Intraday Market Thoughts Archives
Displaying results for week of Feb 18, 2018USD Stumbles, CAD Retail Sales Drop
The US dollar retreated Thursday after a week of gains as hawkish talk was brushed aside. The yen was the top performer while the US and Canadian dollars lagged. A new Premium trade will be issued ahead of the Asia Friday trade session. It will be the 3rd index trade.
Goldman Sachs grabbed headlines (but not markets) with a note on Thursday suggesting the FOMC could hike rates five times this year and FOMC speakers underscored the strong economy. But bonds weren't impressed and 10-year yields retreated back to 2.92%.
The market dabbled with the hawkish talk before having second thoughts. The yen led the way and USD/JPY dropped to 106.68 from 107.78. The move nearly erased two days of gains and underscored the downtrend in the pair and the struggles of the US dollar more broadly.
Struggling right alongside USD was CAD. Another round of NAFTA talks begins Feb 25 and the market is reluctant to buy the loonie until there is some sense of clarity on the trade deal. In addition, the economy continues to send mixed signals.
Canadian December retail sales dropped 0.8% compared to a flat reading expected. Ex autos was even worse at -1.8% compared to the +0.3% consensus. The loonie initially tumbled but got back on its feet.
Odds of a March BoC hike fell to 9% but the April meeting is at 49%. That's down from 54% before the data but it's still too high. The BOC wants a resolution on NAFTA and wants to see the effects of prior hikes before making another move. A key loonie factor will be inflation data on Friday. The CPI is forecast to rise just 1.5% y/y, down from 1.9% in December but the trend in core numbers will be key as well.
Before that – at 2350 GMT – Japan will also be looking at CPI numbers. Headline inflation is forecast to rise to 1.3% y/y from 1.0% but core is expected to rise just 0.3% y/y.
| Act | Exp | Prev | GMT |
|---|---|---|---|
| Core Retail Sales (m/m) | |||
| -1.8% | 0.1% | 1.7% | Feb 22 13:30 |
| FOMC's Dudley Speaks | |||
| Feb 23 15:15 | |||
| FOMC's Mester Speaks | |||
| Feb 23 18:30 | |||
| FOMC's Williams Speaks | |||
| Feb 23 20:40 | |||
| CPI (m/m) | |||
| 0.4% | -0.4% | Feb 23 13:30 | |
| National Core CPI (y/y) | |||
| 0.9% | 0.8% | 0.9% | Feb 22 23:30 |
My BNN Hit on Yields & Powell
Explaining to BNN the importance of understanding yesterday's price action ahead of "Big Wednesday". Full interview.
Why the Whipsaws after Fed Minutes?
What happened in the two hours following the release of the January FOMC minutes? Why the subsequent spike in yields & reversal in indices & USD? And what it means for next Wednesday? Full analysis.
ما حدث بعد محضر اجتماع الاحتياطي الفيدرالي؟
ما الذي حدث في الساعتين التاليتين لإطلاق محضر اجتماع الاحتياطي الفيدرالي في يناير؟ تراجعت مؤشرات الأسهم بنسبة 1.8٪، بالتزامن مع قفزة سريعة في عائدات السندات وانتعاش لأسعار #الدولار لكن لماذا ؟ الإجابة هنا مع أشرف العايدي
The 3% Quandary
The FOMC Minutes led to a whipsaw in US dollar trading Wednesday and exposed a dilemma. The US dollar was the top performer once again while the Australian dollar lagged. China returns from holiday in the day ahead. 9 Premium trades are currently in progress, 2 of which in indices.
The FOMC Minutes didn't offer much in the way of surprises but offered plenty in the way of market moves. The US dollar fell 30-40 pips across the board on the headlines only to make a complete recovery 30 minutes later and finish at the highs.
In the lead-up to the release, there was fear about an especially hawkish set of minutes but that didn't materialize. Instead, there was the predictable optimism about growth along with hints at upside risks to inflation.
At first, it seemed fears in the market were soothed. The US dollar dropped and stock markets rallied. But bond traders pushed yields further in a sign of jitters about four rate hikes this year.
A short time late, stocks joined bonds lower and USD rallied. The looming level is 3% in the 10-year note. It rose 6 bps to 2.95% Wednesday – the highest since 2014. Along with the big figure, the 2014 high of 3.06% is a major level of resistance.
At this point, other markets are beginning to get worried about the reaction to higher borrowing costs. We get the sense that many are heading to the sidelines to see how it will shake out. Ultimately, 3% is just a number and it's not a magical line in the sand that's going to torpedo borrowers' finances so there might be a sigh of relief once it's breached. But until then, expect further jitters to continue.
If you're in London this week, you can attend Ashraf's full assessment for FX, yields and indices on Thursday evening at GKFX London HQs and on Friday at the London Forex Show.
Looking ahead, the Asia-Pacific economic calendar is light but it includes the return of China after a week of holidays. That's likely to add a bit of volatility and certainly some flows. Further down the agenda, the Fed's Quarles speaks at 0515 GMT along with French CPI, German IFO sentiment data, UK GDP and Canadian retail sales. All that should make for plenty of action.
| Act | Exp | Prev | GMT |
|---|---|---|---|
| FOMC's Quarles Speaks | |||
| Feb 22 5:15 | |||
| FOMC's Bostic Speaks | |||
| Feb 22 17:10 | |||
| France Final CPI (m/m) | |||
| -0.1% | -0.1% | Feb 22 7:45 | |
| Second Estimate GDP (q/q) | |||
| 0.5% | 0.5% | Feb 22 9:30 | |
| Core Retail Sales (m/m) | |||
| 0.1% | 1.6% | Feb 22 13:30 | |
تطبيق نموذج الكأس و العروة
كيفية تطبيق نموذج الكأس والعروة في صفقات اليوم الفيديوالكامل
مقابلتي مع قناة العربية
I'll be at Friday's London Forex Show
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USD Gains from Indices Selloff
The USD-indices inverse relation was bolstered today as the US returned from a holiday Tuesday and the climb in USD continued for a third day. The dollar was the top performer while CHF and CAD lagged. A full slate of data from Australia, Japan and the UK is due up next. A 3rd USD trade was issued in the Premium Insights. Indices extend losses after Friday's doji action.
The dollar showed some better signs Tuesday as it climbed in a more-liquid market. EUR/USD appears to have stalled after two attempts at 1.25 and is consolidating in the 1.22-1.25 range in part due to softer (but still healthy) ZEW and eurozone consumer confidence readings.
Treasury yields continued to march higher with the entire curve hitting fresh multi-year highs. The enthusiasm was dampened slightly after a 2-year auction but sales of 5 and 7-year notes in the next two days could flip the script.
One particularly soft currency this month is CAD, which now at the bottom of the YTD performance chart. December Canadian wholesale sales fell 0.5% compared to a +0.4% reading expected but retail sales and CPI numbers later this week will be the numbers to watch.
In the immediate term, the focus will first shift to AUD, which hit a six-day low Tuesday. Job vacancies, construction work and wages data is all due early in Asia-Pacific trading. The Q4 wage index is forecast to rise 2.0% and it will likely be the market driver barring another big surprise in construction data. There are currently 2 AUD trades in the Premium Insights, both at break-even.
The focus then moves to Japan with the Nikkei PMI at 0030 GMT and the all-industry activity index at 0430 GMT. Both are unlikely to be market movers and China remains on holiday.
The big headlines in the day ahead will be from the UK jobs/wages report due at 0930 GMT. The path of UK economy at the moment remains opaque so all the numbers will be watched closely for any sign of Brexit strain or resilience. Wages numbers will be especially important with avg weekly earnings forecast to rise 2.5% y/y. The January FOMC minutes follow in Wednesday evening.
| Act | Exp | Prev | GMT |
|---|---|---|---|
| Wholesale Sales (m/m) | |||
| -0.5% | 0.4% | 0.3% | Feb 20 13:30 |
| Flash Manufacturing PMI | |||
| 55.4 | 55.5 | Feb 21 14:45 | |
| Eurozone Flash PMI Manufacturing | |||
| 59.2 | 59.6 | Feb 21 9:00 | |
| All Industries Activity (m/m) | |||
| 0.5% | 1.0% | Feb 21 4:30 | |
| Average Earnings Index (3m/y) | |||
| 2.5% | 2.5% | Feb 21 9:30 | |
| Eurozone Consumer Confidence | |||
| 0 | 1 | 1 | Feb 20 15:00 |
| FOMC Meeting Minutes | |||
| Feb 21 19:00 | |||
V-Shaped vs W-Shaped Bounces
In my latest video for GKFX, I explore the importance of distinguishing between V-shaped versus W-shaped bounced in equity indices & the implications for the path ahead. Full video.
Dead-Cat Dollar
The US dollar continued its modest rebound on Monday with China and North America on holiday. The Australian dollar was the top performer early in the week while the yen unwound some of last week's strength. CFTC positioning showed an ill-timed shift towards the dollar. A new Premium trade in a major index has been issued earlier, highlighting 5 technical factors, in addition to Thursday's index trade. The RBA minutes are due next, followed by the ZEW survey on Tuesday morning. The UK jobs report is on Wednesday and not Tuesday as reported earlier.
انتهاز الارتداد المتردد (فيديو للمشتركين)
The US dollar found some life on Friday and that continued Monday but we will have to wait until the day ahead to see if it was anything more than flows and position squaring ahead of a long weekend in yet-another dead cat bounce.
USD/JPY clawed its way up to 106.70 after falling to 105.50 at the lows on Friday. The bounce so far is well-within the standard range. One level to watch is the Sept 2017 low of 107.29 as that former support level will now act as resistance.
In economic news, the Eurogroup nominated Spanish economic minister De Guindos for the ECB vice presidency in a move that was generally expected. Spain was due for an executive position and there were few candidates to choose from so they were forced to take a politician at a time when central bankers are increasingly politicized. His motives are sure to be questioned during his 8-year term but for now he's saying all the right things.
Looking ahead, the RBA meeting minutes are due at 0030 GMT. Details about recent forecasts will be welcome as Lowe shifts to a more-upbeat outlook on growth but maintains the expectations for low inflation.
A bigger market mover will come at 100 GMT when the German ZEW sentiment survey is due. The consensus on the current situation is a dip to 94.0 from 95.2 last month. A strong reading could put the euro back on a path to a cycle high.
CFTC Commitments of Traders
Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.EUR +128K vs +141K prior GBP +15K vs +28K prior JPY -115K vs -113K prior CAD +33K vs +40K prior CHF -20K vs -20K prior AUD +9K vs +14K prior NZD +2K vs +3K prior
The theme was US dollar buying in the latest changes but that turned out to be the wrong move as the dollar sank back into the doldrums until Friday's bounce. Yen shorts continue to get beaten up, will they capitulate?
My Thursday Seminar in London
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