Intraday Market Thoughts Archives

US Retail sales fell 2.8% in October vs expectations of -2.1% following a revised 1.3% decline, while sales excluding autos fell 2.2% vs expectations of a 1.9% decline. Stock futures curtail some of their earlier losses, while USD remains under broad pressure. EURUSD seen confined in its symetrical wedge, with upside capped at $1.27 trend line and support resting on $1.2570. GBPUSD faces resistance at previous support of $1.4780, while USDJPY resistance standing at 96.80, with downside potentially extending towards 95.70 trend line support.

EURUSD extends retreat after failure to breach above the $1.2850 trend line resistance charted from the Oct 29 high through the Nov 5 high. Interim resistance stands at $1.2760, while support stands at $1.2660, followed by $1.26. GBPUSD recovers more than 2 cents off its latest 6-year lows of $1.4558 on its way to post its first daily rise in 6 sessions. While those gains emerged solely on the heels of the explosive spurt in risk appetite, sterlings advances remain...

The 8.30 am EST release of the US retail sales report is expected to show a 2.1% decline in October (biggest since November 2001), following a 1.2% drop in September, while sales excluding autos are seen falling 1.2%, twice the decline in ... COMPLETE INSIGHTS SENT TO SUBSCRIBERS. Resistance levels stated yesterday continue to hold, with GBPUSD, USDJPY and AUDUSD at $1.4920, 98.50 yen and $ 0.6710 respectively.

As explosive as was todays 7% rally in the major Wall Street indices, it remains a typical example of bear market advances, similar to what we saw on Friday, albeit with greater magnitude. Similar to last Friday. todays gains extended despite the biggest increase in weekly jobless claims in 7 years and a 17-year high in the 4-week moving average. This was a case of bargain hunting, which remains panic buying with the objective of pocketing short term gains. Traders will always find a market for their short term profits and today was an appropriate example. The reaction in FX markets favored higher yielding currencies against USD and JPY. Whether risk appetite will extend its gains based on a smaller than expected decline in tomorrow's sales or reverse on a worse than expected drop is the next question. Resistance for GBPUSD, USDJPY and AUDUSD stands at $1.4920, 98.50 yen and $ 0.6710 respectively.

Sterling hit a fresh 6-year low of $1.4670 as selling escalated on the expectations of further aggressive BoE rate cuts as early as next month. Following this months 150-bp slashing of interest rates, markets are now pricing more than a 50% chance of a 75-bp cut to 2.25%. With the Bank of England taking a U-turn on its inflation directive, dealers are given a carte-blanche to add on to sell-positions, especially as bank desks seek to maximize their profits ahead of year-end. While this time a year ago selling the US dollar was the path of least resistance among inter-bank dealing, selling the pound is the new riskless trade as perceived by the inter-bank dealing community. $1.46 may transpire at the next European session as markets fret ahead of the US retail sales report.

Jobless claims surged by 32K last week to a fresh 7-year high of 516K, lifting the less volatile 4-week average to a 17-year high of 491K. US trade deficit fell by a greater than expected 4.4% to $56.5 billion in September, largely due to a decline in oil imports. US equities edge into positive territory after having fallen in 5 out of the last sessions, with the only up-day occurring on Friday despite the release of the highest unemployment in 14-years. But there is a strong possibility that today's rally may taper off later in the session ahead of tomorrows release of retail sales report. More analysis on the retail sales report will be sent to subscribers.

Sterling breaks below $1.49 to reach the $1.4890 low of June 2002, which is also a major support, matching the cyclical low of May 1996 and June 1989. Sterling's damage is a result of UK-specific factors (BoE inflation report, rising unemployment and King's remarks) as well as overall assault on higher yielding currencies as US stocks deepen their selloff following Treas Secretary Paulson's remarks on curtailing the debt bailout to mortgage assets. A flurry of negative news on the earnings front is also accelerating the slide in equities. Buying USD and JPY against European and antipodean currencies remains the order of the day as equities have little to look ahead to, apart from Friday's ominous release of the October retail sales report.

Yen accelerates gains after a relatively quite 2 days, dragging USD by 2 yen in less than 4 hours to 96.30, now eyeing 96 yen. Key short term support stands at 95.70. Any reversal is seen encountering pressure at 97.50, followed by staunch resistance at 98.50. USDJPY has closed below 100 yen for the last 16 trading days, the longest sub-100 yen streak since 1995.

Sterling breaks below $1.52 for the first time since 2002 and hits new record lows against the euro at 82.36 pence as the Bank of England forecasts deepening economic contraction and inflation falling well below the 2% target, which would be the first time since 2005. The currency damage was exasperated by reports showing unemployment hitting a 16-year high and average earnings growth at the weakest in 5 years. If buying the yen was seen as the path of least resistance, then selling the pound has been the more popular trade, as the currency drops 38%, 13% and 24% against the yen, US dollar and euro respectively. Having broken below our $1.5250 target, we could ow now expect $1.48 as the BoE is seen easing by another 75-bps as early as next month.

EURUSD joins non USD FX on the downside, breaching below $1.28 and onto $1.27 as the failure for global risk appetite to recover erodes the hopes of euro bulls. ZEW index on investors economic sentiment unexpectedly improved to -53.5 in November from -63 in October, after reaching an all time low of 63.9 in July. The historical average stands at +27.5.The improvement was attributed to the German govt's passing of the rescue package. The 4-hour EURUSD chart shows a clear formation of lower peaks and lower highs, forming a symmetrical triangle whose lows are being tested at $1.2700. Key foundation stands at $1.2650. Upside capped at ...

Global market fallout extends from Asia to Europe, favoring JPY across the board, with USD being the second best performer as the credit crisis forces broadening layoffs in and out of the US, further curtailng demand and dimming the earnings outlook. AUDUSD eyes 0.6580 and 0.6540, while GBPUSD eyes $1.5530. GERMANY's ZEW SURVEY due at 5 am EST is expected to show a slight in improvement to -60.5 from Octobers -62.7, which is well below the historical average of 27.5 points.

EURGBP crosses above the previously mentioned target of 0.8155, nearing last month's record high of 0.8194 by 4 pips, just days after the Bank of England cut interest rates below those of the Eurozone for the first time in the life of the euro. The figure would be the highest since 1996 when using the Deutsche mark for a synthetic representation of the euro. With Eurozone rates at 3.25% vs 3.00% in the UK, and todays bigger than expected decline in UK PPI justifying prolonged BoE cuts, towards 2.25%, EURGBP could carry further fundamental momentum to reach as high as 0.8250. GBPUSD faces 2-week trend line resistance at $1.5900, a breach of which faces renewed pressure at $1.5960. The lower highs from Oct 14, Oct 20, Oct 30 and Nov 05 underscore ... MORE AVAILABLE TO SUBSCRIBERS OF INTRADAY THOUGHTS

Forex rates gap higher in Asia's Monday morning session in favor of higher yielding currencies at expense of USD and JPY in line with Fridays 2.9% rally in S&P and Dow. But these significantly high FX prices are unlikely to hold due to 1) the fundamental reality of the 14-year high in US unemployment rate 2) S&Ps downgrade of GM to a deeper junk status at CCC+ on further deterioration in its cash balance and new layoffs announcement. Although USDJPY gapped from 98 to 99.30, I expect it to retreat towards 97.50s. Similarly for GBP, it is expected to extend declines from $1.5820 high to as low as $1.5660. Note that my $1.5650 target from Fridays post-jobs analysis was already hit. EURUSD seen retreating towards $1.2720, but EURGBP may regain 0.8155-60.