Intraday Market Thoughts Archives

The duration of the current equity rally has now lasted 6 months (from 1st week of March to second week of September), which is about 3 times the duration of all bear market rallies and downlegs since 2008. The massive fiscal and policy stimuli from the US authorities as well as the partial nationalization of most big banks contributed in making this the longest bear market rally since 1930s. Todays $3.00 sell-off in oil prices despite lofty gold prices highlights the USD-nature of the lingering risk appetite. Todays article highlights the disparity between the USD and JPY, suggesting that the equities advance is well into gravity-defying territory.

Oil breaks above the interim resistance of $72.40, adding robustness to the weekly chart, which would pave the way for $73.50 as the next barrier. The 200-week moving average stands at 74.76 and has yet to be broken since October 2008. Conversely, the VIX drops could retest its own 200-week MA, currently at 23.17, a trend not broken since June 2007. USDCAD is vulnerable to 1.0715-20, while CADJPY eyes 83.80.

The dollar damage intensifies as EURUSD hits fresh high for the year at the $14627 resistance, GBPUSD knives through the $1.66 resistance onto $1.6742, calling $1.6842 into focus. The Nikkei fell 69 pts to 10,444, while the Shanghai Composite gained 64 pts to 2,989, still failing to regain the 3,000 level. DOLLAR WEAKNESS is occurring simultaneously along with YEN STRENGTH, which is an unusual pattern when markets are on the rise. This suggests that dollar weakness is NOT necessarily a reflection of improved risk appetite but secular damage in the greenback. And the fact that oil prices continue to fail at the 72.40 resistance and are lagging gold and other commodities, suggests caution with overinterpreting dollar weakness to be a result of improved risk appetite.

Watch Ashraf's VIDEO PRESENTATION on CANTOS Chart of the Week warning on the monthly reversal on the Shanghai Composite, USDJPY and EURGBP http://bit.ly/rOK7E

STERLING's ROUTE-66 could be a thing of the past as GBPUSD regains ground above $1.66 following the BoE decision to opt for the status quo (rates & QE scale unchanged). Traders must watch carefully whether the rally to $.16659 is another short-lived development as the currency could remain vulnerable to the combination of QE, deteriorating fiscal affairs and a cloudy outlook for equities. Only a DAILY CLOSE above $1.6625-30 in cable would force us to alter our view about this patern. The Bank of Canada of made reference to persistent strength in the Canadian dollar remained a risk to the economic recovery, while reiterating that CPI would trough in Q3. EURUSD and AUDUSD struggle at $1.46 and 0.86 respectively.

The unexpected 27K decline in Australian August payrolls is the third negative data surprise in 2 days, following declines in retail sales and home lending. The data dampen premature speculation of an RBA hike to occur as early as next month. Aussie is off its 0.8638 high as are all the currencies against the USD. We stick with our interim 1.09 target on USDCAD ahead of the BoC rate announcement due at 13:00 GMT. Oil continues to fail at the 72.40 resistance, but a breach above it remains limited at 73.20. Todays EIA inventory data (instead of usual Wednesdays) expected to show a drop of 1.5-1.8 million barrels in crude oil. BoE announcement due at 11:00 GMT (12:00 BST). Downside risks loom large for AUD and CAD.

Sterling weakness persists across the board on fears that the BoE tomorrow could move towards negative interest rates on bank reserves and/or requiring banks into holding higher levels of short-dated gilts, thus pressuring yields into negative territory. The main issue has been for the BOE to force banks into lending their reserves or buying assets, as opposed to hoarding them. GBPUSD once again fails to breach above $1.66 and settles at 1.6540s in NY lunch. EURUSD unable to close above $1.46 and the $1.4627 resistance--61.8% retracement of the move from the 1.6050 high to the 1.2327 low.

Four consecutive daily gains in US stocks adding to the broad US dollar damage as EURUSD eyes the $1.4627 resistance and AUDUSD regains 0.86 despite disappointing Aussie retail sales and home lending. Participants must be cautious from fundamentally weak currencies, which are gaining vs USD, such as GBP and CAD. GBPUSD continues to fail in breaking above $1.66 (as signalled in our weekly article below), while EURGBP hits 2 months high at 0.88, aiming for 0.8990. Further losses in USDCAD remain a USD story but todays low remains well above yesterdays 1.0677. Expect 1.09 before weeks'end.

Ashraf's interview earlier today explaining the rally in gold and distinguishing inflationary from deflationary forces.

http://watch.bnn.ca/#clip210903

And Ashraf on Bloomberg earlier today event:http://bit.ly/322Gpa

Ashrafs interview earlier on Bloomberg TV on the dollar selloff and gold

USD http://bit.ly/322Gpa The broadening decline in the US dollar has helped gold regain $1,000 and oil above $70, which printed $1.45 in EURUSD. Re-merging structural concerns with the US budget deficit are at the forefront of the FX price action. Higher than expected UK manufacturing data helped boost GBP above $1.6550. EURUSD hit a NEW HIGH for the year at $1.45 largely as an anti-USD play, facing next key resistance at $1.4609--61.8% retracement. Despite the gold's rally, we're expecting a failure of the current rally at 1,035-40 before an eventual retreat towards 960s. Projections for $1,200 are for later in Q4 and beyond.

W'ere back from vacation that was not market-free. Sterling was not freed of the negative newsflow surrounding the possibility of negative interest rates aimed forcing UK banks to lend money rather than hoarding it. Theres even talk of an additional 25 bln in quantitative easing once the current $50 bln ius used up. Failing to decisively close above $1.64 on Friday was a clear sell sign, and now were heading towards a retest $1.62. USDJPY showed no convincing break above 93 and remains vulnerable to 92.30s. Aussies break 100 pts above the key 0.8470s resistance may have been helped by rallying gold prices and ongoing market expectations that the RBA would be among the first to tighten. While the technical is a vital developments, risk aversion has shown it takes no prisoners in overwhelming high yielding currencies. Ashraf will be guest hosting CNBC Squawk Box this morning from 515am-6am GMT (115am-2 am EDT) and on Bloomberg TV discussing FX & commodities at 10:36 am GMT (6:36 am EDT)