Intraday Market Thoughts

The Breakouts Continue, RBA Preview

by Adam Button
Dec 2, 2013 23:28

Add gold and the Canadian dollar to the long list of trades that are breaking out. The taper trade added to USD strength Monday after solid ISM manufacturing numbers while JPY lagged. The RBA decision is the main risk in the hours ahead.

The main news in US trading was a rise in the ISM manufacturing report to the highest since 2011 at 57.3 compared to 55.2 expected. The employment and new orders components were also upbeat, adding another check mark for the Fed hawks.

USD/JPY jumped above 103 on the ISM headlines to the highest since May. The technical breakout of GBP/JPY also continued and NZD/JPY climbed above a previous double top.

The larger technical developments were in gold and USD/CAD. Gold broke below its recent range, falling $34 to $1218 and the lowest since July. USD/CAD hit 1.0654 and is threatening to break the 2011 high of 1.6058, which would pave the way for further gains.

The main event in Asia-Pacific trading is the RBA decision at 0330 GMT, which comes 3 hours ahead of the retail sales report. The market firmly believes there will be no rate cut and the RBA is unlikely to change its neutral bias. The key may be language about the Australian dollar, the statement already says AUD is 'uncomfortably high' but Stevens may use the recent Aussie weakness to press the momentum.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. EUR +0K vs +0K prior JPY -123K vs -112K prior GBP +0K vs -2K prior AUD -33K vs -36K prior CAD -29K vs -16K prior NZD +10K vs +12K prior CHF +4K vs +3K prior US Dollar Index longs at 16K vs 15K prior

Yen shorts carved out a new six-year high in the data, which reflects the close on Nov 26. The important change might be flat positioning in EUR and GBP, which suggests traders are unsure on Europe but could be swayed strongly by any new and convincing developments.

Today's Premium trades added 2 new trades and 3 charts in USDCHF ahead of the flurry of US events as well as the CHF implications of ECB dovishness this Thursday. Full details on these and other existing trades are found in the Latest Premium Insights
Act Exp Prev GMT
ISM Manufacturing Employment
56.5 53.5 53.2 Dec 02 15:00
ISM Manufacturing Prices
52.5 55.0 55.5 Dec 02 15:00
Retail Sales (NOV) (m/m)
0.4% 0.8% Dec 03 0:30

Latest IMTs