Intraday Market Thoughts

On the Latest US Dollar Weakness

Nov 22, 2017 22:03 | by Adam Button

The main catalyst for US dollar bulls over the past 2 months has been tax reform, but that could also be the catalyst for the bears as Ashraf indicated here and here.  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.

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On the Latest US Dollar Weakness - Usdjpy Daily 22 Nov 2017 (Chart 1)

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 passing something is more likely than ever. So why the US dollar weakness?

We've been writing this week about the divergence between stock markets and USD/JPY. In the past , there has been a solid correlation between the pair and equity prices. Recently, however, the S&P 500 and Nikkei have soared while USD/JPY has languished.

One theory is that traders are wary of 'selling the fact' and getting out of the way early. 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 pause button after a December hike and wait for inflation to get closer to target. 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 little to the vast majority of Americans. See Ashraf's notes on the disappointing tax holiday for US multinationals and rising cost of debt in the aforementioned pieces.

Maybe the market is saying that this plan isn't going to boost incomes, wages, investment or growth. 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 reaction in stocks.

Whatever the reason for the dollar selling, the USD/JPY chart sent a major signal Wednesday. It broke the 100-day and 200-day moving averages, along with the October low in a 125 pip drop. It was part of a broad dollar rout. It's tempting to brush aside because of the US holidays but this move is too big and long-lasting to ignore.

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.

قوة العنق والكتف الايمن

Nov 22, 2017 18:32 | by Ashraf Laidi

هل تم أختراق خط العنق في الرسم البياني لليورو ؟ هل تأكدت فرص الشراء على الزوج و ماهي احتمالات الارتداد و اعادة الاختبار ؟ الفيديو الكامل هنا

قوة العنق والكتف الايمن - Orbex Video Snapshot Nov 22 2017 (Chart 1)

USD Fails to Follow Indices

Nov 22, 2017 12:55 | by Adam Button

The march higher in equities continues after existing home sales numbers beat estimates but the reason that USD remains weak across the board is attributed to the fact that emerging markets are fuelling global indices, rather than US data. (see chart below). UK Chancellor Hammond announces a non-inspirting budget and GBP slips off its highs after 2017 and 2018 GDP growth estimates have been revised lower. The minutes of the Oct 31-Nov 1st FOMC meeting are out at 7 pm GMT/London.  Ashraf has laid out in today's Premium video that Emerging Markets funds are outperforming their US counterparts. The Premium video will be posted before the US stocks session.

USD Fails to Follow Indices - Spx Eem 22 Nov 2017 (Chart 1)

The quiet-markets trade we wrote about earlier this week bore fruit as commodity currencies rallied and the S&P 500 jumped to a fresh record. The yen remains defiantly bid as it has all year.

AUD and CAD resilience against USD as oil climbed and iron ore hit a two-year high. The S&P 500 rose 17 points and touched 2600 for the first time.

In spite of the mammoth climbs in asset prices since the crisis, one area that remains relatively depressed is US housing. It's the area where the crisis began and many buyers and speculators continue to carry the scars.

That may change in the years ahead. October US existing home sales rose to 5.48m from 5.37m, a 2.0% m/m increase. The median house price is $247K. Compare that to neighbouring Canada where the average selling price is more than double, despite lower incomes. Signs of tightening continue to creep in with US inventories down 10.4% y/y to the lowest since 1999. If the US expansion is to maintain for its pace for a few more years, it will likely be on the heels of rising household spending due to climbing home prices, along with a healthy jump in construction.

Looking ahead, US jobless claims, durable goods and FOMC minutes are out later. Expect thin trading volumes in the US ahead of Thursday's Thanksgiving Holiday.

Act Exp Prev GMT
Second Estimate GDP (q/q)
0.4% 0.4% Nov 23 9:30
Core Durable Goods Orders (m/m)
0.4% 0.7% Nov 22 13:30
FOMC Meeting Minutes
Nov 22 19:00

What's next for Merkel & Germany?

Nov 21, 2017 18:59 | by Ashraf Laidi

Will there be another round of elections? Can Merkel resign? Full analysis.

ماذا بعد في ألمانيا و لميركل؟

Nov 21, 2017 18:40 | by Ashraf Laidi

هناك المزيد من الثرثرة بأن ألمانيا قد تجرى انتخابات جديدة بعد شهرين من إجراء الانتخابات، وهى حالة لم يسبق لها مثيل فى تاريخ البلاد بعد الحرب التحليل الكامل