Intraday Market Thoughts Archives

Unlike gold, silver continues to remain supported above its 4-year trendine, which it has probed for the past 3 weeks. yET, gold remains above its 100-week MA since December 2008, while silver has broken below its own 100-WMA. See our latest Hot-Chart on silver http://ashraflaidi.com/hot-chart/?a=3426

Chinese GDP in line with expectations; Troika's patience with Greece; Swiss PPI declined; Italian auction. US PPI surprise son the upside; UoM consumer sentiment is next. Thursdays Premium Insights have now been fully updated. See details below.

The greenback trades in a narrow range off its previous highs. European equities are gaining about 0.75% and commodity dollars are the relative strength winners in the ongoing session.

Risk trades started to recover even before the release of Chinese GDP that showed 7.6% growth in Q2 compared to 8.1% in Q1 y/y. AUD pushed higher along with NZD after the figures as rumors were circulating ahead of the releases of a 7% print. Nevertheless, this is still the weakest growth in three years. AUDUSD that responds to Chinese data the most trades near session highs around 1.0180.

"The patience of the Troika might be at its end" said German's finance minister after reports showed that Greece performed only a fraction of reforms that it agreed to, MNI reports. EURUSD ignored the comments and continues to trade around the 1.22 figure.

European data was limited to Swiss producer and import prices that declined in June 0.3% m/m and 2.2% y/y and to UK construction output that fell 6.3% y/y.

Italian 10 year yield declined from 6.07% to 5.92% after Italy reached a full take up as it sold EUR 3.5 bln of 2015 BTPs. The average yield declined to 4.65% from previous 5.30% and cover improved to 1.73 from 1.59. This was a solid result considering that last night Moody's downgraded Italy by two notches to Baa2 with negative outlook.

June PPI edged up 0.1%, surprising forecasts of a 0.5% decline, following a 1.0% decrease in May. PI ex food & energy rose 0.2% in line with expectations and the prior reading.

UoM consumer sentiment is due at 9:55 am and it is anticipated to rise marginally in July to 73.5 from previous 73.2. The market could also react to Atlanta FED president and FOMC member Dennis Lockhart's speech on the economy that starts at 1:20 pm.

EURJPY, GBPUSD , Silver, gold and oil were added to Thursdays Premium Insights For DIRECT ACCESS to these Premium Insights, click here: http://ashraflaidi.com/products/sub01/access/?a=665 Non Subscribers can please click here: http://ashraflaidi.com/products/sub01/

The euro rebounded after falling as low as 1.2166 but sharp selloff in the Australian dollar was the big story on Thursday. The yen as the top performer. The focus will remain on AUD ahead of key releases on Chinese GDP, industrial production and retail sales. Thursdays Premium Intermarket Insights are out, starting with EURUSD.

Euro slumped in Europe but began to recover in US trading, climbing back above 1.22. The low of the day came just ahead of initial jobless claims. The 350K reading was much better than 372K expected but the Labor Department cautioned that auto plant retooling likely skewed the numbers. The mid-week July 4th holiday may have been another distorting factor.

Some good news also helped the euro as Spain announced an emergency lending facility for regions and relaxed regional deficit targets. Comments from Spains finance minister also suggested that junior bank bondholders may not need to take a haircut contrary to reports from yesterday.

Draghi said voiced a neutral bias while the ECBs Knot said there is no technical reason the ECB cant lower rates further.

Late in the session, dovish comments from the Feds Williams also weighed on the dollar.

Commodity currencies were a main focus of the session as the soft Australian jobs report spilled AUD/USD to 1.01 from has high as 1.0280 yesterday. EUR/CAD fell to a record low. As techs and black box trades sold the break, USD/CAD came under pressure.

The focus on commodity FX will continue in Asia with Chinese GDP set to be released at 0200 GMT. The economist consensus is 7.7-7.6% but the market is expecting likely priced for 7.5% due to the rate cut and soft import/export figures earlier this week. There are rumors of a number closer to 7.0%.

At the same time, June industrial production is expected to rise 9.8% y/y with retain sales expected 13.4% higher.

Disappointing numbers will weight most heavily on AUD but will spill over to CAD and other risk trades as well. If GDP can meet the consensus, there is potential for a rebound in risk trades.

The Premium Insights anticipated EURUSD to deliver a few more false rebounds before charting a gradual descent on its sub-1.20 path. The pair retested the $1.27 figure only once since its close below $1.25 in late May. Now that EURUSD has hit fresh 2-year lows at $1.2167 and the US dollar index hit new 2-year highs at 83.61, the broadening case for a higher greenback is more apparent. For DIRECT ACCESS to these Premium Insights, click here: http://ashraflaidi.com/products/sub01/access/?a=665 Non Subscribers can please click here: http://ashraflaidi.com/products/sub01/

-AB

The core of the EURUSD losses over the past 24 hours has been attributed to something we long warned about -- The realization that Operation Twist from the Fed will not be sufficient in overturning negative market eroding sentiment suffering from the negative macro figures, without the coordinated help of liquidity operations from the ECB and Japan. This was the message from Wednesday's release of the FOMC minutes. Three weeks ago, we anticipated EURUSD to deliver a few more false rebounds before charting a gradual descent on its sub-1.20 path. The pair retested the $1.27 figure only once since its close below $1.25 in late May. Now that EURUSD has hit fresh 2-year lows at $1.2167 and the US dollar index hit new 2-year highs at 83.61, the broadening case for a higher greenback is more apparent. For DIRECT ACCESS to these Premium Insights, click here: http://ashraflaidi.com/products/sub01/access/?a=665 Non Subscribers can please click here: http://ashraflaidi.com/products/sub01/

Ashraf's appearance co-hosting of CNBC's Squawk Box, discussing:

European reforms; EURUSD valuation; Quantitative Easing vs Optn Twist;bunds; LIBOR & TED spread & more. http://youtu.be/ar2m96XfKf4

AUD weakens on disappointing labor market data; no changes from BOJ; Eurozone industrial production rose mixed; Italian auction. Focus turns to jobless claims, budget deficit and Canadian NHPI. All EURUSD & EURJPY shorts from Friday hit their targets. A new set of Premium Insights is due today.

The USD rally continued throughout the Asian and London sessions on the back of FOMC minutes that showed that the commission was not ready for further easing. European equities are losing about 1% and JPY with USD lead while AUD and NZD lag. EURUSD fell to 1.2186 which pushed USD Index to fresh two year highs.

The AUD weakened during the Asian session after the Australian labor market data fell short of expectations. The employment declined 27K in June while May's result was revised lower to 27.8K from initial 38.9K and the unemployment rate ticked up to 5.2% from previous 5.1%. AUDUSD trades near session lows around 1.0120.

The BOJ kept the overnight call rate steady between 0% and 0.1% and did not announce any new easing. The central bank only decided to change the size of selected funds such that the net effect would be no change in the total size of the asset purchase program. JPY initially weakened across the board but quickly recovered lost ground and currently trades higher across the board. Large moves were especially seen against the AUD and EUR while USDJPY lost only about 50 points and trades around 79.35.

On the data front, Eurozone industrial production rebounded in May 0.6% from -1.1% m/m but posted further decline 2.8% from 2.4% y/y.

Italy reached a full take up as it sold 12 month BOT totaling EUR 7.5 bln. The average yield fell considerably to 2.697% from previous 3.972% but cover declined to 1.55 from 1.73. Italian senate approved fiscal compact and the measure has to be ratified by the lower house.

The NY session starts at 8:30 am ET with jobless claims that are anticipated to rise marginally this week to 376K from previous 374K. Federal budget deficit is due at 2:00 pm and it is expected to narrow in June to USD 91.7 bln from 124.6 bln.

New housing price index from Canada is due at 8:30 am and it is seen steady in May at 0.2% m/m but lower at 2.3% from 2.5% y/y.

All EURJPY and EURUSD shorts from Friday hit targets. USDCAD , GBPUSD and AUDUSD were all stopped out, leaving USDJPY long in progress as the pair nears our target. A new set of Premium Insights will be released today. Click here for direct access http://ashraflaidi.com/products/sub01/access/ ?a=664

What happens when US imports & exports fall below their 3-month moving average? A stabilizing US trade deficit in May to $48.7 bn from $50.6 bn is always good news, but when both imports and exports show signs of a flattening (see chart in the link below), making the connection to world growth becomes inevitable. Extending the analysis to commodities and equities, we note a close relationship between the rate of trade growth and equities. See full article here. http://www.cityindex.co.uk/market-analysis/ashraf-laidi-blog.aspx

Ashraf

Flows dominated in another choppy day of trading but the euro put in fresh two-year lows. On the day, the yen was the laggard while the Australian dollar led. The Australian employment report is the highlight of Asia-Pacific trading.

The euro fell as low as 1.2212 after a round of dollar-buying following the minutes of the June 20 FOMC meeting. The minutes were entirely negative on the outlook for the US economy and downcast on Europe and China as well but there was no hint of immediate QE and the market took that as a green light to buy dollars.

EUR/USD immediately fell a half-cent and risk trades initially suffered. The pound was especially weak in US trading, falling below 1.5500 from 1.5575 near the European close.

Additional volatility was injected by record demand at a 10-year US debt auction. The Treasury sold the notes at 1.46% compared to the 1.52% the market was expecting an enormous miss in auction terms. Ten-year yields fell near a record low, pulling down USD/JPY, then rebounded on speculation that Chinese/Japanese demand was responsible not investors fearing economic weakness.

Otherwise, newsflow was light with no developments in Europe even as periphery yields eased lower.

At 0130 GMT, Australia will release the June employment report. Zero job growth is expected and the unemployment rate is forecast to tick up to 5.2% from 5.1%. As always, the part time/full time breakdown will be an important secondary factor.

of EURJPY and EURUSD shorts hit all targets, remaining 1 for each in progress, gold short hit all targets, USDCAD , GBPUSD and AUDUSD were all stopped out, leaving USDJPY long in progress as the pair nears our target ahead of the BoJ decision and lingering uncertainty in the Japanese ruling party. A new set of Premium Insights will be released tomorrow. Click here for direct access http://ashraflaidi.com/products/sub01/access/?a=664

-AB

Spanish PM announces EUR 65 bln in budget cuts ; German CPI as estimated; French budget deficit narrower; German auction. Focus turns to US and Canadian trade balance figures and later in the session to FOMC minutes. Ashraf reminds us that 1 year ago exactly today as Italian banks were damaging global markets, Italian 10-year yields were exactly where they are now today at 5.9%. . 2 LTROs and 1 Italian government later no change in yields. But EURUSD is 13% lower from where it was on Jul 12, 2011. Central banks can do the trick with yields, but no longer efficient in FX. More on those Premium Insights below.

The greenback is weaker across the board in the ongoing session. European equities are trading mixed within -0.4% and +0.15% and the relative strength winners are NZD and AUD.

Spanish 10 year yield declined to 6.69% after Spanish PM Rajoy announced new spending cuts and taxes (VAT will increase from 18% to 21% next month) aimed at narrowing the budget deficit by EUR 65 bln by 2014. The announcement comes one day after the EU agreed to give Spain one extra year, till 2014, to bring its deficit to 3% of GDP.

The news of the Spanish austerity comes on the same day as the ILO warns that 4.5 mn jobs could be in jeopardy in the EU if austerity measures were not complimented by labor market reforms.

European data calendar was limited to German June CPI that was confirmed at -0.1% m/m and at 2.0% y/y in line with initial estimates and French current account deficit that narrowed to EUR 4.1 bln in May from previous EUR 4.4 bln.

German 10 year bond auction resulted in a record low yield 1.31% from previous 1.52% while cover improved to 1.5 from 1.4. EUR 4.15 bln was allotted.

The US session starts at 8:30 am ET with trade deficit that is expected to narrow to USD 48.5 bln in May from April's USD 50.1 bln followed by wholesale inventories at 10:00 am that are seen at 0.4% from previous 0.6%.

The FED will release the FOMC minutes from the June 19-20 meeting at 2:00 pm. The commission decided to extend the Operation Twist to the end of the year so market participants will look for hints of the possibility of further QE after the Operation Twist is completed. Considering the disappointing manufacturing and NFP reports, the minutes could be perceived a bit outdated.

Canadian data is limited to May trade deficit at 8:30 am ET that is expected to widen marginally to CAD -0.5 bln from previous CAD -0.4 bln.

1 of 2 EURJPY shorts hit all targets, both AUDUSD shorts were stopped out as did GBPUSD. Gold short hit all targets. USDJPY and EURUSD remain in progress. Click here for direct access http://ashraflaidi.com/products/sub01/access/?a=664

The euro fell to a fresh two-year low on Tuesday after the German constitutional court hinted at a possible delay in a decision on the ESM. The yen was the top performer while the euro lagged. Second-tier data fills the Asia-Pacific calendar. Premium shorts in EURUSD & EURJPY nearing their targets. Gold hit final 1575 target. Ashraf will host CNBC Squawk Box on Wednesday at 6:20 am BST.

The German constitutional court was cryptic and indecisive as it questioned top lawmakers and the head o the Bundesbank. The court asked Weidmann if a delay of 2-3 months on a decision would disrupt markets, raising fears that it will be a lengthy process.

It is possible that a decision will come in weeks and a temporary decision could come even sooner but the market is having a difficult time evaluating the merits of anti-ESM claims.

Overall, the German delay is not a major setback but market was certainly eager to sell euros. Shortly after the open of US trading, EUR/USD slumped to the Monday low of 1.2262. After a short-lived bounce, the pair fell as low as 1.2236.

In the crossfire, EUR/AUD broke below 1.20 for the first time and EUR/GBP hit a long-term low.

Other data was mixed. The IMF forecast a larger Italian deficit but Italys finance ministry cancelled a planned mid-August bond auction saying revenues were higher than expected.

The pound also slumped after the BOEs King said the expected recovery is not materializing. NIESR also said the economy contracted at a 0.2% pace in the quarter ending in June.

At 2350 GMT, Japan releases the May tertiary industry index. Expectations are for a 0.2% after the 0.3% fall in April. At the same time, the June CGPI is expected to fall 1.0% y/y on lower resource prices.

At 0030, the focus shifts to Australia for Westpac July consumer confidence. Previously, the index stood at 95.6. An hour later, May Australian home loans are expected to rise 0.8% m/m.

Comments from the RBAs Lowe are expected at 2300 GMT.

Our Premium shorts in EURUSD and EURJPY are nearing their 4 targets, ditto for AUDUSD. Rest of trades are on GBPUSD, 1 existing on USDJPY and USDCAD. Gold hit target. Direct access to those trades and latest charts is found here: http://ashraflaidi.com/products/sub01/access/?a=664 Non Subscribers can join here: http://ashraflaidi.com/products/sub01

Ashraf tells AlArabiya that Spains ability to secure a one-year extension of its deadline to attain a 3.0% debt/GDP target and to obtain 30bn from the 100bn bailout is a sufficiently good reason for Spanish and Italian 10-year yields to post their biggest one-day decline in eight days. See more in synopsis here: http://youtu.be/kqN7FfkomqY

Periphery yields decline; UK industrial production above expectations & trade gap narrows by more than expected; German constitutional court decides on ESM case. Commodity Currencies pushing higher. US session brings Canadian housing starts and IBD/TIPP economic optimism index. Detail on the latest Premium Insights are below.

JPY remains the best performing G10 currency so far this month, but today, the strength is dominated by commodity currencies, led by SEK, AUD, NZD and CAD. Year-to-Date, NZD is the best performer, followed by CAD, AUD and GBP.

Market sentiment improved during the London session after periphery yields and spreads declined below key levels. The Italian 10 year broke back below 6% and Spanish counterpart below 7%. Risk was also boosted by UK manufacturing and industrial data that bested expectations. UK manufacturing production rose sharply in May 1.2% from previous -0.8% m/m (-1.7% from -1.5% y/y) while industrial production rose 1.0% from -0.4% m/m (-1.6% from -2.0% y/y). Trade deficit narrowed to GBP 8.4 bln from April's GBP -10.1 bln.

Gauging the strength of industrial production is difficult though as May had one additional working day because a bank holiday was moved from May to June. Next month could see a sharp fall as June lost two working days due to the Jubilee celebrations. Data for June will be published on August 9th. GBPUSD rose after the release from 1.5500 to 1.5540.

Other data showed that French industrial and manufacturing production declined both on monthly and yearly basis while Italian industrial production improved. Unconfirmed reports also suggest that the next tranche of the Greek aid could be delayed to mid September.

The German Constitutional Court is scheduled to publish its verdict on the case against the ESM and fiscal compact. An approval is necessary before the president can sign it into a law so it can become operational. The latest headlines suggest that the decision could be delayed.

The US session starts at 8:15 am ET with Canadian housing starts that are expected to decline in June to 203K from previous 211K followed by NIESR estimate of UK June GDP at 10:00 am.

The US data is limited to the IBD/TIPP economic optimism index that is also due at 10:00 am and it is seen marginally higher at 46.9 in July from June's 46.7.

2 new trades on EURUSD, 2 new trades on EURJPY, 2 new trades on AUDUSD, 1 new on GBPUSD, 1 new on gold and 1 existing on USDJPY and USDCAD. Direct access to those trades and latest charts is found here: http://ashraflaidi.com/products/sub01/access/?a=664 Non Subscribers can join here: http://ashraflaidi.com/products/sub01

Ashraf's take on Spain and the euro to Reuters Today after Madrid secures 30 bn from the 100 bn bailout plan agreed upon last month. Click here to watch/listen http://reut.rs/OUshmO

ECB President Mario Draghi raised the possibility of more interest rate cuts, saying that the data will decided if lower rates are needed. The pound led while the antipodean currencies lagged in a quiet start to the week. Details on Fridays Premium Insights found below.

Draghi did not hint at any imminent cut but his comments show that the 0.50% and 0% deposit rate may not be the lower bound. He also reiterated many of his comments from the ECB press conference, emphasizing that some downside risks had materialized.

The Eurogroup meeting in Brussels is focused on Spain with bailout requirements likely to be stretched out for another year. Cyprus is also on the agenda and musings about the summits later in July could move the market.

The euro was steady on Monday, edging to 1.3220 from 1.2300 at the beginning of US trading. The S&P 500 was quiet, slipping 0.2% to 1352.

Oil was a mover, gaining more than $2 to $86/barrel on talk of Chinese stimulus and rumors that China will cut retail fuel prices on Wednesday. Talk of QE3 also helped after the Fed’s Williams said officials have fallen well short of their employment mandate and that he would prefer bond and MBS buying if needed.

The lone indicator of note on the calendar is the Australian NAB business confidence indicator for June at 0130 GMT. The prior reading was -4.

LATEST PREMIUM INSIGHTS from Friday include 2 new trades on EURUSD, 2 new trades on EURJPY, 2 new trades on AUDUSD, 1 new on GBPUSD, 1 new on gold and 1 existing on USDJPY and USDCAD. Direct access to those trades and latest charts is found here: http://ashraflaidi.com/products/sub01/access/?a=664 Non Subscribers can join here: http://ashraflaidi.com/products/sub01

-AB

Chinese CPI and PPI lower; Spain could get till 2014 to lower deficit; Swiss unemployment rate steady; German trade surplus lower; Eurozone Sentix declines further. Focus on Draghi, Tucker and Williams; BOC business outlook. Details on Fridays Premium Insights found below.

AUD and NZD came under pressure during the Asian session in response to a lower than anticipated Chinese inflation data. Annual CPI eased to 2.2% in June from previous 3% which is 29 month low while PPI declined by 2.1% from previous -1.4%. If Q2 GDP that is due on Thursday night disappoints, then further interest rates cuts will be likely. Shanghai index is losing nearly 2.5%.

Sentiment improved slightly during the London session after Reuters published a report that EU finance ministers will grant Spain one extra year to reach a deficit target of 3% of GDP. The ecofin meeting takes place tomorrow in Brussels.

On the data front we learned that Swiss unemployment rate remained steady in June at 2.9% while analysts forecasted an increase to 3.2%; German trade surplus declined in May to EUR 15 bln from upwardly revised April's EUR 16.2 bln and that Eurozone Sentix investor confidence index declined further in July to -29.6 from -28.9.

Spanish 10 year yield moved higher and reached 7.1% before easing slightly. Italian counterpart rose to 6.17% which is still below pre-summit 6.28%.

There are no reports due during the US session. However, markets are likely to respond to the ECB president Mario Draghi who testifies at 8:30 am ET before the European parliament; to the MPC member Paul Tucker who testifies on LIBOR submissions in London at 11:30 am and to San Francisco FED president and the FOMC member John Williams who will speak at 11:55 am on the US economy.

CAD traders should not miss the BOC's quarterly business outlook survey that is due at 10:30 am ET.

LATEST PREMIUM INSIGHTS from Friday include 2 new trades on EURUSD, 2 new trades on EURJPY, 2 new trades on AUDUSD, 1 new on GBPUSD, 1 new on gold and 1 existing on USDJPY and USDCAD. Direct access to those trades and latest charts is found here: http://ashraflaidi.com/products/sub01/access/?a=664 Non Subscribers can join here: http://ashraflaidi.com/products/sub01

Another subpar US jobs report stifled risk appetite dropping the euro to the lowest levels in two years. The yen was the best performer on Friday and last week while the euro lagged in both categories. We take a look at the weekly forex technicals and details on Friday's Premium Insights, 8 new trades & charts on EURUSD & EURJPY.

The US added 80K jobs, short of the 90K economist consensus, and significantly below what markets were anticipating after Thursdays upbeat ADP numbers. The unemployment rate held steady at 8.2%.

The report inches the Fed another step closer to launching QE3 but its almost certainly not weak enough to spark action at the Aug. 1 meeting. Markets sense US growth at 2% or lower without the chance of government or central bank stimulus. That is a scary proposition and risk assets predictably sold off with the S&P 500 down 0.9% to 1355 and oil down nearly $3 to $84.45.

The main loser was the euro, which fell to fresh long-term lows against USD, GBP, AUD and others. The failure of EU Summit measures to improve optimism for more than a week paints a damning picture for Europe.

Commodity currencies fell nearly as hard as the euro, as AUD, CAD and NZD all hit one-week lows. Even a better-than-expected Canadian jobs report did little to step the disappointment from its southern neighbour.

Weekly Charts

EUR/USD touched a two-year low but closed marginally above the June 1 low of 1.2088, pointing to the possibility of a small bounce, perhaps to 1.24, before the next leg down to 1.20.

GBP/USD bearish engulfing candle on the cable chart points to more potential downside but the mid-June low of 1.5454 may act as a buffer before a retest of 1.53.

USD/JPY small weekly gain and is trapped between the 55-week and 100-week moving averages at 80.45 and 78.70, respectively. No sign of a breakout yet.

AUD/USD many bearish developments this week with the pair failing at the 200-day moving average and 55-week moving average. The 100dma also crossed below the 200dma. The weekly candles stick is also a spinning top or gravestone doji.

USD/CAD potential bullish hammer reversal on the weekly chart. Also had the 55dma cross above the 200dma this week.

LATEST PREMIUM INSIGHTS from Friday include 2 new trades on EURUSD, 2 new trades on EURJPY, 2 new trades on AUDUSD, 1 new on GBPUSD, 1 new on gold and 1 existing on USDJPY and USDCAD. Direct access to those trades and latest charts is found here: http://ashraflaidi.com/products/sub01/access/?a=664 Non Subscribers can join here: http://ashraflaidi.com/products/sub01

-AB