/y.

The NY session starts at 8:30 am ET with Canadian building permits that are seen higher at 2.3% in October from previous -4.9%. The reaction is likely to be muted as traders will wait for BoC rate announcement at 9:00 am ET. The overnight rate is likely to remain at 1%. A forecast compiled by Bloomberg shows that BOC is the only G10 central bank that is expected to raise rates during 2012. Nonetheless, traders will await the statement of the BoC and whether it revises down its economic forecast.

Also from Canada, is the 10:00 am release of the November PMI anticipated to rise to 55.2 in from previous 54.4.

See our latest positions in EURUSD, EURJPY, USDCAD, AUDNZD, EURGBP, GOLD, SILVER, http://ashraflaidi.com/products/sub01/access/?a=564 Nonmembers click here to join http://ashraflaidi.com/products/

December IBD TIPP economic optimism index is due also at 10:00 am and should improve to 42.5 from 40.6.

Standard and Poors muddies European waters, Eurozone GDP set to stay stagnant, RBA cuts rates by 25 basis points, Swiss CPI confirms more deflation, UK sales slump. Latest Premium Intermarket Insights are below including the triggered short in AUDNZD issued prior to the RBA cut.

Last nights decision by Standard and Poors to put fifteen Eurozone nations on downgrade watch including all six triple A nations threw a spanner in the works after an initially positive reaction to yesterdays Merkozy press conference. While it is unlikely that Germany could lose its rating it is becoming increasingly likely now that France probably will, given that S&P suggested they could be downgraded two notches. This throws the viability of the EFSF into serious doubt and the funds own triple A rating.

S&P cited concerns about the sustainability of debt to GDP ratios set against a backdrop of deteriorating growth and a lack of decisive decision-making reflecting structural weaknesses in within the Eurozone and European Union.

Eyes turn to Eurozone growth when the Q3 Eurozone GDP is due out at 10:00 GMT, expected to show growth of 0.2% q/q and 1.4% year y/y.

The Reserve Bank of Australia duplicated last months 25 basis-point cut to bring rates down to 4.25%, reflecting deepening concern about the continued uncertainty prevailing in Europe. With Chinese data also showing signs of weakness the bank obviously feels it is prudent to try and get ahead of any ill winds that could blow ashore from Europe and China, as any inflation threat diminishes.

Here are the latest PREMIUM INTERMARKET INSIGHTS on EURUSD, EURJPY, gold, silver, AUDNZD, USDCAD & GBPCAD. http://ashraflaidi.com/products/sub01/access/?a=564 Nonmembers click here to join http://ashraflaidi.com/products/

In Switzerland, evidence of more deflation was shown in the 0.5% y/y decline in Nov CPI from previous -0.1% vs exp -0.3%. This strengthens the argument for further intervention by the Swiss National Bank to fight off the effects of deflation.

UK BRC like for like sales showed a sharp decline of 1.6% in November. GBP had been surprisingly lifted by better than expected services PMI, which ended up netting a slightly unchanged result for GBPUSD.

We're updating our Premium trades after S&P placed 15 Eurozone nations under watch for negative implications, stating it could downgrade the rating of Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg by up to one notch and may downgrade the rating of Italy and France by up to two notches. Downgrades could follow as early as Friday. EURUSD still holds at 1.3370s, while metals fell. Here are the New trades: http://ashraflaidi.com/products/sub01/access/?a=564 Nonmembers click here to join http://ashraflaidi.com/products/

Risk appetite pushes high with S&P500 (cash) testing that all-important 55--week moving average (1264) we often point out to in our presentations/webinars. EURUSD rebounds after Fridays long squeeze. Our Thursday longs in euros were violently stopped out on Friday, despite a decent US jobs report, whose positive impact on risk appetite went unnoticed by the euro. Today, EURUSD and EURJPY are displaying those same technicals shown in last week. See our latest Premium trades with new charts on EURUSD and USDCAD. New trades on EURUSD, EURJPY, USDCAD, AUDNZD, gold & US crude are posted here: http://ashraflaidi.com/products/sub01/access/?a=563 Nonmembers click here to join http://ashraflaidi.com/products/

UK PMI services rose but employment dropped; Eurozone retail sales rose m/m but fell y/y; Italy approved austerity and its 10 year yield declined. Market turns to ISM non manufacturing and factory orders. Risk appetite back on the rise at the expense of broad weakness in USD and JPY. Dow futures +151 pts, ES + 18 at 1261. Premium Intermarket Insights due ahead of the US session.

Traders await Merkel-Sarkozy meeting in Paris where, among other topics, the possibility of a fiscal union will be discussed. A press conference is scheduled for later today but all details will likely be released only on Friday during the EU economic summit. There will likely be several bouts of rumour-driven market moves and retracements.

10 year Italian bond trades comfortably below the critical 7% around 6.43% after the Italian government approved austerity measures worth of EUR 30 bln. 10 year German-Italian spread is tighter at around 4.43%.

UK services PMI rose in November to 52.1 from previous 51.3. Analysts expected worsening towards 50.6 so GBPUSD jumped higher on the release. However, it quickly lost its gains and within minutes fell to pre-release levels as November saw the fastest pace of job losses in 15 months. A contraction in employment was recorded four times out of the last five months. Nevertheless, resilient service sector could imply that the MPC will not increase the Asset Purchase Facility after its Thursday meeting and will wait instead for additional data.

Eurozone data was mixed today. October retail sales increased +0.4% m/m after dropping -0.6% a month earlier but the annual result recorded a -0.4% decline after September's -1.4%. Eurozone Sentix investor confidence fell further in December to -24 from November's -21.2 which is a sixth back to back decline.

The New York session will bring ISM non-manufacturing that is expected to rise to 53.8 in November from 52.9 in October and October factory orders that are seen lower at -0.3% from previous +0.3%. Both releases are due at 10:00 am ET.

Market volatility could also increase at 12:10 pm when FED Chicago president and FOMC member Charles Evans delivers a speech in Indiana on the US economic outlook.

Merkozy to meet today in France over their differences on Eurozone stability pact, Italy announces new austerity budget, Eurozone Nov Services PMI slowed to 47.5 from 47. 8, UK Services PMI set to slip back, China Services PMI drops, US ISM non-manufacturing also due. Premium Intermarket Insights due ahead of the US session.

Ezone Nov Services PMI slowed to 47.5 from 47. 8. 47.8 was expected. Germany services PMI slowed to 50.3 from 51.4 vs exp 51.4. Yet the German composite services PMI did fall below 50 at 49.4. Italy Nov services PMI rose to 45.8 above the expected 44.1, France services PMI rose to 49.6 vs. expected 49.3.

German Chancellor Angela Merkel and French President Nicolas Sarkozy are set to meet in Paris today to agree on closer political and economic integration and attempt to resolve their differences over ensuring and enforcing transgressors. Sarkozy remains opposed to the idea of enforcement by the European Commission & European Court of Justice. Merkel is insistent on treaty changes to ensure compliance.

Italian Prime Minister Monti announced a new austerity budget of around 30bn with about 20bn in cuts between 2012 and 2014, including increasing value added tax, reintroducing a property tax, and raising the state pension age.

UK Nov services PMI will be key, given that the services sector accounts for over two thirds of the UK economy Expectations are for a weakening from 51.3 to 50.5, not great but still better than the majority of our European peers.

6 of our Friday 17 Premium trades were stopped out. The ongoing trades are found directly here http://ashraflaidi.com/products/sub01/access/?a=562 Nonmembers click here to join http://ashraflaidi.com/products/

Less than week after China manufacturing dipped into contraction for the 1st time in 3 years, services PMI data dropped to 49.7 in Nov from Octobers 57, increasing expectations of further easing after last weeks reserve requirements cut. This mornings HSBC services PMI also showed weakness but not to the same extent dropping from 54.1 to 52.5. In the US the slow recovery is economic data is expected to continues this afternoon with the latest ISM Non-manufacturing data for November.