Intraday Market Thoughts Archives

Ashraf's take for Reuters Insider on JP Morgan's $2 bn trading loss, Spanish bank recapitalization, EURUSD levels and latest gold selling http://link.reuters.com/jap28s

Signals that political leaders in Greece may be able to avoid an election buffered sentiment on Thursday but overall move were small. On the day, AUD was the best performer while JPY lagged but a portion of those moves were unwound in US trading. The focus shifts to China where key economic data including CPI, retail sales and industrial production will be unveiled. Today's Intermarket Insights charts Euro bottoms and Daily/Weekly/Monthly charts on AUDUSD. More details see below.

The euro hit a session high of 1.2979 early in US trading after the Greek Democratic Left said he had a proposal for a unity government. Risk assets were also boosted by comments from Samaras suggesting he wants to avoid another vote.

If that vote comes, the polls continue to show staunch anti-austerity party Syriza gaining ground. They are polling at 23.8% -- 7 points higher than in the election.

US news was neutral. US initial jobless claims were virtually in-line with estimates at 367K vs the 368K consensus. Bernanke spoke to an audience in Chicago and said that credit remained tight but did not comment on the broader economy. First quarter US GDP estimates were trimmed after an unexpectedly large trade deficit.

Spain continues to struggle with 5-year CDS hitting a record high. An FT report said the European Commission will give Spain more time to meet deficit targets if it agrees to certain provisions.

Some fireworks hit the US banking sector late in the session as JPMorgan revealed that a position in the corporate CDS tracking index will cost the bank $2 billion. Risk trades declined and traders shuddered when CEO Jamie Dimon uttered synthetic credit portfolio losses.

The Chinese data begins at 0130 GMT with April CPI figures. The consensus is for a slowdown to 3.4% y/y from 3.6%. At the same time the producer price index is expected to fall 0.5% y/y.

The second round of Chinese data comes at 0530 GMT with industrial production expected up 12.2% y/y and retail sales expected up 15.1% y/y.

The lead focus will be on CPI because it will largely determine if China can lower interest rates. The secondary focus will be on industrial production. The market has probably built in slightly lower expectations about production due to soft import data a day ago.

Thursdays Intermarket Insights include trades on EURUSD, AUDUSD, USDCAD and gold. Direct access click here: http://ashraflaidi.com/products/sub01/access/?a=634 Non subscribers click here: http://ashraflaidi.com/products/sub01/

Euros familiar trend of bottoming in the middle of the month suggests that the bottom may not be put until mid-next week, but the lows are seen relatively limited. Meanwhile, Aussie requires a triple chart look to reconcile for the latest moves. Todays Intermarket Insights charts Euro bottoms and Daily/Weekly/Monthly charts on AUDUSD. Direct access click here: http://ashraflaidi.com/products/sub01/access/?a=634 Non subscribers click here: http://ashraflaidi.com/products/sub01/

Ashraf discusses the ongoing clash between austerity & growth in the Eurozone and its impact on sovereign yields and the euro. He also talks techs in yen and the various commodity currencies. English synopsis is found below the actual clip. http://youtu.be/e7pdNwC6bNY

Ashraf explains in these 2 videos (March London Expo) his favourite commodity currency and why: http://www.moneyshow.com/video/video.asp?wid=8317&t=3&scode=027664

and on the rekation between USD & equities http://www.moneyshow.com/video/video.asp?wid=8316&t=3&scode=027664

Spain nationalized Bankia and plans further measures to restore credit on Friday but Spanish CDS hit a record on Wednesday. The yen was the top performer while the Australian dollar lagged in a volatile day of trading. Australian employment is the highlight of the Asia-Pacific session. The latest on Tuesdays Premium Intermarket Trades is seen below.

Spain took a 45% share of Bankia ahead of a package of bank reforms to be announced Friday that officials hope will end the credit crunch. Adding to the worries was a report from the European Commission that said Spain will have a 6% deficit compared to the 5.3% deficit-to-GDP expected.

Spains main stock index closed below the US crisis levels for the first time since 2003.

On the other side of Europe, Greeces Syriza party announce that it is unable to form a government, leaving little doubt that a second election will take place in June. The first post-election poll show Syriza and leader Tsipras surging to the lead with 25% of voters. A win by the anti-austerity party would significantly increase the chances of Greece leaving the Eurozone.

The euro fell to 1.2910 in early European trading but later bounced back to 1.2950. Overall, however, the news is grim for the region and that will continue to weigh on the euro.

The US stock market fell hard in early trading but once again trimmed losses to a minimum, closing down 0.7%. Fed members Kocherlakota and Pianalto did not signal any changes in policy and Bernanke is unlikely to roil markets Thursday when he speaks via satellite to an audience in Chicago.

The main event of the upcoming session is April Australian employment at 0130 GMT. The economy is expected to shed 5K jobs and the unemployment rate expected to tick up to 5.3% from 5.2%. The Aussie fell as low as 1.0021 on Wednesday and it would likely take a miss of more than 5K jobs to send it below parity.

The latest on Tuesdays Premium Intermarket Trades is seen below. All targets hit in EURUSD, gold and AUDUSD shorts, while stopped out in USDCAD shorts. For the rest on gold and AUDCAD, get direct access to those trades here: http://ashraflaidi.com/products/sub01/access/?a=633

-AB

The leader of Greeces second party stepped up his anti-austerity rhetoric, say Greece should put a moratorium on all debt payments. The euro fell below 1.30 but rebounded on signs of compromise from conservative leader Samaras. No upper-tier economic releases are scheduled for the Asia-Pacific session. Tuesday's Premium Insights are found here: http://ashraflaidi.com/products/sub01/access/?a=633

The leader of the breakthough party in the Greek elections Alexis Tsipras continues to sound more like a zealot than a deal broker. He sent the euro below 1.30 on Tuesday after he said the election results make the Troika bailout accord null and void.

The euro rebounded after conservative leader Samaras said he is willing to tolerate a minority government and does not want new elections. The euro rebounded to nearly 1.3050 in the aftermath of his comments.

The European Union has responded to the Greek electoral uncertainty by scheduling a summit on May 16, the same day a new Greek election could be called.

Overlooked in the focus on Greece was a troubling statement from Spanish PM Rajoy. He said the Spanish Treasury is practically the only entity in the country that can finance itself on the market with funding channels closed for the rest of the economy. At this point, a Lehman moment in Spain appears closer than ever.

Risk trades fell hard at the end of European trading with the S&P 500 falling as much as 1.65% and commodity currencies struggling but those trades later rebounded with stocks closing down just 0.4%.

-AB

Last Tuesdays short bias in EURUSD was not filled but the expectations that the 4-week trend line would be broken did materialize. For the 3rd time in 2 months, the pair broke a 4-week trendline support yet did not close below 1.30. Will it be different this time? Find out in our latest Premium Intermarket Insights. For direct access, please click here:

http://ashraflaidi.com/products/sub01/access/?a=633 Non subscribers, can click here: http://ashraflaidi.com/products/sub01/

Greeces leading party gave up efforts to form a coalition government, raising the risk that voters will be sent back to the polls. Markets were quiet in US trading but on the day the Canadian dollar led and the euro lagged. Australian trade data is the lone indicator on the Asia-Pac calendar but Swan also delivers the countrys budget.

Leading Greek vote-getter New Democracy had two days to put together a coalition but gave up in less than 12 hours after meeting opposition politicians. The next attempt falls to anti-Troika party Syriza. A senior party official from New Democracy said a deal is unlikely. In the event that no government can be formed an election will be called for June 10 or June 17.

The euro found some support on a report that Greece has enough money to last through July, not June as was rumored. The bulk of the euro rebound to 1.3050 was based on speculation Spain could announce a bad bank plan on Friday. The government said it will announce a decree but there is no confirmation nor details on the cost.

US news was light but consumer credit rose to a 10-year high in April, suggesting some credit-fuelled spending in the near term.

The market is squarely focused on the euro as it attempts to close the Sunday gap. EUR/GBP meanwhile closed below the 2010 low and could be primed for further declines.

Economic data is light in Asia-Pacific trading. At 23:01 GMT, comes the UK shop price index with an inflation rate of 1.6% expected. Comments from the Feds Lacker will be delivered shortly afterwards. Local markets will eye Australian trade balance at 0130 GMT. The March deficit is expected at A$1.3 billion compared to A$480 million in February. At 0930, Treasurer Swan delivers a budget that is expected to bring the country back to surplus.

-AB