Intraday Market Thoughts Archives

BEWARE OF THE EURO / STOCKS DIVERGENCE: The euros divergence from rising US and European equities is growing similar to the divergence prevailing in Jan-April (see 1st red circle) when EURUSD fell 15% and S&P500, Dow-30 and FTSE-100 rose 16%-19%. If the Jan-April pattern repeats itself, then it is feasible to expect equities to catch down with the euro. The fundamental rationale would be based on i) broadening Eurozone concerns weighing on UK and Eurozone banks; ii) prolonged rise in US yields and iii) growing doubts upon the completion of the $600 bln QE2. We stick with our technically negative euro stance based on: i) the inability to regain the all important 55-week MA (1.3370); ii) the inability to regain the Nov 4 trendline. EURUSD eyes short term target fo $1.3070, followed by $1.26 in mid Q1 2011.

CHINA's INCREASE of RESERVE REQMT RATIO is no longer weighing on market sentiment as participants are expecting the more aggressive option of higher interest rates (borrowing and lending). I noted in last night's IMT that a hike in the RRR would be more market friendly than a hike in interest rates. CAD IS STRONGEST CURENCY OF THE DAY so far after Canada trade deficit dropped to C$-1.71 from C$-2.49 bln. EURCAD eyes 1.3280. $EURUSD pressured by improved USD following the $7bln decline in US trade deficit. $1.3160, followed by $1.31.

WILL ANOTHER CHINESE TIGHTENING shake off rising markets? The PBOC has raised reserve requirements twice last month after hiking interest rates on October 19. The stepping up of monetary tightening is a result of escalating bank lending and more recently mounting inflationary pressures (CPI at 4.4% in October, expected above 5% in November). The latest sign that PBOC will tighten policy is the cancellation of the 3-year auction after banks refused to buy bills at cheaper yields. The PBOCs refusal to lift yields suggests it will opt towards raising the reserve requirement ratio (RRR) instead of raising interest rates. If the PBOC goes with only the RRR and leaves interest rates unchanged, then the negative market reaction may be relatively modest. An actual hike in interest rates would have more of an impact in the form of stronger USD vs. EUR, NZD and AUD, and a short-lived pullback in yen crosses such as 62 in NZDJPY. Nonetheless, in the medium-term, I remain bullish USDJPY, expecting 85.90.

HERE ARE A FEW VIDEO TESTIMONIALS from my last paid seminar in London (March 2010) http://youtu.be/4trJRUZZWRE Had people flying from Singapore, LA, Koln & Dublin. As for the Jan 23 event, it is NOT a CMC Markets event but involving AshrafLaidi.com and ProTraders Club

http://www.ashraflaidi.com/about/workshop01.asp

A FEW VIDEO TESTIMONIALS from my last paid seminar in London (March 2010) http://youtu.be/4trJRUZZWRE Had people flying from Singapore, LA, Koln & Dublin. As for the Jan 23 event, it is NOT a CMC Markets event but involving AshrafLaidi.com and ProTraders Club

CLICK HERE TO REGISTER: http://www.ashraflaidi.com/about/workshop01.asp

MORE BAD NEWS FOR EUROZONE; Hours after Fitch downgraded Ireland to BBB+, Irelands centre-left opposition Labour Party said will vote against the EUR 85 bln IMF/bailout package due for approval next week. I stick with my $1.27 forecast (60% chance to take place before year-end) as I stick with my forecast for 0.9660 and 0.9550. Another AUSTRALIAN JOBS SURPRISE did lift AUDUSD but not beyond 0.9860. AUDNZD NEARS 10-year highs at 1.32, which appears to be a triple top so far. Although the cross could come off in reaction to a China rate hike (Friday or weekend) I am nor ready to call major slide in AUDNZD below 1.30. Lets review this further. USDJPY ROAD TO 85.90 ALSO REMAINS INTACT. REGARDING MY Jan 23 FX Workshop, it is $445.00 for my 4-hour session and $1695 for my presentation, Lori workshops (materials and training) from Jan 21-23 : REGISTER HER:

http://www.ashraflaidi.com/about/workshop01.asp

ASHRAF FX WORKSHOP in LONDON: Ashraf will speak on Jan 23rd in London as part of a 3-day PAID WORKSHOP with CTA Chris Lori of Pro Traders Club. CLICK HERE to book your seat:

http://www.ashraflaidi.com/about/workshop01.asp

AUSSIE TRADERS watch tonight's Nov employment report (00:30 GMT), which could well provide the fundamental catalyst for extending the classic bearish formation in the charts below. Aussie Nov employment seen +20K from 29.7K and the unemployment rate seen at 5.2% from 5.4%. A positive may support AUDUSD back towards the 0.9880s but as long as no weekly close occurs above 0.9950s, the formation remains valid. Also watch out for the possible materialization of a Chinese rate hike later this week would be a negative for AUDUSD as has been the case in previous tightening. 09760 and 0.9640 appear the next key levels of support. The 500-pip rebound from Dec 1 to Dec 7 may have well stopped out several shortsbut much talked about right shoulder resistance of 0.9950-60 was never broken as far as a daily close is concerned. http://chart.ly/e73rwly

US 10 YEAR YIELDS EXCEED JPN YIELDS BY 1.94%, the highest since July. The US-JPN spread has now regained its 200-day MA for the 1st time since May. It is NO COINCIDENCE that the US 10 yr yield has ALSO broken above its 200-day MA for the 1st time since May 2010. This clearly illustrates how USDJPY is notable beneficiary from rising global yields as yield-hungry Japanese capital seeks opportunities abroad. USDJPY is set to regain last months 15-week high of 84.40, which could pave the way for 85.80-90s by year-end. USDJPY bulls require a close above the 100-day MA of 84 to extend the current leg-up.

HERE IS A FRESH LOOK at the latest AUDUSD chart and that Head & Shoulder formation remaining intact. http://chart.ly/e73rwly But bear in mind Aussie Nov jobs report is due Thursday and NOT Wednesday as indicated on the chart. At any rate, fresh downside could well reassert itself towards prelim target of 0.9720

CHICAGO RESIDENTS: This Thursday, a fundraiser for Pakistani Floods @ Salvage One - 1840 W Hubbard St. 6-9 pm http://twitpic.com/3dwr4y 5 months after Pakistan's worst floods, 14 million are people still in need of urgent humanitarian assistance, 4 million of whom are homeless, facing freezing conditions. Please give a lending hand.

USD MAKES BROAD COMEBACK and AUDUSD & EURUSD CHARTS from yesterday remain valid http://chart.ly/uk5r9j7

Ashraf's Video for Reuters Thomson on Gold, SCRB & Silver

http://link.reuters.com/zav88q

Ashraf's Interview with AlArabiya

http://bit.ly/fZQyh5

EURUSD MAKES ANOTHER short-lived bounce, failing to regain the $1.34 resistance. The Nov 4 trendline continues to hold. In the event that price action remains capped and no Irish vote takes place this week, then euro bears should have more confidence in dragging EURUSD back to $1.3150, especially if the PBOC delivers its rate hike this weekend prior to next weeks CPI. EURGBP makes another failure at the 0.85 before succumbing to 0.84, inline with our bearish take on the pair, allowing for 0.8320 and 0.8180 to stand as the next key med term targets.

TAX CUTS BOOST RISK TRADE as all major currencies rally against USD and JPY. Pres Obamas announcement to extend Bush-era tax cuts for the wealthy and middle class for 2 years. The program includes 2% payroll tax cut and a 13-month extension of jobless benefits. Despite opposition from some democrats policymakers, the tax cuts will likely pass by the end of current legislative session. AUDUSD BREAKS OUT of the right shoulder shown in yesterdays chart http://chart.ly/uk5r9j7 as it rises above 0.9930 to 0.9964 amid surging risk appetite. AUDUSD targets 1.0010. IRISH BUDGET due at about 15:45 GMT. EURUSD attempts to regain $1.34230s. Those playing the risk aversion play must be cautious as Dow futures are now up 87 pts. Gold hits new high at 1427, Silver at 30.44, shrugging talk of a Chinese rate hike over this weekend.

Ashraf's Video Market Highlights with Michael Hewson discussing the US jobs report, charting EURUSD reaction, previewing the AUDUSD chart ahead of the

RBA decision and the flurry of UK data along with EURGBP implications :

http://youtu.be/O45JB6L_tZA

HERE ARE TWO CHARTS to consider on EURUSD & AUDUSD ahead of tonight's RBA decision http://chart.ly/uk5r9j7

And Ashraf's Arabic interview w/ CNCB Arabia http://bit.ly/fOjJFf

EURO BEARISHNESS REMAINS as EURUSD fails to regain the $1.3440s mentioned in Fridays CNBC interview (view here http://bit.ly/hjjlZB ), which was required to pave way for prolonged gains. $1.3440s represented the 55-week MA, which I noted to have been an essential landmark after the Nov 23 break. ALTHOUGH THE USD INDEX DID CLOSE the week below its 200-week MA of 79.67, it did NOT close the week below its Nov 4 trendline support of 79.05. The fact that the markets have quickly returned to Eurozone concerns (IMF insistence for EU to augment its EUR 750 bln rescue fund, inevitability of renewed ECB bond purchase and Tuesdays Irish Budget vote). $1.3210 appears next short term target as long as $1.3330 is avoided. While EURCHF is taking a fresh battering, while USDCHF makes a valiant recovery after bouncing off the 0.9725 low. Although USDCHF trendline support stands at the lower level of 0.9690s, we need to closely monitor the upmove of the last 12 hours, which may suggest an extension towards 0.9930.