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Intraday Market Thought: Yen vs Gold - The Extreme Trade

by Ashraf Laidi | Jul 8, 2015 14:51
Gold's accelearating sell-off since June 18 highlights the metal's....Oil's 19% decline from its May highs at a time when central banks have....We saw these price worries escalate back in January-February in the midst of the....And with gold seen as a hedge for inflation, any signs that disinflation....The 34% plunge in the Shanghai Composite index over the last 3 ½ weeks....The aforementioned dynamics explain yen's outperformance relative to all....The acceleration of gold's sell-off since June 18 highlights the metal's....Oil's 19% decline from its May highs at a time when central banks have....We saw these price worries escalate back in January-February in the midst of the....And with gold seen as a hedge for inflation, any signs that disinflation....The 34% plunge in the Shanghai Composite index over the last 3 ½ weeks....The aforementioned dynamics explain yen's outperformance relative to all..
Intraday Market Thought: On the Latest US Dollar Weakness

by Adam Button | Nov 22, 2017 22:03
The main catalyst for US dollar bulls over the past 2 months has been tax....nbsp; The yen was the top performer Wednesday while the US dollar lagged...New Zealand retail sales beat estimates in early Asia-Pacific trading...One of the two Premium trades in EURUSD took 90-pip gain...6 of the existing 8 Premium trades are currently in the green...For months various markets have been pricing in changes to the US tax code...It's impossible to say exactly what's priced in but it's clear that....So why the US dollar weakness?....We've been writing this week about the divergence between stock markets and....In the past , there has been a solid correlation between the pair and equity....Recently, however, the S&P 500 and Nikkei have soared while USD/JPY has....One theory is that traders are wary of 'selling the fact' and getting....Perhaps that's true...Another is that the Fed is increasingly getting worried about low inflation...Today's release of the FOMC minutes showed some members want to hit the....There is probably some truth in that as well...Back to the tax story...The dollar is selling because of the tax plan...More specifically, the details of the plan...It's increasingly clear this isn't a broad-based tax cut...It's heavily skewed to corporations and the top earners, while offering....See Ashraf's notes on the disappointing tax holiday for US....Maybe the market is saying that this plan isn't going to boost incomes,....Instead it will add to the deficit and lead to spending cuts down the road...What it will do is boost corporate profits and that explains the rosy....Whatever the reason for the dollar selling, the USD/JPY chart sent a major....It broke the 100-day and 200-day moving averages, along with the October low in....It was part of a broad dollar rout...It's tempting to brush aside because of the US holidays but this move is too....Looking ahead, the Asia-Pacific calendar is light...Early in trading the Q3 New Zealand retail sales report showed a 0...2% rise excluding inflation...That's better than the +0...1% expected and the kiwi caught a small bid on the release.
Intraday Market Thought: Is the Worse of the Aussie Behind ?

by Adam Button | Nov 26, 2015 23:48
The latest economic numbers in Australia point to a stunted economy but there....In FX trading on the US Thanksgiving holiday, the dollar didn't get any....Japan's Oct CPI rose 0...3% y/y, beating expectations of 0...2% and previous 0...0%....The Premium Insights have two GBP trades ahead of Friday's release of UK Q3....Yesterday's Australian capex numbers were the worst in 30 years of records...Private capital expenditures fell a whopping 9...2% compared to the -2...9% consensus...The immediate reaction was a 40-pip decline in AUD/USD but it's....That's two poor readings for Q3 ahead of the RBA decision on Tuesday and....What's impressive is that the market hasn't shuddered despite such scary....If the Aussie can make it past the RBA and GDP without another push lower, it&....China and commodity prices will continue to be factors to watch but barring....Once Q3 is in the rearview mirror, the RBA may look towards the middle of next....Note that that in Sept/Oct/Nov there has been a series of higher lows in AUD/USD...The employment report was probably a mirage but AUD has been hit by some....We often ask: If something can't fall on bad news, why should it fall at..
Intraday Market Thought: What’s Next for The Dollar

by Adam Button | Mar 30, 2016 23:24
The post-Yellen US dollar selling stalled late Wednesday...We look at what's coming next...The New Zealand dollar was the top performer for the second day while USD....Australian job vacancies and private sector credit reports are due later...Thursday morning is the Eurozone flash CPI, detailed in Ashraf's Premium....nbsp; 2 new Premium trades have been issued since yesterday's EURUSD....Both trades are currently netting +70 pips in the green...The US dollar reaction following Yellen's speech is reminiscent of the post-....It included two days of heavy USD selling until it was exhausted and....Once again hike expectations have been dashed and now the market sees just a 20%....Essentially, Fed expectations have been wiped out...Contrast that with the generally solid tone of US economic data (at least....The market might be hesitant this week because of risks from non-farm payrolls...One small reassuring signal was in the ADP report...It showed 200K new jobs in March, slightly more than the 194K expected...Fed dove Evans kept the door open for two rate hikes this year but coupled....The outperformers against the US dollar have been commodity currencies and that&....The Fed and other global central banks are working to rekindle global growth...Many of the tail risks from 6 weeks ago have diminished and the relatively high-....The ANZ business confidence report for New Zealand for March is due at 0000 GMT....The prior reading was +7...1...The Australian dollar is in focus in the hours ahead with the Feb job vacancies....The latter is expected to rise 0...5% m/m.
Intraday Market Thought: Liquid(ity) Engineering

by Adam Button | Dec 19, 2016 0:25
The Chinese capture of a US drone rattled markets on Friday but the story....The yen is the early leader while the Australian dollar lags...CFTC positioning data shows the market piling into yen shorts...A new trade in NZD has been issued moments ago, while Friday's clsose....The US dollar fell on Friday and risk assets reversed lower after China....The move sparked tensions and tweets from the President-elect but it stopped....A reversal of some of that tension is the likely path for markets early in the....The market reaction to the drone seizure was outsized and that's no surprise....The lesson for the week ahead is to keep a close eye out for news and to buy....It's also a warning to remain cautious, even with the euro breaking....Markets tend to drift at this time of year, not to race...Aussie Downgrade?....The reason for some minor Australian dollar weakness to start the week was a....The update is due out in the hours ahead and the risk is that a ballooning....One Aussie....Commitments of Traders....Speculative net futures trader positions as of the close on Tuesday...Net short denoted by - long by....EUR -88K vs -115K prior...JPY -63K vs -34K prior...GBP -72K vs -77K prior...CHF -25K vs -25K prior...AUD +14K vs +21K prior...CAD -22K vs -18K prior...NZD -4K vs -2K prior....The weekly positioning data showed a rush out of euro shorts and into yen....It's the first post-ECB look at positioning...It's also the second week in a row of aggressive yen selling...Despite the fast move from flat to -63K, history shows there are likely still..
Intraday Market Thought: New Year, New Dilemma

by Ashraf Laidi | Jan 1, 2017 18:09
China's PBOC gradually returns to the headlines as it's gripped by the....Why is this a dilemma? CNY fell to 5-year lows due to surging capital....In order to support the yuan, the PBOC depleted its foreign currency reserves....The most conventional way to do that is by draining liquidity from the bond....Less liquidity means rising interest rates...How far have China's yields gone? The yield on Chinese 10-year govt bonds....30% last week, reaching its highest since August 2015, the very month China&....Chinese short term bonds also felt the strain as the overnight SHIBOR (the rate....As bond yields rise (also due to rising Chinese CPI and higher global yields)....These Wealth Management Products make up about 35% of China's GDP and are....Surely, you will be hearing about them from me again as the year progresses...PBOC Steps in....Add to all of this Fed hike expectations and downward pressure on CNY, you will....And so, aside from the problem of a falling currency, the central bank now....How do I step in?....Playing the “China Trade” in currencies can be done via AUD and/or....But how does one deal with the inevitable rumblings about rapid USD....Wishing you a Happy & Healthy New..
Intraday Market Thought: When Article 50 Hits

by Adam Button | Mar 13, 2017 17:18
A big week looms with the Fed decision and SNB getting top billing on the....But the main source of volatility could be the pound...Reports began to circulate over the weekend suggesting that May is targeting....Meanwhile, Scotland will hold another indpendence referendum, possibly next....There are 5 Premium trades currently in progress...A new tactical USD trade will be among the trades added as we approach the Fed....Triggering Artcile 50 is a unique even but it strikes us as one that's....Part of the market reaction may depend on the finesse of May's delivery and....But as Ashraf mentioned last week, any reiteration of the "Take it or....Like Friday's jobs report, it could be the kind of thing that sparks a....It's not necessarily an easy trade to anticipate but if the pound begins to....And dont forget the Fed's impact on GBPUSD...Commitments of Traders....Speculative net futures trader positions as of the close on Tuesday...Net short denoted by - long by....EUR -59K vs -58K prior...JPY -54K vs -50K prior...GBP -81K vs -66K prior...CHF -10K vs -9K prior...AUD +51K vs +33K prior...CAD +29vs +25K prior...NZD -4 vs +3K prior....The two big moves were in GBP and AUD...Specs are clearly betting against the pound in anticipation of Article 50...With the trade already so one-sided, that doesn't leave many sellers for....Stepping away from the short term, once in awhile we're reminded of how....The China Daily reports today on plans to build 40,000 football primary and....Those are mind-boggling numbers...Those same sorts of investments are happening all over the business....5 pp of GDP, China is boldly plotting for total dominance...There will be waste, no doubt, but that kind of ambition filters down everyone..
Intraday Market Thought: Faith Fades, Bombs Fall

by Adam Button | Apr 13, 2017 22:57
The confidence markets had in the new President and the Republican agenda is....The Australian dollar was the top performer on the day while the Canadian....Japanese industrial production is next...Overnight's Aussie jobs figures exceeded expectations, forcing the....Our indices trade joins metals deeper in the green...The quintuple flip-flop from Trump on Wednesday was followed by a fresh bomb....This time, it was literally a bomb as US forced dropped a GBU-43/B Massive....It's now the largest non-atomic bomb ever used in combat...Markets wobbled a bit on the headlines but takeaways are tough...On the one hand, US officials wouldn't even say if Trump knew about it or....A more sinister view would be that after last week's bombing in Syria, Trump....He wouldn't be the first leader who campaigned on less aggression and had....A less-sinister but more-troubling view for markets is that Trump doesn't....Markets have made a big bet on deregulation, infrastructure spending....Confidence is still high but it's waning and almost daily...On Thursday, the S&P 500 fell 16 points to 2329 and is now just 7 points....In FX, the US dollar was strong and the general theme was an unwind of the moves....We've highlighted bonds lately but 10s were flat on the day...Another spot we're watching closely is volatility...Several measures are disconnecting from markets in a way that could signal....The problem is that many such signals have been wrong in the past but volumes....Markets are likely to quiet down in the day(s) ahead with Good Friday and Easter....Asia-Pacific trading is mostly open on Friday and the US has decided to release....The next even to watch is Japanese industrial production at 0430 GMT...It's the final report and no revisions are expected from the +2...0% m/m prelim data.
Intraday Market Thought: Dollar's Next Hurdles

by Adam Button | May 12, 2017 1:25
A bull market is like a great trader...The good days are solid and consistent, while the bad days are rare and the....We explore the USD below...In response to rising questions about metals from Premium subscribers with....nbsp;....That's how the US dollar and S&P 500 are performing at the moment...A shudder hit both early in US trading, but it came after days of gains and by....On the day, the yen was the top performer while the New Zealand dollar....The Asia-Pacific calendar winds down with a quiet calendar but US CPI and....The Fed is helping to keep a constant bid under the dollar...Comments from NY Fed's Dudley didn't get much attention because he was....He said the recovery continues apace, which is seemingly innocuous but in the....As has been shown over the last 6 months, everything can change and the swiftest....As we noted earlier in the week, the quiet calendar helped the US dollar....That changes Friday when CPI and retail sales are released at the same time...At some point the market (and the Fed) will lose patience with the inability of....The retail sales control group is expected to rise 0...4% and it will need to at least come close or some second thoughts will creep....There is likely more leeway on inflation but beyond the June FOMC, Yellen will....But even if the numbers are soft, it's proven tough to hold US dollar shorts...The slump on last week's non-farm payrolls was wiped out by Monday and..
Intraday Market Thought: Fed Finds Doubt, BOC Finds Confidence

by Adam Button | May 24, 2017 23:05
The FOMC minutes showed that officials aren't dead-set on hiking in June....That led to a US dollar lagging Wednesday while in contrast CAD led the....Next, it's onto comments from Evans, Sakurai and Debelle...A new GBP trade has been issued in addition to the 5 existing Premium....USD/CAD fell a full cent on Wednesday as commentary from the Fed and BOC....Two weeks ago, a Fed hike was seen as a done deal but soft data has clouded the....The minutes said that most policymakers wanted to hike soon but generally agreed....And that was before soft retail sales and CPI...Plenty of economic data remains to help shape the Fed's view but the broad....The CME Fedwatch implied probability of a hike remains at 82% but that will be....In contrast, the BOC was pessimistic early in the year but has been bombarded....Poloz largely brushed it off but in the latest BOC statement he changed tack and....The statement said the neutral stance was 'still' appropriate but that....The Canadian dollar climbed across the board despite a 20-cent dip in oil...The pair will be back in focus on Thursday with the OPEC decision due...It's been widely communicated that a 9-month extension is coming but the....Before the focus shifts to OPEC, central banks speakers from around the world....It begins at 0125 GMT with the Fed's Evans...He could single-handedly beat back the dovish Fed sentiment...He's followed 5 minutes later by the BOJ's Sakurai...Then, at 0800 GMT, the RBA's Debelle speaks in London...The New Zealand budget at 0200 GMT could also be a market mover.