Intraday Market Thoughts Archives

Japan's devastating tsunami deepens its damage after the biggest earthquake in history struck the NthEastern part of the country. Fears about the nuclear facilities have raised a state of emergency. Markets are in the red following stronger than expected US retail sales but consumer sentiment hit a 5-month low. USD eases off its highs; EURUSD and AUDUSD face their hourly trendline resistance at 1.3855 & 1.0075 repectively. Will need to see whether those key support levels will hold this week (1.3790s and 1.0020s) despite having seen lower intraday levels (but these are not as important as the daily and weekly closes as Ive stated repeatedly in these IMTs. EURGBP is nearing its 100-week MA of 0.8660s, at which point the bears come skim off the top. More on this pair in the HotChart http://bit.ly/gikAn3 SUPPORT LEVELS IN PREV IMT on GBPUSD AUDUSD remain intact as I expect deterioration in stocks in the final day of a week where the S&P500 has finally shown a sub-55dma close for 1st time since Sep.

US dollar strength spread in Asia and into Europe, dragging AUDUSD below the important Jan 11 trendline support of 1.0020s, now calling for 0.9920 prelim target, followed by 0.9870. Both GBP and EUR are hit hard vs. USD, but rising EURGBP indicates cable is the bigger loser as the sub 1.6 break paves the way towards 1.5920, followed by more important support at $1.5770s. The EU summit on expanding EFSF is due today, with Germany leading the Northern countries insistence to require stronger commitments from the peripheral countries before raising their loan guarantees. An 8.9 earthquake hit NthEastern Japan triggered major tsunami warnings into central America and Hawaii. Nikkei was down as much 5% before ending 1.7% down. EURUSD breaks below 1.3780s and is vulnerable to extended losses towards 1.3580s later in week in the event of a Friday close below 1.3770s. CANADA JOBS due at noon GMT exp +23K from +69K and unemp rate 7.7% from 7.8% allows the potential for 0.9820s in USDCAD. US retail sales due 13:30.

S&P500 Closes Below its 55-day MA for the 1st time since Sep 2010. But the DJIA has yet to close below its 55-day MA of 11,949.

STICKING w/ YESTERDAY's IMT CALLING for further gains in USDX as all the components of the index are down across the board. EURUSD stands on the 2-month trendline support of $1.38, around which swing traders could bid up the pair into 1.3830s. while euro bears could use the figure as the new focal point as USDX accumulates fresh gains into next week. Both US jobless claims and US trade balance were dismal, so USDX needs decent retail sales tomorrow to save the day, but I would think is more is needed to destabilise recently improved USD-momentum considering the Ezone doubts. THESE IMTs will be available at a cost starting from next month as they will include charts & tradable ideas. Those who followed this mornnings IMT were told of the suggestions to exploit GBP upside for fresh shorts after UK manu data ahead of BoE. The pair moved as planned, pushing towards $1.6195 before losing a 150 pips. China's 2nd trade deficit in 12 months served as an excuse to upset risk appetite despite the main reason for that being lower sales during the Chinese New Year holiday.

Just when all eyes were fixated in Portugal, Moodys downgraded Spain to Aa2 with a negative outlook, sending EURUSD towards the $1.38 trendline support. This level must be held this week (close) to avoid prolonged losses to as low as $1.3660s. EURUSD has yet to break above the 3-year trendline resistance reiterated over the past 3 weeks. THOSE WHO TRADE FX ON HIGH MARGIN have been stopped out or margined out of positions in AUDUSD, GBPUSD and EURUSD, but each of these pairs continued to respect the important resistance levels of 1.02, 1.6350s and 1.4320s respectively. AUDUSD rests on the 1.0030s support. A close AT parity would be deemed a a break of this trendline, thereby paving the way for 0.992s0. UK industrial production and manuf output both beat expectations at 4.4% and 6.8% y/y respectively, but we could well see this as an opportunity for shorts to pile in near $1.6190-1.6220s ahead of what is expected to be a no-rate hike from the BoE, with the renewed downside falling on the back of the latest bout of risk aversion. USDCHF eyes a gradual retest of 0.9380, followed by a possible 0.9460s into next week.

RBNZ Cut by 50 bps, Aussie Jobs Came in Negative & BoE Awaited for Nothing. Despite the RBNZs 50-bp cut to 2.50, NZDUSD quickly recovered from its slide to 0.7340s. The main reason NZDUSD had managed to stabilize was the pre-emptive nature of the rate cut. The RBNZ said: We expect that the current monetary policy accommodation will need to be removed once the rebuilding phase materialises. While this suggest the RBNZ is unlikely deliver further easing, it opens the way for further GDP weakness, something the cenbank alluded to prior to the earthquake. Weekly NZD stochastics appear oversold at this point, so traders can expect corrective moves to as high as 0.7440s before retesting 0.73.NZDCAD remains a favourite short after the Feb 2009 trendine support was broken at 0.7370s, now eyeing a prelim target of 0.6960s. NO BoE RATE HIKE EXPECTED on Thursday, but market is split between the tightening occurring in April and May. A surprise rate hike is highly likely drive cable towards $1.6300s but UNLIKELY to see the close above the oft-mentioned unclear $1.6350-70 trendline resistance, which every serious trader must be aware of in this important currency pair. ALSO WATCH OUT FOR UK MANUF OUTPUT at 9:30 am GMT, usually a market- mover (see calendar for expectations http://bit.ly/5pdFAN ) More on the tactical options on EUR vs GBP and ECB vs BoE in the HotChart http://bit.ly/gikAn3 US Weekly Jobless Claims have been increasingly attributed to major USD Thursday moves, so those are worth a look EUs vote on EFSF build-up and US retail sales are both on Friday. SEE PREV IMTs for those levels in EURUSD, AUDUSD and NZDCAD.

NZD and GBP countdown into their respective interest rate decisions (RBNZ Wednesday at 20:00 GMT, BoE Thursday noon GMT). Consensus expects RBNZ to cut by 25-bps to 2.75% but there is talk of a possible 50-bp rate cut. Notably, NZD outperformed AUD and most other currencies on Tuesday when the USD rallied across the board. Potential hedging plays may be considered w/ short NZDUSD and short AUDNZD ahead of the RBNZ, exploiting AUDs ongoing weakness and muted rebound. ------ GBPUSD TRADERS RECALL my repetitive calls on the importance of the $1.6360-70 trendline resistance (from Nov 2007 high), which held last week in the face of attempted bullish assault. The suibsequent decline towards 1.6130s may well play again when (if) the BoE holds rates steady tomorrow. In teh meantime, 1.6260s resistance is seen intact---------- EURGBP REMAINS well under the 2 year and 10-month trendlines as shown in the latest hotchart, while more interestingly, the price is under those trendlines as well as the 100-week MA of 0.8623, See HotChart for more detail http://bit.ly/fW8qGj

USD seeks to add more upside in the 2 weeks to come. FX markets maintained USD well bid despite a rebound in equities, adding further (desperately needed) support for the USD index, which translated into EURUSD falling below 1.39, GBPUSD below 1.6170 and USDJPY testing 82.90s. ----- Expectations of an ECB hike failed to boost EUR after Standard and Poor's ratings report warned of further downgrades in Eurozone peripheral nations and told MNI that a Greek default come in between 30-50%, so a haircut of more than 50%. EUR bulls may rest comfortably unless a break below 1.38 trendline materializes. ------ AUDUSD requires a close below 1.0015-20 to extend losses towards the next target of 0.9950s. Aussie jobs tomorrow night, BoE decision on Thursday and US retail sales on Friday will help deterlimne these key levels. LATEST HOT CHART ON EURGBP here : http://bit.ly/gikAn3

The latest HotChart is finally up, this time revisiting that EURGBP pattern. Click here for more detail http://bit.ly/gikAn3 AUDUSD extends sell-off below 1.07, now eyeing next prelim target at 1.0010. GBPUSD adds to selling but traders ought to watch out for those typical 70-80 pip rebounds off the highs, especially ahead of Thursdays BoE meeting.

Markets debate on whether OPEC will raise output to stem oil prices (partial OPEC hike more likely), politicians debate on whether the UN should draft a resolution to remove Qaddafi by force (unlikely), while FX markets debate whether the ECB will raise rates next month. ----------- The positive euro impact of higher oil must not be underestimated as players may tend to place too much emphasis on the ECB. One aspect the ECB will pay attention to is whether the Bank of England will raise rates this week (unlikely) as UK inflation nearly double that of Eurozone. The the ECB has NEVER delivered a one-and-done rate hike since its creation, could we expect it to make an exception this time and raise rates to 1.25% and staying put for the rest of the year. ------------ Those who argue the ECB must do more than one rate hike ought to take into consideration the latest downgrades of Spain and Fitch as well as the possibility of a Portuguese bailout as Portuguese 10-year bond yields stand above 7% for the 22nd straight day (an occurrence which triggered the bailout of Greece and Ireland). ---------------- With the longer-term trendine resistance at $1.4320s, EUR has more upside against USD as well as AUD (1.41) and NZD (1.93). This is NOT to say that $1.4320 is a done-deal, but the oil and ECB factors provide room for EURUSD to test $1.4140s in the interim well ahead of next months ECB meeting. AUDUSD trades the range at 1.0190-1.01, with possibility of seeing 1.0070 ahead of Aussie jobs.

The Reserve Bank of New Zealand and Bank of England are both set to decide on interest rates this week, with the former widely expected to cut by 25-bps to 2.75% on Wednesday and the latter seen holding steady at 0.50%. Despite the full market pricing of the RBNZ rate cut, NZD could lose more ground in the event that risk appetite falls on the defensive later in the week. NZDUS continues to struggle holding above the 200-day MA as mentioned in Wednesdays Charts Video for Thomson Reuters http://bit.ly/gaSp50 , therefore we need to see a close below 0.7360 for a confirmed bearish close towards 0.7270s. And with the strong possibility that the BoE will keep rates unchanged on Thursday, we could see GBPUSD displaying renewed selling at the $1.6330s back onto $1.6250s. AUDUSD 4 hour techs ongoing failure to regain 1.02 continue to show a repetitive pullback towards 1.01 but support remains at 1.0050s. Aussie jobs report later this week will be key in influencing Aussie techs to test the intermediate lows.