Intraday Market Thoughts

Silver Splattered, RBA Minutes Next

by Adam Button
May 21, 2013 1:29

The US dollar slid lower on Monday as moves were a mirror image of the dollar strength on Friday but the bigger story was volatility in precious metals. The Fed's Evans was upbeat on the economy which is a step toward QE tapering. The calendar in Asia is light as the BOJ starts its two-day meeting. Also stay tune for the RBA minutes of this month's RBA rate cut. Some Premium subscribers wondered why Ashraf issued 2 new shorts on Silver on Friday afternoon in a day when gold's decline stole the headlines. 1 of the 2 XAGUSD shorts hit its final targets, while the other remains in progress. Both USDCAD longs are working as well as 1 CADJPY long. Full details on these remaining trades are seen in the latest Premium Insights. A new edition is to be issued on Tuesday.

Ashraf recommending selling silver on Friday and it crashed 7% in spectacular fashion shortly after the open on Monday. The explanation on why gold was avoided is included in silver's Premium note. That was only the beginning, however, as the precious metal stormed back and closed nearly 3% higher on the day. A similar pattern played out in gold, albeit on a smaller scale as it traded down to $1338 and the jumped to $1400.

It's difficult to draw conclusions from the wild price action in metals. The rebound may only be a temporary blip or it could be due to a squeeze on an otherwise quiet day. Generally, the kind of volatility we see in metals frightens longer-term investors and they head to the sidelines.

At the moment, the broader FX market is caught in a chop. The dollar strength on Friday was nearly perfectly wiped out today, showing no near-term trend in the market.

The US dollar remains in focus ahead of comments from Dudley on Tuesday and Bernanke on Wednesday. Hints about tapering could lead to extended USD gains. Clues might have come from Chicago Fed President Evans, who is normally one of the most-dovish Fed members. Evans noted a quickly improving economy and said he would agree to taper QE if he was confident the labor market would continue to improve. Similar comments from Bernanke would lead to USD strength.

The calendar for Asia-Pacific trading in the upcoming session lacks any kind of strong catalyst. The BOJ begins its two-day meeting but there won't be any announcement until Wednesday.

Two events on the calendar might attract some interest. The first is the Q2 report on inflation expectations from New Zealand's central bank at 0300 GMT. The market is leaning toward a rate hike late in the year or in early 2014 but there are some worries about house price inflation which could move that forward. Signs of high inflation expectations in this report could help NZD rebound.

The RBA minutes of this month's rate cut will be released at 1:30 GMT as traders look for signs of further easing. Rather than the beginning of a new easing campaign, this month's rate cut action is ikely to have been an isolated move, which may be followed by subsequent measures.

At 0430 GMT, Japan publishes the all-industry activity index for March. It's a laggy data point and misses in more-important data points have done almost nothing to JPY but it bears watching. The consensus estimate is -0.4%.

Act Exp Prev GMT
RBNZ Inflation Expectations (Q2) (y/y)
2.2% May 21 3:00
All Industry Activity Index (MAR) (m/m)
-0.3% 0.6% May 21 4:30
Chicago Fed National Activity Index (APR)
-0.53 -0.23 May 20 12:30

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