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Intraday Market Thoughts
March 11, 2010 12:40 ET: Revisiting the S&P500 and VIX charts in Monday's article showing how the S&P500 / VIX ratio is unable to break above the 65 resistance. 65 = the ratio. A higher ratio corresponds to higher S&P relative to VIX, hence bullish for markets and vice versa. Today, the S&P500 / VIX Ratio is at 60, down 5 points from Monday, which supports my anticipation for underperformance in S&P500 relative to the VIX. My forecast for a Chinese rate hike tomorrow (see previous note) and possible disappointment in US retail sales could well drag down the ratio further down. Note how that 65 level also coincided with the 200-weel moving average. http://bit.ly/ b3SlDw
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March 11, 2010 09:41 ET: Markets are increasingly tying last nights stronger than expected China inflation to rising chances of a tightening decision from the PBOC tomorrow (higher reserves requirements, rate hikes or more cutback in bank lending). Any further tightening action from China would crimp the risk trade to the benefit of the US dollar. This may help explain golds retreat towards 1100 despite the fact that the metal began falling in NY Wed afternoon trade. Readers of this website were warned 1 day before the Feb 12 increase in reserve requirements by the PBOC when the media was abuzz with Greece. Our rationale for alerting the RR hike was based on stronger than expected Jan banking loans data (and not on CPI which was softer than expected). Today, the media is more mature in these matters, expanding its coverage of a possible tightening as early as tomorrow (40% possible). GBPUSD fails at 1.5048, eyeing 1.4930, CAD broadens losses , eyeing 1.0345 and 87.20 in USDCAD and CADJPY respectively.
March 11, 2010 04:58 ET: NZD weakness extends in European trading after the RBNZ decision to hold rates unchanged was accompanied by a dovish statement (no rate hike until before summer). NZDUSD hovers around 0.70, capped at 0.7050, with prelim downside target at 0.6930. NZDJPY consolidates at 63.30s territory, but 64.70 resistance holding since Feb 3. Chinas faster than expected CPI was accompanied with relatively cool Feb banking loan data (CNY 700 bln vs, exp CNY 675 bln). Remarks from Chinas stats bureau foreseeing mild inflation do will not prevent further tightening measures; especially as the Chinas Banking Regulatory Commission reiterated its calls for banks to limit credit expansion. This MAY help explain golds drifting near 1110 despite euros recent advances following JC Trcihets tacit approval for the EMF. EURUSD med term trend line resistance from Fen 9 high at $1.3670, a break of which calls up $1.3730.
March 10, 2010 10:53 ET: For those asking about the recorded version (online) of my 1-day course in London this Saturday, it will be the first time CMC will record such an event so no assurances on the level of the quality in capturing the details of the charts. Those paying 299.00 to attend the course in person will not only get handouts of the course but, also take part in active Q&A session as well as the Lunch-time discussions, which have always proven to be of added value in past occasions. Intraday-Correlations, measuring FX secular strength/weakness on intraday basis and detailing the trading on the news w/ technical approach in cross-markets are some of the topics we will discuss in detail in and outside of the classroom.
LINK TO REGISTER http://bit.ly/ bSHPbb
March 10, 2010 07:44 ET: RBNZ RATE DECISION, AUSSIE EMPLOYMENT figures and SWISS NATIONAL BANK decision will be the source of potentially KEY MOVES IN FX as traders find clues for further improvement in the high yielders or a pullback off their 2 month highs. Seel Link for delatiled caledar of these events http://ashraflaidi.com/ economic-calendar/ RBNZ decision expected to keep rates unchanged at 2.50% but watch for any dovish language considering the recent strengthening of the currency. Aussie employment have been stellar in terms of both falling unemployment rate and rising employment change, which means that any retreat in the figures could weigh on the Aussie especially if CHINESE data raise speculation of further PBOC TIGHTENING. Speculation that tomorrow's SNB policy decision may not sound the same urgency in capping the franc as in previous quarters, which could drag support CHF vs. AUD and EUR. REMAIN ALERT from the possible combination of any disppointment in US RETAIL SALES on Fri and faster tigthening signs from China. Meanwhile, nothing comes out from Greece, Washington, Germany except mixed statements about the EMF.
March 10, 2010 05:15 ET: MORE POOR UK DATA as UK Jan manufacturing output fell 0.9% (vs exp +0.3%) but rose 0.2% y/y, while Indus production -1.5% m/m vs exp -0.8%. GBPUSD enters its 3rd daily decline, eyeing $1.4850 as the 2 and 3 hour stochastics point lower. EURGBP attempting to close above 0.91 for the first time since Nov 30--the 61.8 retracement of the 0.94-0.86 decline. Therefore, EURUSD weakness must emerge in order for EURGBP to retreat anew as we do not expect any marked rebound in cable above $1.5. JUST AS GOLD PEAKED OUT at 1140, SILVER topped out at 17.55 unable to close above the 61.8% retracement of the 18.85-14.62 decline. Daily silver stochastics also flattening. Updates and IMTs are updated less frequently as Im on a business trip in Milan. GOLD prelim resistance at 1126 -- 50% retracement of the decline on the 4-hour chart, now eyeing 1115.
March 9, 2010 11:01 ET: Greek PM Papandreou's trip to Washington did not stop credit agencies from issuing cautious notes over Greek banks. Greece's austerity package was mainly designed to win some time and fend off the credit rating agencies. But if the aim of the austerity package is to serve as a bargaining tool towards France and Germany and a potential qualifier for IMF assitance, then we could see more noise/criticsim/counterstatements about European solidarity instead of concrete aid. Papandreou's also didnt prevent the ECB from slamming the idea of a European Monetary Fund, which is based on bailouts and rescue package--against the practices of the Bundesbank model. And during this cacophony of formal speeches and declarations, the Federal Reserve gives more details about its exit strategy, via reverse repos. This explains the defensive stance of the euro below $1.36 and the loonie's retreat bak to 1.03.
March 9, 2010 06:25 ET: CHINESE GOLD REMARKS overnight helped drag the metal lower when the head of State Administration of Foreign Exchange said China faced constraints in adding gold holdings, considering it already holds 3000 tons. SAFE said the long term yield of holding was not good, dampening speculation that Beijing would buy the remaining 191 tons of gold on offer by the IMF. Whether these methods are a way to lower the price of gold with the intention of buying it later at more attractive prices remain to be seen. Golds failure to break 1140 gives way to 1105 as the next target, followed by 1087 viable this week. GBPUSD resumes its post-data damage, hitting the $1.4930 target in last IMT, but support standing at $1.4860. As yen stabilizes, NZDJPY and CADJPY appear most vulnerable of the yen crosses to lose their recent gains, eyeing 61.80 and 86.60. *** 3 DAYS REMAINING TO REGISTER FOR ASHRAF'S 1-DAY COURSE in LONDON *** Register here http://bit.ly/ bSHPbb
March 8, 2010 20:23 ET: MOODYs UK BANK ALERT: Moodys says in special report on UK banks that their extraordinary support obtained during the crisis is being gradually phased outm but does not add anything on the implications of this transition. GBPUSD nears $1.4980 target after February RICS figures on house prices tumble to 17 from 31 (lowest since Aug 09). With no key UK data in sight, the combination of negative UK positioning and possible profit-taking in Asian equities will be needed to break below $1.4980 and onto $1.4930. JPY stabilizes after Monday weakness as Asian stocks get in the red. GOLD CONFIRMS FAILURE AT 1140. Next downside target at 1112-13.
March 8, 2010 14:06 ET: US Markets adrift in neutral territory as the risk appetite cannot build on Friday's gains. GBPUSD loses +170 pts to $1.5030s on a combination of profit-taking and dovish comments from BoE's Kate Barker indicating a bumpy path to recovery while allowing for the possibility of further quantitative easing. S&P500 testing the trend line resistance from the Jan 11 high at 1140. GBPUSD hovers at the $1.5070s level indicated in the prior IMT, but any renewed selling in Asia could send cable back down to $1.4980. Watch out for UK Feb RIC housing figures at 0:01 (exp 35 from 32) and BRC retail sales. Euros failure was at $1.37 (lower than anticipated resistance of $1.3770) before retreating to $1.3630, now running the risk of calling $1.3570 as PM Papandreou's speech was countered by critical remarks from ECBs Stark regarding the notion of a European rescue fund (EMF).
March 8, 2010 06:15 ET: European markets stall in Monday morning despite a 2% rally in Tokyo and Hong Kong, while Dow futures are unchanged. With equities have already rallied on Friday in response to US jobs data, the lack of US data today and tomorrow could allow the bulls to retest the mid Jan highs. AUDUSD breaks well above the 0.9080 resistance and could be set for further gains towards the 0.9230s, which coincides with the trend line resistance from the Nov high through the Jan high. GBPUSD stall below $1.52, with any deterioration in appetite likely to drag down cable back to $1.5090 (toppish oscillators in 3-hr chart). $1.5240 stands as the short-term obstacle in the event of fresh pick-up. markets await Greek PM Papandreou trip to Washington as speculation mounts about a possible IMF deal.
March 7, 2010 19:01 ET: Its all about yen weakness in Asian trade as the combination of improved risk appetite after better than exp US jobs report and public statements from Japanese officials (adding to QE and allocating budget for FX intervention). CADJPY and NZDJPY among the best performing pairs, eyeing prelim targets at 88.50 and 63.90. Weekly candle in CADJPY was particularly bullish, suggesting the possibility for 89.40 especially amid the absence of key data in Mon and Tues. USDJPY eyes interim resistance at 91.35-0.
March 5, 2010 12:09 ET: Markets anticipate the 17:30 GMT join press conference by German Chancellor Merkel and Greek PM Papandreou after their meeting in Berlin. German made it clear it will only give political support and not make any promises for financial aid to Greece. Yen weakness extends across the board on better than expected US jobs report and the subsequent rallies in US equities. The key resistance levels of gold (1140) and oil (81.40) have been tested but have yet to show a close on the week. AUDUSD made an intraday break of the 100-day MA 0.9070 as was the case on Wednesday but it will have to close the week above it for the bull run to extend beyond this key resistance levels. GBPUSD faces next obstacle at 1.52
March 5, 2010 09:05 ET: US Jobs report widely better than expected (-36K, unemp. rate unchanged at 9.7%) boosting Dow futures by 50 pts while giving brief lift to the USD. YEN is the biggest loser on the news as USDJPY could regain 90.50s, but stay away from chasing yen weakness into rest of the trading session as stocks risk losing their gains. Similar dynamics occurred at the release of the Dec 4 report when better than expected figure fuelled USD strength to the extent of weighing on equities and commodities. US 10 year bond yields gain 8 bps to 3.68% but seen capped at 3.75%. Gold remains capped at 1140 and GBPUSD seen retesting $1.4970, while capped at $1.5120 AUDUSD nearing the elusive 100-day MA of 0.9065-70, which may call for fresh shorts back 0.9010 and 0.8980 (NOT 0.8880)
March 4, 2010 22:06 ET: NFP DOLLAR BIPOLARITY? With forecasts for Fridays US jobs report ranging from -150K to -40K and unemp. rate expected +0.1% to 9.8% + the price effect of the previous revisions, the multitude of factors weighing on the report will undoubtedly cause wild swings in the 30-60 mins after the release. USD will likely rally on NFP bipolarity i.e. with the overall report either very disappointing (big NFP decline + big rise in unemp rate OR big NFP increase and unemp rate decrease). Weve already seen the June 2009 jobs report (released in Jul) when a rare consistency in the jobs report (declining NFP losses and falling unemp rate) caused a $USDX rally along side a short-lived rally in stocks. A more recent & memorable case was the Nov jobs report (released in December 4th) which showed the smallest NFP decline in over 2 years. A strong report would spike up fed funds futures and make USDJPY among the biggest winners of the day. All $USDX pairs would rally with the opposite case being for JPY. A gloomy report would help USDX to the extent of a sell-off in equities, as it stands, THE AUDUSD DEJA VU ALERT IS STILL ON and EURUSD RESISTANCE still holds as in here http://chart.ly/ d4mscs
March 4, 2010 13:01 ET: Daily VIX chart http://chart.ly/ xv36e3 shows signs of a possible rebound from an oscillators perspective, which are consistent with previous rallies (4 green circles). A rise in the VIX implies a pullback in the S&P500 along with most equity indices. Integrating the peaking signs in the Aussie and the CRB as well as the bottoming process in the VIX, these dynamics may just be suggesting a deterioration in risk appetite emerging from Fridays US jobs report, which would refuel USD longs at the expense of equities, energy, metals and all European currencies.
March 4, 2010 10:52 ET: USD EXTENDS GAINS across the board, dragging EUR to 1.3580 and cable back towards the 1.5030 lows. AUDNZD continues to rally beyond 1.31 but AUDUSD deepens losses towards 0.8990s, eyeing 0.8950s. Worse than expected pending home sales weighing on risk appetite. Gold hits 1127 target in previous tweet, now looking to extend losses towards 1117 in Asia. AUDCHF target stands at 0.9580. GBPUSD eyes 1.5020 from current 1.5060. Key WATCH ASHRAF's GOLD PRESENTATION on CANTOS CHARTS http://bit.ly/ 4Un1wP
March 4, 2010 06:59 ET: Bank of England keeps makes no statement at its interest rate decision. Preliminary demand orders for Greeces 10-year bond offering reached 16 bln. It is not clear when the bond offering will actually take place. France says a Franco-German aid for Greece is NOT on the agenda, which fuels speculation that Greece will seek assistance from the IMF, in which case would be a positive for the euro. We stick with the $1.3770 interim resistance followed by key ceiling at $1.3850, while renewing our call for the $1.32 target before end of quarter. AUDUSD failure to breach above the 100-day MA of 0.9065-70 level (did not close above it) is consistent with our alert for emerging risk aversion (as was the case in the week of Dec 1). Watch Ashrafs Video Presentation on Gold at Cantos Charts http://cantos.com/ charts
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