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Intraday Market Thought: Will Turkish Lira Fall Spread Further?

by Adam Button | Aug 13, 2018 15:28
An emerging market economic crisis is nothing new but Turkey is the world'....The lira fell another 11% in early trading Monday to 7...15...CFTC positioning data showed more money going into US dollar longs...USDJPY held support at the confluence of the 55-DAY and WEEK moving average,....The yen remains the strongest of the week and the month ahead of the US....Macro data return this week with UK jobs (Tues), CPI (Wed), US retail sales (Wed)....Crisis and collapse are words that are too-often used in financial markets and....The Turkish lira is down 50% this year and fell by as much as 16% on Friday....The country's large current account deficit (over 5% of GDP) and the....It's a situation that has many historical parallels and often leads to....Erdogan on the weekend continued to plea with people not to take money out of....He also hinted at Plan B and Plan C, which sounded like a mixture between....The problem with a hint like that is that it ensures a stampede to the exits....An implosion of the Turkish economy alone may not pose a risk to the global....With GDP of about $850B, it sits between the Netherlands and Indonesia in the....That compares to $360B for Greece at its peak...Like Greece, the issues isn't the local economy, it's contagion...Emerging markets with some similar strains to Turkey are also under major....Currencies in Argentina, Russia, South Africa and Brazil fell 3-6% last week....This is all leading to bids in the traditional safe haven currencies –....The most-obvious vector for contagion is via the financial system and European....The yen is higher across the board in early trading...IMF or Currency Controls?....In our experience, these are some of the most unpredictable events...Yet, considering the looming threat of capital controls, it's not likely to....The latter would imply a bailout of as much as $40 bn but would necessitate....The 10 Lira mark is considered a possible destination in the event of a....CFTC Commitments of Traders....Speculative net futures trader positions as of the close on Tuesday...Net short denoted by - long by....EUR +11K vs +23K prior...GBP -59K vs -47K prior...JPY -63K vs -68K prior...CHF -46K vs -44K prior...CAD -25K vs -32K prior...AUD -54K vs -51K prior...NZD -25K vs -24K prior....Dollar bets generally increased but they were pared against the Canadian dollar....What was left of euro longs was probably busted out late last week in the fall....15 and yen shorts are now vulnerable.
Intraday Market Thought: USD Eases on Trump Comments

by Adam Button | Aug 20, 2018 19:28
The US dollar was broadly lower on a slow Monday session following Trump....The comments were made at a fund-raiser for wealthy Republican donors at the....There were no specific USD comments but the greenabck dropped off on the....CFTC positioning showed a net euro short for the first time in 15 months...The Premium short in USDJPY was closed at 110...00 for 120 pt gain as the remarkable divergence between USDJPY and USDX....The chart below indicates that the USD/CNH has fallen below the USD/CNY for the....This may indicate that the PBOC is more successful at swaying speculating....More on this in tomorrow's Premium video...The first steps toward ending the China-US trade fight boosted risk assets on....The week ahead ends with the Jackson Hole symposium in what's....On Tuesday and Wednesday a delegation led by Chinese Vice Minister of Commerce....S...representatives led by Treasury Under Secretary for International Affairs....On Friday, the WSJ reported that this is part of a roadmap towards a November....That sparked speculation that a true trade war can be avoided...Other reports suggested that the US is currently focused on the yuan but a rise....Or it could be nothing...The market is clinging to some dim signs of hope here when all actions point to....On August 1, Trump announced hearings on tariffs of 25% on more than $200....Hearings and consultations on those tariffs start Monday and continue until....That's the key day on the calendar and could mark a watershed moment in....If this week's summit ends badly, markets may jump to conclusions about....CFTC Commitments of Traders....Speculative net futures trader positions as of the close on Tuesday...Net short denoted by - long by....EUR -2K vs +11K prior...GBP -61K vs -59K prior...JPY -58K vs -63K prior...CHF -46K vs -46K prior...CAD -26K vs -25K prior...AUD -51K vs -54K prior...NZD -27K vs -25K prior....The euro has dropped to 1...14 from 1...26 in the past 5 months in a painful move for euro longs...They packed it in last week and are now net short for the first time since May....Other moves were relatively minor.
Intraday Market Thought: How to Watch Brexit Play-by-Play

by Adam Button | Sep 6, 2018 11:19
Trading sterling is a Brexit-headline minefield at the moment but the moves on....Choppy trading ahead of the US ADP report and services ISM...Thursday is a key deadline in the China-US trade saga...A new index trade has been issued...The video for Premium subscribers is now posted, explaining some in-depth set-....There are two ways to evaluate Brexit negotiations...The first is the economic lens; namely, what's good for the economy going....This means pricing in the chance of a no-deal Brexit that immediately leads to a....Goldman Sachs puts this at an uncomfortably high 30%, while Carney....The positive baseline would be a transition period that meets the status....The ebb and flow is a complicated balancing act that also includes the odd....The good news on Wednesday was a report saying the UK and Germany were prepared....The bad news was a denial that anything had changed from a German government....The other lens to evaluate Brexit negotiations is price action...The market's reaction to the news often tells you more than the news...On Wednesday, cable jumped 150 pips on the initial story and then gave up half....Last week, a similarly vague, anonymously sourced story sent cable 150....This examples are oversimplified but they're a glimmer of hope for the....At some point there will be clarity and it's in everyone's best interest....That doesn't mean it's time to buy the pound just yet...Surely over the next few months there will be intermittent negative headlines,....Negotiations are always toughest at the end...The event to watch for will be when sterling no longer falls on the 'bad....When the denials are brushed aside...We may be nearing that point but we're not quite there yet...On other trade deals, a similar uncertainty remains...Late on Wednesday there were faint signs of a NAFTA breakthough as Trump....A CAD-boosting deal could come before the end of the week...Today is also the end of the comments period for the tariffs of 25% on $200....A recent report said Trump is considering announcing that the US will....This would be a major escalation from the current tariffs on $60B of goods.
Intraday Market Thought: Bonds Break Out

by Adam Button | Oct 4, 2018 13:04
USD eases off from Wednesday's broad rally, boosted by the best ISM non-....But the story remains the bond market as yields around the world soar on rising....Stocks indices are in the red as rising yields threaten...USD was the best performer in Wednesday's trade but is now pulling lower as....A new Index trade will be issued to subscribers after the London close...US factory orders and jobless claims are up next...Ahead of Friday's US and Canada jobs, FX traders watch the EURUSD weekly....15, while gold attempts to retest its 55-DMA at 1202...If you're in Paris next week, join Ashraf for the Traders' Event in....The break down in bonds and corresponding jump in yields has the....US 10-year yields rose 12 basis points to the highest since 2011 at 3...23%....US 30-year yields also rose above the key 3...25% zone to hit 3...39%....We wrote earlier this week about the Amazon wage hike and a tipping point on....The bond market is now signaling something similar...Fed speakers this week (Kaplan and Harker) signaled no rush to raise rates....The combination of soaring bond yields and rising oil is a solid reflection of....In the big picture, it's still early but if bond market participants think....If so, emerging markets could suffer accelerating outflows in what becomes a....It's been a storm of challenging news for the Aussie lately as AUD/USD....Some of that is broad US dollar strength but there are several headwinds...On the weekend, Chinese manufacturing PMIs were softer then the RBA decision....Yesterday August building permits were down 9...4% m/m after a 5...4% drop the month before...That was also far worse than +1...0% expected...If trade is weak, watch for a break of the September low of 0...7085 in what would be a fresh low since Feb 2016.
Intraday Market Thought: Big Turn, Not Just NFP

by Adam Button | Nov 2, 2018 10:01
A new month flipped a switch in the foreign exchange market with the dollar....The trio of AUD, NZD and GBP each soared around 2% to wipe out the entire month....Metals continue to dominate energy with silver at the lead, rescuing the 14...20 right-shoulder support...nbsp; The volatility will continue with non-farm payrolls Friday but there's....The DAX short hit the stop, while the EURUSD long deepens in the money...A CHF trade was issued yesterday...Commanding Technical Levels....The 0...9% selloff in USDX was the 5th largest daily drop in percentage terms over ....November suggests that flows were playing a big part in the late-October....0 level, while EURUSD and GBPUSD respected the August lows...Ashraf bought the euro on Wednesday ahead of the August low of 1...1320 and that level held in a big way as EUR/USD reversed and rose more than 100....It proved that sometimes the simplest techs are the best...Sterling moves were even more dramatic as they were fueled by a report of a....The BOE forecasts also showed a slightly higher path for rates...In response, GBP/USD soared to 1...3020 after trading as low as 1...2700 on Wednesday...The Australian and New Zealand dollars also got a big boost from an Aussie....AUD/USD climbed to 0...7205 from 0...7075 in a slow, steady climb...nbsp; It's just one report but it highlights that the trade war may play....We listen to the talking heads and expert economists daily but no one has....Instead everyone is relying on models and assumptions about what 'should&....We're keeping an open mind about what will happen and will be guided by....Thursday's Aussie figures may suggest an argument that China has....Watch the Trade Figues....That trade theme is why we'll be watching Friday's US and Canadian....The ISM manufacturing report was littered with anecdotal reports about....Some suggested near-term problems while others are working through inventories....Don't rule out a miss on the $53...6 billion consensus estimate for the US deficit...At the same time, wage data is undoubtedly critical to the market and....The consensus for average hourly earnings is +3...1%, a rise from 2...8%....Hurricane skews could impact and anything above 3...2% would surely be a market mover and possibly a lasting one.
Intraday Market Thought: Oil Upends Inflation Outlook

by Adam Button | Nov 21, 2018 10:34
That thing about indices is found below...Eyes are shifting back to central bankers as the rout in oil and equity....The US dollar was the top performer Tuesday while the Australian dollar....Wednesday's US durable goods report will be a welcome dose of hard data...A new Index Premium long was entered in the final hours of NY trade...The Premium video is found here below with OPEN ACCESS to everyone this time...nbsp;....A further 7% fall in oil prices brings the decline to 31% since October and....The U-turn in oil may prove to be more important than the rout in equities when....The drop will put negative pressure on headline inflation in the months ahead....Even though most central bankers watch core inflation, the drop in headline....So far that paradigm hasn't entered into the central bank discourse aside....A broader shift may still be premature but it's worth pondering...The two central banks to watch are the BOC and Fed...In comments this week top officials (Wilkins and Williams) gave no indication....For the BOC, the blackout now looms for the December 5 meeting...The odds of a hike there have dwindled to just 10% and the BOC has already....Something about US Indices....Ashraf emailed me last night to remind me that the Dow Jones Industrials index....Both indices have shown back-to-back declines of 2% or more in mid October,....What about declines of 1% or more? The last time the Dow30 fell by more than 1%....Since then, every time the index had back-to-back declines of 1% or more went....5% or 2...0%....Yesterday, the Dow30 fell 2...20% (-551 pts) and on Tuesday it fell 1...56% (-396 pts)....If the pattern holds, then this could mean a rally of 1...5% or 2...0% today or Friday is highly plausible, i...e...DOW30 could close up more than 350 pts to near 24800s...Bear in mind US markets will be closed on Thursday for Thanksgiving and shall....nbsp;....With the US holiday looming, the Fed schedule is quiet for the remainder of....The next Fed decision is Dec 19 and hike odds are at 71% from 83% a month ago...In the interim, expect an escalating focus on economic data...This week's home builder sentiment report was the first sign of a sudden....On Wednesday, the October durable goods report is due out...It's another forward-looking indicator but it has a spotty record as....Capital goods orders non-defense ex-air are forecast to rise 0...2%..
Intraday Market Thought: Oil Adds to Fed Intrigue

by Adam Button | Dec 19, 2018 13:00
The collapse in oil prices resumed on Tuesday with prices now down 40% since....The New Zealand dollar was the top performer while the Canadian dollar....The Fed decision looms...A new Premium trade ahead of the Fed decision was issued before the close of....The image below is the statement from the September rate hike, noting possible....A detailed video on pre & post-Fed trades has been posted for Premium....We highlighted the fall below $50 in WTI as a key technical support breakdown,....05...It appears to be headed in that direction in a hurry with prices down $4....91 as global growth fears mount...The market is voting that OPEC hasn't done enough and US inventories....Risk trades in the currency market made some minor headway Tuesday but there was....The S&P 500 had been comfortably higher but finished flat...After the close, FedEx cut its profit forecast on slower global growth and....They pointed to soft business outside of the US and weakness in Europe in....The drop in oil is an added wrinkle for the Fed and may help to give them cover....With Wednesday's decision looming the odds of a hike are down to just 64%....Through 2019, there's only a 35% chance of another hike...What the vanilla pricing doesn't show is tail risk...The market is understandably jittery right now and the modest pricing for Fed....At the same time, the Fed is limited in exactly how it can send signals...There will be no line in the statement saying 'we're going to pause'....The drop in oil is certainly deflationary and the Fed could argue....This and trade worries could tilt the balance of risks to the negative side...A number of dissents in favor of no hike would also send a dovish message, as....If the decides to immediately pause, it's not entirely clear that risk....If the Fed isn't careful about the wording, the message could be....Keep a close watch on gold...It's testing the December high and a surprise pause or dovish message would....There is also a strong seasonal tailwind early in the year.
Intraday Market Thought: Time for the Pre-Santa Selloff

by Adam Button | Dec 3, 2019 12:55
Equity indices extend Monday's selloff after pres Trump widened his....AUD is the strongest of the day after the RBA left rates unchanged and headed....GBP hit $1...30, now up 1...9% on the year as the 2nd best performing currency behind CAD, which is....4% vs USD...USDJPY extended its downfall, after failing a major quadruple confluence...more below)....CFTC positioning highlights the large net-negative position in NZD...A 2nd Premium trade has been issued earlier today after 2 key indicators....فيديو المشتركين و التفسير وراء آخر الصفقات...The RBA retained a dovish bias in its statement but took out any urgency in....75%....Two parts of the statement helped to lift the Australian dollar...The first was a nod to falling risks in the global economy due to an improvement....That's a variable factor and could change in a big way by the time of the....The other notable change was the addition to the final paragraph of a nod....That's a hint that policymakers would rather be on the sidelines and may....AUD/USD rose a quarter cent after the decision but the bigger move in FX came....That came after a surprisingly soft ISM manufacturing index at 48...1 compared to 49...2 expected...Another High Profile Failure....Ashraf pointed out to USDJPY's recurring failure at 110...The pair dropped back below its 200-DMA, eyeing 108...40 after another high profile failed attempt to break/reach 110, coinciding....VIX jumps above its 100 and 200 DMAs after posting yesterday its biggest....SPX is at risk of breaking the next crucial support of 3075/76...Here is a chart below that Ashraf posted yesterday after that manuf ISM miss...Trump took to twitter to blame the Fed and a strong dollar but manufacturing....Lately there have been signs of an upturn or at least stabilization but....CFTC Commitments of Traders....Speculative net futures trader positions as of the close on Tuesday...Net short denoted by - long by....EUR -61K vs -63K prior...GBP -37K vs -32K prior...JPY -40K vs -35K prior...CHF -21K vs -16K prior...CAD +20K vs +29K prior...AUD -45K vs -47K prior...NZD -36K vs -35K prior....The data was delayed because of the US holiday and the surprise is the....The turn in the kiwi continued on Monday and even with the round of risk....That should have the shorts sweating.
Intraday Market Thought: Powell, Lagarde, Elections & Trump

by Adam Button | Dec 12, 2019 12:00
Powell kicked off another round of US dollar weakness ahead of what should be....Risks include the ECB decision, UK election and US-China tariffs (more on....The Australian dollar broke a year-long trendline Wednesday, but keep an eye on....After having closed GBP trades at a gain 2 days ago, a new round of Premium....فيديو المشتركين إدارة مخاطر الإسترليني حول الانتخابات...The most-notable change in the FOMC statement was the addition of a line....To emphasize the point, the Fed removed a dovish nod to 'uncertainties'....But it was a comment from Powell in the press conference that sparked a slump in....He repeated a line we highlighted after the October FOMC – that it would....He emphasized that was his personal opinion and not the FOMC's but for....The initial thinking in October was that it could have been a slip of the tongue....The commodity currencies made the largest moves on the comments in part....Notably, AUD/USD rose above a downtrend that began almost exactly a year ago at....7400 and was previously tested (and held) four times...A break of the 200-dma at 0...6911 and the October high of 0...6933 would confirm the end of the long slide...The first event of the day ahead is the ECB meeting...Changes in policy are almost out of the question but this is Lagarde's first....Most analysts expect her to be a dove, but she may position herself as someone....It could be argued Lagarde will not be in a hurry to ease as the Fed removes....The main event of the day comes late as UK exit polls and election results come....The first exit polls are due at 2200 GMT and moves in the pound will be....Final polls show Conservatives with 5-12 point leads with the median closer to....Whatever the result, expect the trend to have multi-day staying power at the....Finally, there are reports that Trump plans to meet with top advisors....The decision may leak immediately, or he could announce it himself...A delay on the Dec 15 deadline is expected at the very least but nothing....If he announces that the tariffs will go into effect, it will crush risk assets.
Intraday Market Thought: Soros' Reflexivity gone too far

by Ashraf Laidi | Dec 4, 2015 20:21
Evidence of Soros' Theory of Reflexivity remaining prevalent in....Simply put, the euro soared 4% due to misplaced and unfulfilled market....The crowding out of euro-short algos was pivotal in the magnitude of the....But questioning the intensity of euro shorts deserves more time and attention....Question your Expectations, not the Central Bank Decision....Many who were “angry” at the Fed's decision to not raise rates....I will not go into detail about how the ECB gave no reason to expect QE....That was the work of one or two major bank economist's forecasts, who were....My colleague Adam Button and I made it clear in several Intraday Market....Markets went too far with embracing the notion of “policy divergence”....Once corrected by the ECB, the result was massive...At the end of day, anyone who landed on planet euro and saw the spike in the....Not at all...It was all expectations' fault...As George Soros postulated in his version of Reflexivity Theory into....Once the basis of those expectations is altered (ECB's policy actions), the....Friday's Draghi Speech not so different from Thursday's....Some say expectations were fed by the central bankers themselves...Not at all (again)....Today's Draghi speech in NY appears to be the main catalyst behind the 2%....The main reason to the rally is attributed to Draghi's statement....It may not matter that Draghi made a similar statement at yesterday's....e...more measures would/could be implemented if the need arose...One day seems to be too late for traders who lost money, but not too late to....nbsp;....A similar situation occurred on September 24, when Fed chair Yellen made....Markets bottomed three sessions later...Undoubtedly, Draghi's power of words continues to hold sway...But since pulling the QE trigger in March, the timing of the words becomes....This is no longer September 2012, when “we'll do what it takes”....One other Small Detail....One overlooked item from Thursday's press conference, which Draghi did not....This implies that, further measures prior to end of Q1 2016 are highly....Not to forget--the ECB's QE has had positive results, according to ECB....6% lows despite prolonged oil declines, improved growth and rising M3)....Thus, any rise in QE size before April is out of the question...Another 10-bp rate cut could may not be considered before June...nbsp; More evidence that EURUSD parity is far from reality.