Intraday Market Thoughts Archives

Over 700 persons will attend Ashraf's 2010 Market Outlook in Singapore on Saturday (Dec 12). here's the info for Walk-Ins http://tinyurl.com/ydxu3a9

Rising risk appetite provides a hefty rebound in global bourses but both USD and JPY remain stronger than last weeks levels, suggesting that FX traders once again unwilling to respond to the risk trade in equities. The same applies for oil and gold as these trade near their lows of the week despite the 1-2% rally in global equities. UK Nov PPI rise 0.2% vs. exp 0.5%. GBPUSD faces trend line resistance at $1.6370 (extends from Dec 3 high thru Dec 4), while EURUSD faces initial resistance at $1.4780 (see current HotChart). Markets await US Nov retail sales (13:30 GMT) expected +0.6% from +1.4%, while core sales seen +.6% from +0.2%. The preliminary release of the Dec Univ of Michigan consumer sentiment (15:00 GMT) exp at 68.6 from 67.4.

Gradual stabilization in the commodity currencies of AUD, NZD and CAD is the only change taking place in USD-pairs, but EUR and GBP show little improvement against the greenback. Latest Hot-Chart on EURUSD examines the potential for a protracted leg down after a breach of prior patterns. http://tinyurl.com/ybb5dfa

HIGHER LOWS & LOWER HIGHS in oil remain the prevailing pattern but oil shorts must be careful in avoiding a potential reversal after the 8-week downtrend, which proves similar to the prior 2 slides (as warned in the Nov 19 article). As long no rebound occurs above $74.50, crude may run the risk of calling $67 as the next target. We long warned used oil as the LEADING SIGNAL for the downturn in risk appetite, therefore remain alert of any stabilization that could signal a rebound of global appetite. For now, the DAILY downtrend remains intact. Stronger than expected Australian job figures and a hawkish RBNZ policy statement fuelled both currencies against the USD and JPY, but the lower highs continue to dominate, The DUBAI FALLOUT has yet to unfold as stakes are being increasingly sold by the various entities of Dubai World.

The US DOLLAR is little changed from where it stood 24-hours ago, but YEN STRENGTH extends across the board, dealing further damage to EURJPY, AUDJPY and EURJPY. The lower highs in AUDJPY and NZDJPY have formed a clear downward trend line from the Oct 23 high and daily stochastics suggest prolonged losses ahead; 78.50 and 61.45 are the looming targets for the pairs. GBP damage resulted from Chancellor Darlings 50% tax levy on bank bonuses exceeding 25,000, which goes into effect immediately. The combination of spending cuts and additional taxes hinders GBP from both a spending multiplier and business impact. EURUSD is set for its biggest weekly drop since March. Next target stands at $1.4490, followed by $1.4180, especially as gold nears our $1.070 target. RBNZ decision (20:00 GMT) widely expected to keep rates unchanged at 2.50% as the central bank vocalizes its efforts to prevent NZD weakness. EURCAD breaks below 61.8% retracement of 1.5535, risking to call up 1.54.

Gold breaks below the Dubai Low of $1,137/oz low reached on Nov 27 in reaction to the Dubai Debt news had taken place 2 days after the $1,194 record high. The fact that gold broke below $1,137 from a higher record ($1,226), could indicate a looming close below $1,090. Having broken well below $1.4770, EURUSD is now vulnerable to calling up $1.42, which could be realized on fresh revelations of selling property and equity stakes by Dubai-based entities in UK and US. The Greek sovereign debt downgrade helped accelerate selling momentum in the euro as it raises fears of similar action in Spanish and Portuguese sovereign debt after these were placed on credit watch earlier this year. The EIA crude oil inventory data could be key in oil's hold of $70.00 and USDCAD's testing of 1.07.

Both USD & JPY rally against all major currencies, with JPY OUTPEFORMING ALL CURRENCIES (USDJPY testing 88.15). GBPUSD tumbles sharply after UK Indus production & manuf output both fell by more than expected (we warned you in previous IMT). The USD recovery intensifies as EURUSD breaks well below $1.48 and USDX jumps past 76. GOLD drops $80 from its $1,225 high. We would be particularly vigilant with a close below $1,070, which would mean a 13% decline from the high. Since January, gold had never fell more than 13% from its cyclical high, thus greater scrutiny will be drawn beyond this threshold. GBPUSD testing 50% retracement at 1.6285 and could extend losses towards $1.6150 on Wednesday's anticipated UK Budget.

UK Industrial production, Bank of Canada's interest rate decision & EIA oil inventories will be the key items in todays FX trading agenda. UK Oct Indus prod (9:30 GMT) exp +0.5% from +1.6%, manuf output exp -7.2% from -9.3%. BoC announcement (14:00 GMT) exp to keep rates unchanged at 0.25% but watch out for the language on growth forecast & currency strength, which has shed more ink over the past 3 announcements. GBPUSD broke below yesterdays 1.6360 target, before recovering to 1.6480. Resistance stands at 1.6580, with downside seen starting at 1.6290, followed by 1.6150. But GBP appears technically more robust against NZD and AUD w/ more upside seen ahead. EURUSD not out of the technical woods as it remains less than half a cent away from the key $1.48 support. With EURUSD making up 57% of the USD index, $1.58 in EURUSD and 76 in USDX must be closely watched as the gateway for possible USD gains. Ashraf is on travel schedule in Asia so updates will be on less regular frequency.

ALTHOUGH BERNANKE reiterated his persistence in communicating the low inflation, low interest rate message, which is clearly USD-negative, FX traders can detect a consolidating foundation for the USD. The USD Index HAS YET TO CLOSE ABOVE THE 55-DAY MA OF 75.79, which would be the first close since April. Traders will require a daily close (preferably weekly) above 76. Technically, the RSI is now at its highest since late April, when the index reached 87. Dollar bulls continue to find hope in oils recurring failure to break above 77 (now below 74.50). The falling foundation of EURUSD and the intraday low below the vital $1.48 support of close above chart of the last12 months. Any recovery in AUDUSD & NZDUSD towards 0.9230 and 0.7220 remains could be seen as fresh selling opportunity.

Japanese equity indices among the best-performing Asian indices despite in Monday despite US indices having paired their gains in the Friday session. FX on risk aversion mode as EURUSD gets close to that important support of $1.4830, cable vulnerable to test $1.6380 and oil prominently unable to regain $76. And despite Japans success to rein in yen strength, we are seeing modest rebound in the currency, as AUDJPY, EURJPY and GBPJPY turn lowerespecially the 4-hour charts. Ashraf is on travel schedule in Asia so updates will be on less regular frequency.