Instraday Market Thoughts

USD Unleashed ahead of Big Week

Jul 25, 2014 16:22 | by Ashraf Laidi

Which pair has just broken above its 55-WMA for the first time in 10 months, produced two major Golden Crosses in less than 5 weeks and, which is currently sitting on 130-140 pips gain in our Premium Insights?  Next week's triple US release of ADP, GDP & FOMC (Wednesday) & NFP (Friday) may unleash fresh USD buying, with GDP likely show a 2.9% bounce and the Fed due to affirm the inevitable step towards the end of tapering, alongside some positive colour on jobs. NFP impact may not be too clear, but expectations are looking brighter, considering the clues from ADP and recent trend in jobless claims. Gold selling is seen stabilizing around 1285 as yields are unable to to make any sustainable recovery should help gold remain supported. We remind our subscribers that they are free to hold their longs until the final target, open various positions are different levels aimed at targets around the final objective, or close positions to lock up profits 50-80 pips before the final target in order to re-open fresh trades aiming at around the final objective.

Jobless Claims Give USD a Pulse, Japan CPI Next

Jul 24, 2014 22:30 | by Adam Button

The US dollar climbed steadily in New York trading after the best jobless claims report since 2006. It was the best performer on the day while the kiwi and Aussie lagged. Japanese CPI is due later.  In our Premium Insights, we issue fresh trades in EURUSD and GBPUSD with four new charts ahead of Friday's UK GDP & following today's PMI-driven EUR bounce. Sticking with our EURJPY and EURAUD shorts, especially as the latter entered at 1.46200, targeting 1.4200 missed its final target by 12 pips. We also await the final 1.1020 target in AUDNZD after the 1.0830 entry on Tuesday produced 1.1016 on Thursday, instead of the final 1.1020. All charts & trades are in the

The US dollar gained 20-40 pips across the board in NY hours in a steady grind after initial jobless claims improved to 284K from 303K. The reaction was an immediate rise in the dollar followed by a steady climb.

The data was strong enough that markets cast aside other, softer figures. June new home sales plunged to 406K from 475K and the Market manufacturing PMI slipped to 56.3 from 57.5 expected.

One of the main victims of USD strength was gold as it fell below the July low to the worst levels in one month at $1287. The 200-dma just below cushioned the losses and will be a key support line in the days ahead.

Taking a broader view of gold the inability to sustain a rally on a variety of geopolitical crises and repeated dovish headlines from the Fed is a discouraging signal and points to the downside potential.

Other news came from the IMF as global growth forecasts were cut in a widely expected move. US GDP was lowered to 1.7% from 2.8% in the most dramatic change. Emerging markets, especially Latam, was also downgraded. The good news was in the UK and Spain were forecasts for this year and next were boosted.

Looking ahead, the yen enters the spotlight with CPI numbers due at 2330 GMT. USD/JPY has risen for 5 straight days and touched a 3-week high Thursday and crossed the 55-dma. A weak CPI would start to kindle the fires for more QE or other measures. At the very least it could boost USD/JPY toward the June high at 102.50.

Act Exp Prev GMT
Tokyo CPI (JUL) (y/y)
3% Jul 24 23:30
Tokyo CPI ex Food, Energy (JUL) (y/y)
2% Jul 24 23:30
Tokyo CPI ex Fresh Food (JUL) (y/y)
2.7% 2.8% Jul 24 23:30
National CPI (JUN) (y/y)
3.7% Jul 24 23:30
National CPI Ex Food, Energy (JUN) (y/y)
2.2% Jul 24 23:30
National CPI Ex-Fresh Food (JUN) (y/y)
3.3% 3.4% Jul 24 23:30
GDP (Q2) (q/q) [P]
0.8% 0.8% Jul 25 8:30
GDP (Q2) (y/y) [P]
3.1% 3.0% Jul 25 8:30
Manufacturing PMI [P]
56.3 57.5 57.3 Jul 24 13:45
Nomura/ JMMA PMI Manufacturing (JUL) [P]
50.8 51.5 Jul 24 1:35
New Home Sales (m/m)
-8.1% -5.3% 8.3% Jul 24 14:00
Continuing Jobless Claims
2,500K 2,510K 2,508K Jul 24 12:30
Initial Jobless Claims
284K 308K 303K Jul 24 12:30
Jobless Claims 4-Week Avg.
302.00K 309.25K Jul 24 12:30

Euro's PMI Squeeze, GBP Awaits GDP

Jul 24, 2014 19:23 | by Ashraf Laidi

Euro's reprieve from better than expected PMI data proved short-lived, while GBPUSD selling intensified today ahead of Friday's release of UK Q2 GDP. 1 of 2 GBUSD trades has been stopped out. We issue fresh trades in EURUSD and GBPUSD with four new charts ahead of Friday's UK data. Our Premium trades in EURJPY remain in progress, while our two EURAUD shorts, are +500 pts in the money, with the 1.4600-1.4630 short entry on Tuesday, targeting 1.4200 missed its final target by 12 pips (today's low was 1.4212). Similarly, our long in AUDNZD issued on Tuesday at 1.0830 produced a high of 1.1016 on Thursday, 4 pips short of the final 1.1020 target. The trade remains intact. All charts & trades are found the Trades section.

Act Exp Prev GMT
Eurozone - Indice PMI des services allemand (JUL) [P]
56.6 54.5 54.6 Jul 24 7:30
Eurozone PMI Manufacturing [P]
51.9 51.7 51.8 Jul 24 8:00
Eurozone Services PMI [P]
54.4 52.7 52.8 Jul 24 8:00
GDP (Q2) (q/q) [P]
0.8% 0.8% Jul 25 8:30
GDP (Q2) (y/y) [P]
3.1% 3.0% Jul 25 8:30

Silver's Soaring Specularive Sentiment

Jul 24, 2014 12:22 | by Ashraf Laidi

Silver's net speculative commitments rocketed 436% from a net long balance of 766 contracts in the week of June 3rd to a net long position of 4,106 contracts. Net longs went on to rise 224% and 120% in the subsequent two weeks. What's going on? Full charts & analysis.

Why the Kiwi Rolled Over After Rate Hike

Jul 23, 2014 23:11 | by Adam Button

The RBNZ hiked rates but the New Zealand dollar plunged early in Asia-Pacific trading. On Wednesday, the Australian dollar led the way while the pound lagged in the sixth day of declines. Japanese trade balance is due later. 

A hike from the RBNZ wasn't a sure thing – the OIS market was only pricing an 86% chance and 1 of 15 economists surveyed by Bloomberg predicted no change. Yet when Wheeler boosted rates to 3.50% from 3.25% the kiwi plunged to 0.8610 from 0.8700.

Two factors weighed. The first was a fresh and aggressive effort to jawbone. Wheeler said the current NZD level is unjustified and unsustainable. He added that the kiwi could have a big fall. Some jawboning was expected but it's a tactic that tends to work best when it's going with the momentum of the market and the recent failure at the 2011 high has awakened the bears.

The second factor was likely the larger one and it was Wheeler saying the “The speed and extent to which the OCR will need to rise will depend on the assessment of the impact of the tightening in monetary policy to date.”

What changed from the previous statement was the second half of that statement. In sum, “assessing” is something that will take time and it's a hint that the RBNZ is now on the sidelines.

The market had been pricing in another 40-50 bps in rate hikes in the coming year but that's now less certain.

We have been bearish on the New Zealand dollar and the fundamental case is now beginning to align with the technical picture. The fall today also breaks the 100 and 55-day moving averages with no firm support below.

Up next is Japanese trade balance at 2350 GMT. The market is looking for a 642-yen deficit. 

Our Premium subscribers trades long AUDNZD & short NZDUSD yesterday are near their final targets. For access, click on the charts and trades of the Premium Insights.
Act Exp Prev GMT
Adjusted Merchandise Trade Balance (JUN)
¥-862.2B Jul 23 23:50
Merchandise Trade Balance Total (JUN)
¥-642.9B ¥-909.0B Jul 23 23:50
Trade Balance (JUN) (m/m)
$150M $285M Jul 23 22:45
Trade Balance (JUN) (y/y)
$1.15B $1.37B Jul 23 22:45