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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.
Intraday Market Thought: Poll-Watching but Euro Move Looms

by Adam Button | May 30, 2017 0:04
It's all about the polls as the UK election winds down and the market....The pound was the top performer in light holiday trading on Monday as it....CFTC positioning showed a big move in euro shorts...More on the latest drop in the euro below...Slippage in the euro ensued in eary Pacific trade on reports that Greece may....Draghi's comments that "extraordinary" amount of monetary....A series of campaign missteps left Theresa May vulnerable and voters began....The Manchester attacked added to anxiety and what looked like a sure thing was....Those are the kinds of numbers that put her close enough to the margin of error....On Friday, the pound fell more than 150 pips in a broad rout that ensure polls....On Monday, the news was better for the Prime Minister with an ICM poll putting....In response, cable rebounded 40 pips...The rebound may continue Tuesday as Chinese, US and UK traders return...At the same time, the week ahead features some major economic data points....CFTC Commitments of Traders....Speculative net futures trader positions as of the close on Tuesday...Net short denoted by - long by....EUR +65K vs +38K prior...GBP -24K vs -33K prior...JPY -52K vs -60K prior...CHF -20K vs -21K prior...CAD -99K vs -98K prior...AUD +3K vs +6K prior...NZD -9K vs -12K prior....The euro gradually had become the darling of the currency market...It's been a rapid shift from a large net short over the past month and the....The market loves a central bank that's bottomed out and an economy that'....Is this recovery for real?....Draghi was certainly optimistic in European Parliament on Monday as he....The ECB is trying to prepare the market for a taper signal in September while..
Intraday Market Thought: Soft Signals

by Adam Button | Oct 31, 2017 22:25
Soft US economic data sent incorrect signals over the past year but the....For the second day in a row both the pound was the leader and the loonie was....Higher than expected employment figures and lower than expected jobless rate....The FOMC decision is due on Wednesday...The Dow "divergence" addressed in today's Premium video (below)....هل حان وقت البيع؟ (فيديو للمشتركين فقط)....How strong is the US economy? If the consumer confidence survey from The....The index hit 125...9 in October compared to 121...3 expected...Manufacturing sentiment is also bubbly with the Chicago PMI rising to 66...2 compared to the 61...0 consensus...That's the best since March 2011...The reports are a continuation of a string of solid data points that are....Combine that with optimism about a tax cut and the US dollar is in a sweet spot...USD/JPY climbed a half-cent on Tuesday as October came to a close...The pound also continued to benefit from speculation that Carney will hike this....USD/CAD jumped after Canadian GDP contracted 0...1% in August compared to +0...1% expected...Poloz also reiterated that inflation risks are balanced and that the BOC will....That virtually rules out a December rate hike...Wednesday's FOMC decision is largely seen as a non-event but we think that&....The market is pricing in just a 0...8% chance of a hike and while it's still remote, the possibility of a hike....Yellen may decide she doesn't want to hamstring her successor into only....Still, what's most likely is a continued pledge to gradually hike rates....That should be enough to keep a bid in the dollar.
Intraday Market Thought: Dollar Solid Ahead of FOMC

by Adam Button | Dec 12, 2017 22:24
The US dollar climbed ahead of the Wednesday's FOMC decision on signs....The Australian dollar was the top performer on Tuesday while the euro....Japanese machine orders and the RBA's Kent are up before Yellen...A new Premium video has been issued and sent to subscribers on the rationale....The US PPI report doesn't always foreshadow headline inflation but is....The November report showed pipeline pressures at the highest since February....1% y/y compared to 2...9% expected...The US dollar got a lift from the report and continued higher for much of the....The USD also benefited from Congressional talk that passing the....That presents two-sided risks but early details show a 21% corporate tax rate,....What will matter more is how deductions and R&D are credited...USD/JPY rose as high as 113...75, which was the best since Nov 14...The pair is slowly approaching the tough zone of resistance in the 114-115 range...It's a zone that's been tested four times in the past year and held...The day ahead could be a big one on that front...If the FOMC hikes rates (an almost sure bet) and delivers some hawkish hints,....However if the Fed decides to stay coy before Powell takes the reigns and the....Ashraf will post a full Fed preview in English and Arabic in Wednesday's....nbsp;....Before then, some Asia-Pacific data could move markets...The RBA's Kent is due up at 0000 GMT...The market is increasingly expecting the RBA to stay on the sidelines for the....Yesterday's soft Q3 house price data underscored the challenges...Another report to note is the October Japanese machine orders report...The consensus is for a 2...9% rise after the 8...1% drop in September.
Intraday Market Thought: Has Cable Been Punished Enough?

by Adam Button | Jun 29, 2018 12:16
On the final day of week, month, quarter and half year, equity indices are....EURUSD rallies on flash CPI hitting the ECB's 2...0% goal (despite core remaining at 1...0%....On the day, euro leads all major currencies higher against USD, with the....The week wraps up with the US PCE report...US May core PCE price index and Canada's April GDP are due out at 8:30 ET....A new note updating the USDJPY Premium trade will be issued and sent after the....Cable Bottom?....Comments from the BOE's Haldane on Thursday underscored how the tables have....In mid-April cable had just touched the highest since Brexit as the market was....It was trading just shy of 1...44 then Carney hinted at some soft spots in the economy in an interview with the....The weakness was real as a series of economic data points missed expectations....3050...Shortly after it hit that low, which was the worst level since November, BOE....He emphasized minimal slack in the economy...In his view at least, nothing has really changed...If the data begins to turn then it will be right back to Plan A...So is the more than 1300 pip decline in the pair justified? Certainly there have....The US dollar is also higher across the board since the slide began but that....There's an argument that this is enough and with cable now testing....3000 from Q4 last year and the 2016 trendline support (see chart above)....Certainly, there haven't been any yet with the pair in a non-stop slide....The US dollar side also merits close scrutiny...Fed centrist Bostic talked about slowing the pace of hikes on Thursday and that....Much will depend on today's May PCE report...Core inflation is expected to tick up to 1...9% from 1...8% and headline to 2...2% from 2...0% but we're nearing the apex of the one-off factors that are boosting....Keep a close eye on personal income and spending as well, both expected up 0...4%..
Intraday Market Thought: Where to Ride out the Volatility

by Adam Button | Oct 12, 2018 8:02
We look at the causes of the latest round of fear and volatility and where....Stock markets were hammered again Thursday but it was the New Zealand....China trade balance is due up next...Thursday's Premium trade is firmly in the money after gold was bought at....The thesis was put forth in this week's English and Arabic videos...Why did Ashraf pick Thursday morning to buy gold? Why not in other....حان وقت الدخول (فيديو للمشتركين فقط)....There was no single trigger for the rout in markets but a handful of factors....1) Rates....Fed hikes are coming whether Trump likes it or not...The Fed will take pains to appear to be independent and that could harden their....In any case, the market is signalling a new regime of higher rates and....What would become of the 4...2% GDP growth when we take out 2...0% inflation, followed by the expiry of Trump's tax stimulus? 3...20% yields become an obstacle, especially when the IMF downgraded....2) The trade war....There was one good sign Thursday as the WSJ reported that Trump will meet with....It's no coincidence that equity selling started after Pence's anti-....The lines are being drawn for a long battle...3) Earnings....Big financials kick off earnings season Friday...Citigroup in particular might have insight into how consumers are coping....More broadly, the focus will be on guidance and commentary because the near....Companies warning about global growth may turn this from an equity event into....4) China....Perhaps the most - concerning chart right now is the Shanghai Composite...Yesterday's 5...2% decline broke major support in a drop to the lowest since 2016...Where to ride it out....Gold showed genuine signs of life Thursday in a $30 to close above the....With bonds, equities and almost everything else falling, there's an....More demand makes sense with looming trouble coming from the US midterms, the....Looking to China, the trade balance report is due later but there were also....A Politico report said it will be the status quo but that news did little to....Ashraf reminded us of the unusual event of the dollar failing to rise during the....That could be part and parcel of pre-empting a reflexive rise in the Chinese....And we know how that correlates with gold.