Intraday Market Thoughts Archives
Displaying results for week of Apr 23, 2017Draghi Lifts Toe off Gas
Draghi took a small step away from the ECB's dovish stance but it wasn't enough for EUR/USD traders. The pound was the top performer while the euro lagged. New Zealand trade balance and a heavy slate of Japanese data are due next. 2 new Premium trades have been opened, one in the euro the other in a major index.
Mario Draghi said the ECB was moving towards “a more balanced configuration” after holding rates unchanged on Thursday. There was speculation about a more pronounced shift but the ECB will likely wait for new forecasts in June.
The euro initially jumped to 1.0930 from 1.0885 but quickly reversed down to 1.0851. Despite the disappointment, that's still above the Dec-March range, the 200-DMA and the previous cluster resistance.
The pound also broke above a shorter-term range as the period of consolidation after the election call ended. The rise to 1.2917 was the highest since October.
The Canadian dollar remained the most volatile currency this week. USD/CAD sank more than 100 pips in Asia after Trump had a change of heart on NAFTA but it was all erased and more in a steady rise to a 14-month high of 1.3671. The high came as oil fell on a restart to Libyan oil production but even as crude recovered, USD/CAD remained well-above 1.36. One story that's weighing is an implosion at mortgage lender Home Capital in what could be the first sign of trouble in Canada's runaway housing market.
The highlight on the economic data calendar was US durable goods for March. The core category rose 0.2% compared to 0.5% expected but that was largely mitigated by a revision higher to the prior. Better shipments added a slight upward bias to Friday's first look at GDP but analysts are generally pessimistic and the Atlanta Fed sees just 0.2% growth.
USD/JPY continues to chop in the 111.20 to 111.70 range. It could get a jolt when CPI, retail sales and employment numbers are released at 2330 GMT. The national CPI is the main line to watch, it's forecast up just 0.3% y/y.
The other release comes at 2245 GMT when New Zealand is expected to report exports at $4.66B in March and imports at $4.30B. That's a trade surplus of just under $370m. Note that the kiwi sank below the March low on Thursday and is the worst performing major since Trump took office.
| Act | Exp | Prev | GMT |
|---|---|---|---|
| GDP (m/m) | |||
| 0.1% | 0.6% | Apr 28 12:30 | |
| Eurozone Spanish Flash CPI (y/y) | |||
| 2.6% | 2.5% | 2.3% | Apr 27 7:00 |
| Eurozone CPI Flash Estimate (y/y) | |||
| 1.8% | 1.5% | Apr 28 9:00 | |
Tax Plan Follows the Script
As we anticipated, the trade was to sell-the-fact on the Trump tax plan. The bulk of currencies finished the day unchanged despite some volatility, the only real movers were the commodity currencies, which lagged. The Asia-Pacific calendar is quiet as we count down to the ECB. A new USD trade has been posted alongside supproting charts moments ago.
اليورو في قيادة المؤشرات (للمشتركين فقط)
Yesterday we wrote about the Trump trading plan: to react to the first hints of action, then exit when he delivers. The market followed the script on Wednesday as he delivered his long-touted tax plan.
As anticipated, it wasn't a plan. It was a one-page, bullet point draft of a dozen principles that he hopes to achieve. It mirrored his campaign pledged and much of it was leaked.
The market's response was to unwind a portion of the rally in risk assets since Friday in anticipation of the news. USD/JPY sagged 70 pips to 111.00. The US dollar fell by a smaller margin elsewhere and the S&P 500 gave up an 8 point gain to finish down 1 point.
We will look for more opportunities to trade Trump in the future.
One continues to be CAD and MXN. The White House will likely announce its intention to pull out of NAFTA in the days ahead, according to reports. The Mexican peso was especially hit hard because it would leave the nations without a trade deal. Canada would fall back on the 1987 FTA if no new deal is reached, and that's similar to NAFTA.But if it's similar to NAFTA, Trump could hate it as well. Certainly the door is now open to a radically different trading relationship between the three nations.
USD/CAD didn't break Tuesday's high on the news but it's nearby and the close above 1.3600 is a bullish technical signal. The pair didn't break higher in part because Canadian Feb retail sales ex-autos were slightly better than expected and with a big upward revision to the prior. Also notable for the pair is that oil couldn't hang onto a gain despite a bullish inventory report.
Also on the commodity front, AUD/USD was cut down on yesterday's CPI report. In US trading, it broke below the April lows and that could set up more technical trouble.The only possible catalyst in today's Asia-Pac session is Q1 import/export prices at 0130 GMT but that's a longshot. The consensus on imports is -0.5% and exports is +8.0%.
The bigger story will come Thursday with the ECB decision. Sources reports suggest references to downside risks will be removed and that may help the euro maintain its upside momentum.
| Act | Exp | Prev | GMT |
|---|---|---|---|
| Core Retail Sales (m/m) | |||
| -0.1% | -0.2% | 2.3% | Apr 26 12:30 |
| CPI (q/q) | |||
| 0.5% | 0.6% | 0.5% | Apr 26 1:30 |
| Eurozone Spanish Flash CPI (y/y) | |||
| 2.5% | 2.3% | Apr 27 7:00 | |
Trump Tax & ECB Hint
We've spent the past six months getting to know Donald Trump and a playbook is beginning to emerge. It was evident in the trade as USD/CAD hit a 14-month high on Tuesday. Euro soared ahead on chatter that the ECB may hint at tapering in June. Australian CPI is due up next. The stocks rally stopped out the DOW30 short and USDCAD long Premium trades, while the EURUSD long from Friday hit its final target. 8 of the last 10 EURUSD trades in the Premium Insights since the Dec Fed hike have hit all targets. A new JPY had been issued.
Actions from Trump follow a three-part arc. First is the hint, the act itself and then damage control by his staff. The latest example was his spat with Canada over dairy.
He first mentioned Canada last week on a trip to Wisconsin when he said dairy farmers were being treated unfairly. On Tuesday, he slapped tariffs on Canadian lumber as part of the response. Afterwards, Commerce Sec Wilbur Ross downplayed the move and said Canada was a good neighbour.
In terms of trading, the time to sell CAD was on the first mention, even though it didn't include a specific threat. Trump appears to speak off-the-cuff but he's repeatedly show that it's part of an agenda and that was the case with Canada. The time to buy back CAD was shortly after the act itself. The tariffs sent USD/CAD up through 1.36 on Tuesday to the highest since last year when oil was bottoming. The loonie staged a small recovery back to 1.3560 on Ross' comments.
Along with that arc, the pattern has been that the first move from Trump is the strongest. When he bombed Syria, the fear was that it was the start of a campaign, but it's gone quiet since. Expect Trump to move on from Canada now.
As for USD/CAD, Trump isn't the only factor. Oil climbed a half-cent Tuesday but it remains in a downtrend. Meanwhile, the French election result and hopes for a Trump tax cut are the driving force in broader markets.
But if you apply our arc to the tax story, you had the hint on Friday. That was the time to buy risk assets. The 'plan' itself has largely been leaked so that may mark the top. In the aftermath his staff will play down parts of the plan that are unrealistic.
Aside from Trump, Australian and New Zealand traders returned from holiday today and that Aussie Q1 CPI report is on the agenda at 0130 GMT. The consensus is for a 2.2% y/y rise with the trimmed mean up 1.8%. Expect a big AUD move on any miss.
| Act | Exp | Prev | GMT |
|---|---|---|---|
| CPI (q/q) | |||
| 0.6% | 0.5% | Apr 26 1:30 | |
The Trade After the Fear Trade
The euro peaked early and faded as we anticipated in yesterday's IMT; we look at what's next. The euro was the top performer Monday while the Japanese yen lagged. Australia and New Zealand are on holiday Tuesday.There are currently 8 Premium Trades in progress; 4 in FX, 2 in indices and 2 in commodities.
The question we're asking ourselves now is whether the French election result was a one-day event or the start of something more durable. The close in EUR/USD was 1.0866, that's the best since November.
What's worrisome is that all the euro charts have eaten into the opening gaps. That's a technical red flag. It suggests a quick squeeze or a fast money trade rather than a sea change in sentiment. At the same time, some consolidation is normal.
Ultimately, the market is more political than it's been in a generation. At the moment, the political temperature is cooling off but it can shift quickly. Ignoring politics, the eurozone economy is showing some bright spots and EUR/USD is at a deeply depressed level. Like sterling, it won't take much to get it moving to the upside. Will the ECB and Eurozone CPI later magnify or break momentum?
The election is also a reminder of the factor that fear plays in trading. Markets are an amazing method of price discovery but add a bit of fear into the equation and prices quickly disconnect from reality. The current era of political shifts will lead to many bouts of fear and not all of them will be unjustified but if we look back at Brexit, Trump and the French election, the fears have been exaggerated at times in each case.
The Trade After the Fear Trade
The euro peaked early and faded as we anticipated in yesterday's IMT; we look at what's next. The euro was the top performer Monday while the Japanese yen lagged. Australia and New Zealand are on holiday Tuesday.There are currently 8 Premium Trades in progress; 4 in FX, 2 in indices and 2 in commodities.
The question we're asking ourselves now is whether the French election result was a one-day event or the start of something more durable. The close in EUR/USD was 1.0866, that's the best since November.
What's worrisome is that all the euro charts have eaten into the opening gaps. That's a technical red flag. It suggests a quick squeeze or a fast money trade rather than a sea change in sentiment. At the same time, some consolidation is normal.
Ultimately, the market is more political than it's been in a generation. At the moment, the political temperature is cooling off but it can shift quickly. Ignoring politics, the eurozone economy is showing some bright spots and EUR/USD is at a deeply depressed level. Like sterling, it won't take much to get it moving to the upside. Will the ECB and Eurozone CPI later magnify or break momentum?
The election is also a reminder of the factor that fear plays in trading. Markets are an amazing method of price discovery but add a bit of fear into the equation and prices quickly disconnect from reality. The current era of political shifts will lead to many bouts of fear and not all of them will be unjustified but if we look back at Brexit, Trump and the French election, the fears have been exaggerated at times in each case.
الحوار الأسبوعي مع أشرف العايدي وجورج البتروني
– نتائج الإنتخابات الفرنسية – إقتراحات لمراكز التداول وكيفية تأثير اليورو على المراكز المفتوحة؟ – إستراتيجيات التداول لليورو -الصراع بين ماكرون ولوبان – كيف يمكنكم التداول بالأسواق الأسبوعين القادمين– شد حبال بين معسكر ترامب والديمقراصين– الذهب والفضة المقابلة الكاملة
ندوة مساء الثلاثاء مع اشرف العايدي
سيركز الاستاذ اشرف العايدي على قرار البنك المركزي الأوروبي الذي سيصدر يومين بعد الندوة و الدور النهائي في الانتخابات الفرنسية. -هل سيحاول ماريو دراغي إقناع الأسواق أنه سيمدد برنامج التحفيز النقدي؟ -هل بإمكان التركيز على التحليل الفني و غض النضر عن العوامل الأساسية؟ -كيف ستاثر موازنة التوقعات من الاحتياطي الفدرالي و المركزي الأوروبي على زوج اليورو/دولار؟
Euro Jumps as Macron, LePen Advance
One thing we haven't heard often in the past year was “the polls were right” but that was exactly what unfolded on Sunday in France as Macron and Le Pen won the first round of the election. The euro opened nearly 200 pips higher at the open with yen tumbling. CFTC positioning data showed few GBP shorts getting cleared out despite last week's jump. The Premium EURAUD long was closed for 240-pip gain, EURUSD long remains 205 pips in the green and EURJPY was stopped out at 190-pip loss.
The final tally isn't yet in but Macron and Le Pen will be in the final round of the Presidential election on May 7. The final results show Macron at 23.8% and Le Pen at 21.6% as of 0:56 am France Time at 95.6% participation. As the earliest numbers rolled in, Fillion conceded and threw his support behind Macron. There had been a slight chance he would stay mum or support Le Pen. Other candidates also endorsed Macron for the final round.
This result was as much a win for pollsters as for Macron. Despite many surveys showing him and Le Pen ahead, the market was cautious after Brexit and Trump. The same pollsters show Macron with a 20-point lead in the final round.
We warned last week that fears in the market were overstating a black swan scenario and the jump in the euro at the open underscored that. It climbed to as high as 1.0937 – a jump of more than 200 pips. EUR/JPY climbed nearly 400 pips.
Expect to see profit taking in fairly short order. Those moves are too big and the same types of fears may start to infect the second round. We will be watching the European open very closely for another surge of volatility. Also note that a finish above 1.0864 would be the best since November.
Commitments of Traders
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.
EUR -22K vs -19K prior JPY -30K vs -35K prior GBP -99K vs -106K prior CHF -14K vs -10K prior AUD +43K vs +45K prior CAD -33K vs -32K prior NZD -15K vs -15K prior
The squeeze after Theresa May called the election certainly caught a few people on the wrong side but it wasn't a full-scale rush to the exits.
