Intraday Market Thoughts

US data drags USD , Aussie capex next

Nov 26, 2014 23:00 | by Adam Button

US durable goods orders have been flat since March and that was one of the reasons the US dollar was the laggard on Wednesday. The kiwi and pound sterling where the top performers. Australian capex is due later as the US bows out of the week for holidays.  Today's 2 Premium Trades are driven by a developing Head-&-shoulder formation in the 10 and 2-year yield spreads between two particular nations. this is leading us to issue 2 new shorts as highlighted by the 3 charts in today's Premium Insights.

Thanksgiving meant several US data points were squeezed in Wednesday. The most notable was durable goods orders; excluding air and defense, orders fell 1.3% compared to a 1.0% rise expected. The average over the past seven months has been close to flat – something that's at odds with the US recovery narrative.

In the PCE report, income and spending were both a touch soft while core PCE rose 1.6% y/y compared to 1.5% expected in a tentative sign of inflation. Initial jobless claims were high at 313K vs the 288K consensus.

It's also growing increasingly clear that the hyper-strong Philly Fed last week was an outlier. The Chicago PMI fell to 60.8 from 66.2, about 3 points below estimates in a sign of solid but not strong manufacturing. Homes sales data and the final U Mich consumer sentiment survey were also soft.

The numbers sparked a roughly 30 pip decline in the US dollar across the board, which is a surprisingly sturdy performance for the buck despite some worrisome numbers. The euro in particular took advantage and rallied up to 1.2534 in the third day of gains after the slump on Draghi's comments Friday. EUR/USD eventually stalled at the downtrend from Oct 15.

The main event in the day ahead is the OPEC decision, which will leak out around 1400 GMT. All signs are pointing to no change in quotas and that will threaten the Nov low of $73.25 in WTI.

Before that, Australian private capex data for Q3 is due. Spending has generally been in decline since mid-2012 and it's no surprise that the Aussie peaked about a year earlier. For Q3, spending is expected down 1.9%. The data is due at 0030 GMT.

Another data point to watch is the net currency sales report from the RBNZ. That will likely confirm intervention over the past few months in NZD

Act Exp Prev GMT
Durable Goods Orders (OCT)
0.4% -0.6% -0.9% Nov 26 13:30
Durable Goods Orders ex Transportation (OCT)
-0.9% 0.5% 0.2% Nov 26 13:30
Continuing Jobless Claims (NOV 14)
2.316M 2.350M 2.333M Nov 26 13:30
Initial Jobless Claims (NOV 21)
313K 288K 292K Nov 26 13:30

When Yield Spreads Show Head & Shoulders

Nov 26, 2014 19:49 | by Ashraf Laidi

A developing head-&-shoulder formation in the 10 and 2-year yield spreads between two certain nations is leading us to issue two new shorts in today's Premium Insights. Charting technical dynamics among macroindicators may not be common, but in the rare occasions when we capture such developments, we must not miss the opportunity to take action, especially as it makes sense from a fundamental perspective and technical standpoint on the spot rate. Full charts & trades found here

Dollar Pauses for Breath

Nov 25, 2014 23:30 | by Adam Button

It could be a holiday-shortened week near the end of the month but the inability of the US dollar to rally on good GDP numbers should be a concern. Overall, the yen was the best performer Tuesday in a modest relief rally while the Aussie lagged. The Asia-Pacific calendar features Japanese small business confidence. This week's Premium Insights include 2 new trades in USDJPY alongside 2 charts ahead of what will be a busy first two weeks of December, including Japan's elections, the Fed meeting and prolonged equity market gains.

The US dollar rose near the best levels of the day after GDP revisions but only for a moment. Afterwards a wave of selling took USD sharply lower.

Q3 GDP rose a hearty 3.9%, solidly better than the 3.3% reading expected. The gains came despite a downward revision in net exports and govt spending. Instead it was consumers and private investment that carried the growth, which is a good sign going forward.

EUR/USD fell to a session low 1.2402 after the data but quickly rebounded up to 1.2475 and then continued another 10 pips higher after soft US data from the Richmond Fed and weak consumer confidence.

What's most troubling is the lack of USD gains on GDP. It's not the first time recently that that dollar has struggled to capitalize on good news and oftentimes that's a warning for the bulls. Wednesday's durable goods orders and PCE numbers might send a clearer signal.

The other obsession in the markets is OPEC and oil. Crude is near the cycle lows after all signs on Tuesday pointed to no production cuts at Thursday's meeting. Instead, countries may pledge to follow current quotas more closely but that will be a disappointment to markets.

The Canadian dollar remains caught between lower oil and better economic data. In the past month, employment, CPI and manufacturing sales have all been bullish for the loonie. On Tuesday retail sales rose 0.8% versus 0.5% expected but the loonie struggled to hold onto gains.

Even if oil can stabilize, there could be some upside in CAD as fundamentals improve.

In the hours ahead, the focus will shift to Japan with the relatively minor release of small business confidence at 0500 GMT. The consensus is for a slight improvement to 47.5 from 47.4 but the risks may be to the downside given the drop in GDP.

Act Exp Prev GMT
GDP Price Index (Q3)
1.4% 1.3% 1.3% Nov 25 13:30
Durable Goods Orders (OCT)
-0.6% -1.1% Nov 26 13:30
Durable Goods Orders ex Transportation (OCT)
0.5% -0.1% Nov 26 13:30
Retail Sales Less Autos (SEP) (m/m)
0.0% 0.3% -0.2% Nov 25 13:30

US Dollar Losing its Mojo

Nov 25, 2014 23:30 | by Adam Button

It could be a holiday-shortened week near the end of the month but the inability of the US dollar to rally on good GDP numbers should be a concern. Overall, the yen was the best performer Tuesday in a modest relief rally while the Aussie lagged. The Asia-Pacific calendar features Japanese small business confidence. This week's Premium Insights include 2 new trades in USDJPY alongside 2 charts ahead of what will be a busy first two weeks of December, including Japan's elections, the Fed meeting and prolonged equity market gains.

The US dollar rose near the best levels of the day after GDP revisions but only for a moment. Afterwards a wave of selling took USD sharply lower.

Q3 GDP rose a hearty 3.9%, solidly better than the 3.3% reading expected. The gains came despite a downward revision in net exports and govt spending. Instead it was consumers and private investment that carried the growth, which is a good sign going forward.

EUR/USD fell to a session low 1.2402 after the data but quickly rebounded up to 1.2475 and then continued another 10 pips higher after soft US data from the Richmond Fed and weak consumer confidence.

What's most troubling is the lack of USD gains on GDP. It's not the first time recently that that dollar has struggled to capitalize on good news and oftentimes that's a warning for the bulls. Wednesday's durable goods orders and PCE numbers might send a clearer signal.

The other obsession in the markets is OPEC and oil. Crude is near the cycle lows after all signs on Tuesday pointed to no production cuts at Thursday's meeting. Instead, countries may pledge to follow current quotas more closely but that will be a disappointment to markets.

The Canadian dollar remains caught between lower oil and better economic data. In the past month, employment, CPI and manufacturing sales have all been bullish for the loonie. On Tuesday retail sales rose 0.8% versus 0.5% expected but the loonie struggled to hold onto gains.

Even if oil can stabilize, there could be some upside in CAD as fundamentals improve.

In the hours ahead, the focus will shift to Japan with the relatively minor release of small business confidence at 0500 GMT. The consensus is for a slight improvement to 47.5 from 47.4 but the risks may be to the downside given the drop in GDP.

Act Exp Prev GMT
GDP Price Index (Q3)
1.4% 1.3% 1.3% Nov 25 13:30
Durable Goods Orders (OCT)
-0.6% -1.1% Nov 26 13:30
Durable Goods Orders ex Transportation (OCT)
0.5% -0.1% Nov 26 13:30
Retail Sales Less Autos (SEP) (m/m)
0.0% 0.3% -0.2% Nov 25 13:30

From Vienna to Zurich: Commodities accumulators panic

Nov 25, 2014 18:17 | by Ashraf Laidi

Will the broadening risk of deflation be diminished by this week's OPEC summit and Swiss gold vote? Full charts & analysis.


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