Intraday Market Thoughts Archives

Rally continues; Eurozone CPI steady; USDJPY trades higher as treasuries decline; ecofin meeting; precious metals keep gains. Markets await for CPI, retail sales; industrial production and university of Michigan consumer confidence. Wednesdays Premium Insights from Ashraf saw, 1 of 2 longs in EURUSD hit the 1.2980 target, while the other remained unfilled. Both USDJPY shorts nearing their targets. 1st of 2 longs in GBPUSD hit 1.6160 target, while the other is in progress nearing its own objective. See more details on CADJPY, gold and oil below in the final paragraph.

The post FOMC rally continues and the buck is sold across the board except JPY. EURUSD trades just below 1.32, GBPUSD jumped to 1.6244 and EURGBP rose to 0.8066. European equities are gaining nearly 2%.

Eurozone CPI remained steady in August at 2.6% y/y but the core figure slowed to 1.5% from previous 1.7%. Employment in the Eurozone was unchanged in Q2 which is the first time since last year that the number of employees did not contract.

Jawboning from Japanese officials along with higher US treasury yields helped to push JPY lower across the board. USDJPY moved back above the 78.00 figure from yesterday's low 77.13 but that is still in the "high risk of intervention" territory. US 10 year yield gained nearly 6% and trades around 1,81%.

The meeting of Eurozone finance ministers begins today in Cyprus and continues tomorrow. Topics will include the possibility of giving more time to Greece to reach its budget goals and possible financial aid for Spain.

Precious metals moved slightly higher during the London session following sharp gains seen yesterday. Spot gold and silver continue to trade near session highs around 1775 and 34.75 respectively. WTI was able to regain the 100 handle.

The NY session starts at 8:30 am ET with August CPI that is expected to rise 0.5% from a previous flat reading m/m and to 1.6% from 1.4% y/y. Core CPI is seen growing 0.2% from 0.1% m/m but easing to 2.0% from 2.1% y/y. Retail sales that are due at the same time are anticipated to slow to 0.7% in August from 0.8% in July.

Industrial production hits the screens at 9:15 am ET and it is projected to decline to 0.1% from 0.6% and finally the university of Michigan consumer confidence at 9:55 am is expected to decline marginally in September to 74 from 74.3.

CADJPY hit all targets, 1 gold all done, the other in progress. Neither US crude not AUDUSD long were filled. DIRECT ACCESS TO THE EXISTING CALLS found here: http://ashraflaidi.com/products/ sub01/access/?a=681 Non Subscribers please click here: http://ashraflaidi.com/products/sub01/

Bernanke went all-in on a third round of asset purchases, committing to a program of mortgage-bond purchases until there is a significant improvement in hiring. The US dollar tumbled after the announcement. The moves are likely to consolidate as Asia-Pacific trading wraps up for the week. As for Wednesdays Premium Insights from Ashraf, 1 of 2 longs in EURUSD hit the 1.2980 target, while the other remained unfilled. Both USDJPY shorts nearing their targets. 1st of 2 longs in GBPUSD hit 1.6160 target, while the other is in progress nearing its own objective. See more details in final paragraph.

The FOMC voted to buy $40 billion per month in mortgage-backed securities for an unlimited time or until the jobs market gains strength. If the labor market does not improve substantially the Fed said it could further increase asset purchases or deploy other tools.

In his press conference, Bernanke said he hoped the move would encourage businesses and individuals to invest and grow the economy.

The market was indecisive for a half-hour after the announcement and then quickly began to unload US dollars. The euro, Australian and Canadian dollars all gained about a full cent. Gold surged $40 to a six-month high of $1772.

USD/JPY was buffered by yen-selling on the crosses due the rise in risk appetite but touched as low as 77.13 the lowest since February. The Fed action increases the likelihood the BOJ will introduce further easing next week.

The Fed sparked a 1.6% rally in the S&P 500 to a fresh four-year high.

Expect markets to now move in a more straight-forward fashion to economic news good news will be good for risk appetite and vice versa. The first test will be Fridays US report on August retail sales.

Inflation also threatens be a major trading theme and could add additional upside to gold prices. The PPI report on Thursday posted its largest one-month increase in three years.

Other economic data was downcast as initial jobless claims rose to 382K compared to 370K expected, although some analysts blamed effects from Hurricane Isaac. The US fiscal deficit for August was also higher than expected.

The lone item on the calendar in Asia is Japans industrial production at 0030 GMT. The consensus is for a 1.2% m/m decline.

The latest Premium Insights from Ashraf give technical and fundamental rationale the calls made. The latest version saw 1 of 2 longs in EURUSD hit the 1.2980 target, while the other remained unfilled. Both USDJPY shorts nearing their targets. 1st of 2 longs in GBPUSD hit 1.6160 target, while the other is in progress nearing its own objective. CADJPY is 20 pips away from its final target. Golds 1st long is less than $3 away from final 1775 objective, while the 2nd long is nearing its target. US crude oil entry of 95.50 was not filled before breaking past our 97.70 objective. AUDUSD was unfilled. DIRECT ACCESS TO THE EXISTING CALLS found here: http://ashraflaidi.com/products/sub01/access/?a=681 Non Subscribers please click here: http://ashraflaidi.com/products/sub01/

-AB

The latest from Ashraf on The Fed, ECB and Tail Risk http://www.cityindex.co.uk/market-analysis/market-news/64002012/tail-risk-will-end-up-chasing-its-tail/

Currency trading was choppy on Wednesday as the market prepares for the FOMC decision. The euro was the top performer while the Canadian dollar lagged. Early in Asia-Pacific trading, New Zealands central bank held rates as expected. Last nights Premium Insights from Ashraf include USDJPY, EURUSD, AUDUSD, GBPUSD, Gold and oil. See below for access.

The euro slipped back to 1.2876 after the post-German-decision rally to a four-month high of 1.2936. Afterwards, trading was indecisive around 1.2900 ahead of the FOMC decision.

There are no market-based estimates of the likelihood of QE3 on Thursday but surveys of economists and other market participants range from 50% to 80%. Either way, the US dollar will be for a wild ride in the day ahead.

The lone US data point on Wednesday was July wholesale sales, which declined 0.1% compared to the 0.7% rise that was expected. The inventory-to-sales ratio hit the highest since 2009 a potential red flag for US growth.

Broad European sentiment continues to improve but there are signs Spain may be reluctant to ask for aid. French officials publically urged Spain to turn to the ESM which suggests private efforts may have been turned away. Spanish 10-year yields were down 7 basis points on the day to 5.63%.

The S&P 500 touched a fresh 4-year high and closed 0.2% higher to 1437.

The RBNZ left rates at 2.50% in early Asia-Pacific trading and said it was appropriate to leave policy unchanged. The statement lamented the high NZD but the market barely moved on the report, with NZD/USD stuck at 0.8200.

At 0100 GMT, Australian releases September consumer inflation data. The prior reading was 2.4% y/y

Last nights Premium Insights from Ashraf include 2 on USDJPY, 2 EURUSD, AUDUSD, 2 on GBPUSD, Gold and oil. See below for access Direct Access to these trades is found here: http://ashraflaidi.com/products/sub01/access/?a=681 Non Subscribers please click here: http://ashraflaidi.com/products/sub01/

-AB

ESM approved; Dutch election; UK jobless claims fall; ILO unemployment rate ticks higher; Eurozone industrial production rises m/m but falls y/y. Market turns to import prices and by the end of the session to RBNZ. Last nights Premium Insights from Ashraf incoude USDJPY, EURUSD, AUDUSD, GBPUSD, Gold and oil. See below for access.

German court rejected complaints against the ECB bond buying plan and backed the ESM bailout fund and the fiscal treaty, MNI reports. The bailout mechanism is therefore constitutional and can start operating after the German president Joachim Gauck signs it into law. Conditions include limiting German exposure to EUR 190 bln without further approval by Bundestag. EU Jean-Claude Juncker has already said the ESM governors will meet 10/8 in Luxemburg. EURUSD initially dropped sharply from 1.2880s to 1.2815 only to explode higher. It currently trades around 1.2930. The upcoming risk event is Dutch parliamentary election. The polls close at 7:00 pm GMT with first unofficial estimates expected shortly after.

UK labor market surprised positively yet again as the jobless claims declined 15K in August from -13.6K in July which is the biggest fall since 6/2010. The data, however, could be skewed due to short term hiring for the Olympics. The claimant count rate remained steady at 4.8% but the ILO unemployment rate ticked higher to 8.1% from 8.0%. GBPUSD continues to push higher trading around 1.6115.

Eurozone industrial production grew 0.6% in July from previous -0.6% m/m but fell additional 2.3% from -2.1% y/y and periphery 10 year yields are only slightly lower, Spanish around 5.62% and Italian around 5.06%.

The US session begins at 8:30 am ET with import prices that are expected to rise 1.4% in August after declining 0.6% in July followed by wholesale inventories that are seen at 0.3% in July from -0.2% in June.

By the end of the session at 5:00 pm the RBNZ will announce its official cash rate decision. Most economists surveyed by Bloomberg expect rates to remain unchanged at 2.50%.

Last nights Premium Insights from Ashraf include 2 on USDJPY, 2 EURUSD, AUDUSD, 2 on GBPUSD, Gold and oil. See below for access Direct Access to these trades is found here: http://ashraflaidi.com/products/sub01/access/?a=681 Non Subscribers please click here: http://ashraflaidi.com/products/sub01/

Wednesdays German Court decision in Karlsruhe, due at around 04:00 ET, 08:00 GMT, 09:00 BST (London) . The decision will be on whether to grant temporary injunctions against Germanys ratification of Europe's new bailout fund, the ESM & fiscal compact. See our trading ideas ahead of Wednesday's Court decision and the tactical positioning ahead of Thursday's FOMC on USDJPY, EURUSD, AUDUSD, GBPUSD, Gold and oil. Direct Access to these trades is found here: http://ashraflaidi.com/products/sub01/access/?a=681 Non Subscribers please click here: http://ashraflaidi.com/products/sub01/

Moodys said it will lower the United States credit rating unless budget negotiations but the country on a path to a lower debt-to-GDP ratio. The headlines sparked a rout on the US dollar; the Australian dollar was the top performer. Japanese machine orders and Australian housing starts are the highlights in Asia. A new Premium Insights from Ashraf ahead of the Wednesday German Court decision and Thursdays FOMC decision is due out at approximately 18:30 EST, 23:30 BST (London Time).

The Moodys comment is not a surprise but it pushed the dollar through some key levels, sparking further declines. The euro rose above the 200-day moving average and USD/JPY hit a 3-month low after breaking the July lows. Cable climbed to 1.6086 the highest since May.

We see the news as a sign of the unwillingness of the market to hold US dollars ahead of the Fed decision. Market participants are looking for opportunities to establish short USD positions. If Bernanke does not announce QE3, the reversal will be large and rapid.

The Australian dollar benefitted from comments from Chinese Premier Wen, who promised to boost growth without offering details. Industrial metals prices have also surged in the past week, pointing to a rebound in the global economy.

The lone data point was the US trade deficit for July. Imports and exports were both lower and the deficit was $42B compared to $44B expected. The trade data is a negative for global growth but the numbers are from July.

In the upcoming session, Australian Q2 dwelling starts are a highlight at 2130 GMT. Starts are expected 2.0% after a 12.6% plunge in the first quarter.

Later, at 2350 GMT, Japanese machine orders are expected to fall 3.6% y/y in a show of the slowing domestic and global economy. At the same time, the July tertiary index is expected down 0.5% m/m. Inflation also gives the BOJ headway room for more QE; the CGPI is expected down 1.9% y/y in August.

The German Constitutional court decision is at 0800 GMT. The ESM is expected get approval but conditions limiting German contributions to perhaps 190B euros, which would be equivalent to Germanys size in the Eurozone. Such an outcome will weaken EUR substantially.

-AB

The greenback fell across the board during the London session but was able to recover a small part of its losses against some majors. USDJPY fell to 77.96 and USDCAD declined to 0.9723. European equity indices are losing about 0.4%.

The common currency rose sharply from 1.2758 to 1.2818 after the German constitutional court announced that they will not delay tomorrow's ESM decision despite new challenges. Other factors that contributed to the rise were comments from IMF director Min Zhu who said that he strongly supports the ECB bond buying program and also comments from the Finnish PM Jyrki Katainen who confirmed that all parties in Finland want to remain in the Eurozone. EURUSD continues to trade right below the 1.28 mark.

UK trade balance was the sole report during the London session and the deficit in July narrowed to GBP 7.1 bln from June's GBP 10.1 bln which is the best result in 17 months. The better than expected result is attributed to 11% rise in exports to non EU countries which is the fastest growth since record inception in 1998. GBPUSD reaction was muted and it continues to trade around the 1.6020.

The US session will start at 8:30 am ET with trade deficit that is expected to widen marginally to USD 44.2 bln in July from previous USD 42.9 bln. IBD/TIPP economic optimism index due at 10:00 am is anticipated to improve in September to 47.3 from 45.6.

Canadian data includes August housing starts that are due at 8:15 am ET and are seen lower at 201K from previous 208.5K followed by July trade deficit that is seen slightly narrower at CAD 1.4 bln from previous CAD 1.81 bln.

GBP could react to MPC member David Miles who speaks at 1:15 pm ET at the Scottish Annual Lecture in Edinburgh.

Trading was tentative to start a week that is filled with risk events. The Canadian dollar was the best performer while commodity cousins AUD and NZD lagged in an unusual development. Australian business confidence and Japanese machine orders are the highlights of Asia-Pacific trading.

The euro slid back to 1.2760 from 1.2800 in US trading as broad risk sentiment ticked lower. The focus was on China after soft economic data and fresh plans to boost infrastructure spending. Sentiment was mixed for most of the session but slipped late in the day.

The first drop in US consumer credit in 10 months contributed to the pullback in risk appetite. So did a Chinese announcement that retail gasoline and diesel prices will rise 6%. The IMF also cut its estimate of Irish 2013 growth to 1.4% from 1.9%.

The market is focused on Wednesdays German court decision on the constitutionality of the ESM. That decision could be delayed by a fresh legal challenge from a German lawmaker on Monday but early indications are that it will be delivered on schedule.

At 2130, Australias NAB releases its monthly survey of business confidence. The index rested at 4 in July and likely fell on talk of foreign investment slowdowns.

In Japan, at 0600 GMT, August preliminary machine tool orders will be released. In July, orders fell 6.7%.

Continued speculation about further Chinese stimulus could dominate Asia-Pacific trading and AUD movements. The market is also keeping an eye on rumors about Xi Jinping, the man expected to take over as leader of China in the coming months. He has cancelled numerous appointments in the past 10 days and speculation about his health is rampant.

-AB

Markets consolidate; Japanese Q2 GDP revised lower; Chinese trade surplus rose; Eurozone investor confidence improved; German auction. Markets will seek hints about upcoming German court ruling and FOMC decision.

The impressive rally that markets saw after the weaker than expected NFP has seen no follow-through. EUR along with GBP are little changed while the rest of the majors are slightly lower against the buck. The only major currency that gained against the USD is CAD. European equities are just about unchanged.

The JPY has ignored a substantial revision lower of Japanese Q2 GDP and continues to trade little changed. The revision took the print from 1.4% to 0.7% q/q and on annual basis from 0.3% to 0.2%. The revision could increase the chance of further easing (the BOJ meets on 9/19) but the upcoming FOMC decision will be more important for JPY pairs. USDJPY trades around 78.30.

On the data front, Chinese trade surplus rose in August to USD 26.66 bln from July's USD 25.1 bln as annual exports rose 2.7% while imports declined by 2.6%. Eurozone sentix investor confidence improved in September to -23.5 from previous -30.3.

Germany sold 6 month bills totaling EUR 3.4 bln. The average yield rose to -0.0147% from -0.0499% and cover improved to 1.5 from 1.3.

Upcoming risk events include Greek PM Antonis Samaras' meeting with the Troika that returned to Athens on Friday which so far has been in "good climate". Tomorrow the PM meets the ECB president Draghi in Germany.

Markets will be searching for any clues regarding the German constitutional court ESM decision on Wednesday and the key FOMC decision on Thursday. The market expects the ESM and the fiscal compact to be upheld but there could be additional conditions on future bailouts that could limit the potential EURUSD gains.

There are no US reports due today.

A weak non-farm payrolls reading rocked the US dollar and re-kindled talk of a QE3 announcement next week. The euro was the top performer and the buck lagged. The weekly CFTC positioning data showed a shift into CAD as it hit the highest levels of the year. More of Ashrafs take on Fridays jobs figures is found below.

Payrolls rose 96K in August, lower than the 96K expected. Details of the report were soft with average weekly hours and earnings missing expectations.

The US dollar immediately slumped and continued lower. USD/JPY dropped nearly a full cent to 78.02. EUR/USD took off and eventually closed above 1.28. The euro now eyes the 200-day moving average of 1.2841.

A survey of economists from Reuters now sees a 60% chance of QE3 next week but we continue to believe that inflation worries and the potential for unintended consequences will keep Bernanke on the sidelines.

The euro, pound, Canadian dollar and gold all hit the highest levels of the summer. CAD was boosted by a solid employment report that saw 34K jobs compared to the 10K expected.

Weekly CFTC data was relatively unmoved but showed that CAD is now the favourite of the speculative community, surpassing AUD. Expect to see larger changes next week when Fridays moves are taken into account.

EUR -102K vs -101K

JPY +24K vs +22K

GBP 7K vs +2K

AUD +62K vs +78K

CAD +67K vs +61K

NZD +11K vs +14K

CHF -13K vs -11K

Ashrafs final words on NFP & Draghi

http://www.cityindex.co.uk/market-analysis/market-news/59362012/non-farm-payrolls-overlooked-as-draghi-fills-qe3-void/