EURJPY at 10-Year Low Under 100, Quiet Markets

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December 30, 2011 06:52 ET: German finance minister ruled out Eurozone breakup; UK house prices fell; Italian PPI rose m/m but declined y/y, Spanish annual CPI lower; France announced bond auction on January 3rd. EURJPY reached decade's low. Progress on Premium trades is found below.

The greenback is consolidating yesterday's gains and trades little changed. European equities are mixed between -0.2% to +0.4%. Relative strength winners are NZD and JPY.

German finance minister Wolfgang Schaeuble said today that Eurozone has the risk of contagion under control and ruled out Eurozone's breakup. He also reiterated that the ESM rescue mechanism will be implemented in Q1 with ESM active in mid-2012.
In the UK, nationwide house prices fell in December -0.2% from previous 0.4% m/m which translates to 1% from 1.6% y/y. Expectations are for weak activity throughout 2012 with flat or modestly lower prices. GBPUSD trades around 1.5450

On the data front, Italian PPI rose in November in line with expectations 0.2% after -0.2% contraction in October which is 4.5% from 4.7% y/y. Spanish annual CPI declined in December to 2.3% from November's 2.9%. Another sobering news came from Greece as October retail sales dropped nearly -11% y/y after -6.5% in September.
Attention on bond auctions is likely to continue as France announced today that it will attempt to sell EUR 4 4.5 bln in 3 month bills, EUR 1.8 2.2 bln 6 month bills and EUR 1.8 2.2 bln 11 month bills on January 3rd, 2012. According to MNI calculation, the total Eurozone bond issuance was EUR 821 bln in 2011.

EURJPY fell below 100 on EBS today for the first time since June 2001. The follow through has been minimal so far and pair recovered to 100.20 level.

Thursdays Premium Intermarket await the 99.80 target in the EURJPY short as well as both shorts in USDCAD. USDJPY hit all targets, while both gold & silver shorts were stopped out as the Aussie shorts. One EURUSD short is in progress. Direct Access http://ashraflaidi.com/ products/ sub01/ access/?a=576 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/ products/

There are no fundamental data releases during the NY session.
Wishing everyone a prosperous & healthy New Year

Patrik Urban

Euro Underperforms Equities Amid Mixed Italy Auction

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December 29, 2011 08:13 ET: Mixed results from today's Italian bond auction; German CPI expected higher m/m; GBPUSD at fresh 13 week low and EURJPY nears 100 level. Market turns to jobless claims, Chicago PMI and pending home sales. Thursday's Premium trades are up (see link below).

Risk aversion stabilizes while EURUSD struggles to regain $1.29 after dipping to 1.2850s. US equity futures are modestly higher.

German December CPI is still being collected but states that have already published their results saw annual inflation in the 1.7% to 2.4% range. Monthly CPI rose 0.5% to 0.7% which is attributed to holiday season. Results for the whole of Germany will be published later today.

Italy sold EUR 7.02 bln (5 to 8.5 bln target) worth of bonds today. The yield was mixed, bonds maturing in 2014 and 2022 saw lower yield while bonds maturing in 2022 and 2018 saw higher yield. Bid to cover was on the weak side between 1.35 and 1.97. The 10 year Italian-German spread widened 13 bps immediately after the auction and stands at 519 bps. Italian business confidence fell in December to 92.5 from previous 94.0.

Thursdays Premium Intermarket Insights include EURUSD, EURJPY, AUDUSD, USDCAD, gold & silver found here: http://ashraflaidi.com/ products/ sub01/ access/ ?a=576 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/ products/

GBPUSD fell to a fresh 13 week low and reached 1.5360. During the decline, EURGBP jumped to a 0.8395 high.

EURJPY continues to trade about 40 points above the key 100 mark. Stop loss orders have likely accumulated below and given thin liquidity, the pair could plunge should these orders be tripped.

The US session starts at 8:30 am ET with jobless claims that are expected to rise to 372K from previous 364K. Print that would be in line with expectations or better could boost sentiment as prospects for a solid NFP result on Jan 6 would improve.

At 9:45 am ET Chicago PMI is due and is seen lower at 60.4 in December from November's 62.6. Pending home sales that follow at 10:00 am ET are expected to pull back to 1.5% in November after soaring 10.4% in October.

Patrik Urban

EURUSD Little Changed Despite Robust Italian Auction

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December 28, 2011 08:10 ET: Italian bond auctions sees strong demand that results in lower yield; Swiss KOF weakest since mid 2009. Market continues to trade in narrow ranges. No data is due in NY session. US equity futures are up 0.25-0.30%. Our latest Premium trades on EURUSD, AUDUSD, USDCAD, gold & silver are found in the link below.

Despite low volatility and narrow ranges, the greenback is slightly weaker in the ongoing session. European equities are higher between 0.3% to 0.7% and the relative strength winners are NZD followed by CAD.

Results from Italian bond auction helped to improve sentiment as Italy sold EUR 9 bln (9 bln target) worth of 6 month bills with average yield considerably lower at 3.251% from previous 6.504%. Bid to cover also improved to 1.62 from 1.47. The Italian treasury also sold EUR 1.73 bln (1.5 2.5 bln target) of 2013 CTZ bonds with 4.853% yield compared to previous 7.814%. Bid to cover also improved to 2.236 from previous 1.59. Lower yield and good demand could imply that ECB's LTRO is being received well and at least temporarily calmed investors. EURUSD trades little changed around 1.3070.

Latest Premium Intermarket Insights include trades on EURUSD, EURJPY, AUDUSD, USDCAD, gold & silver found here: http://ashraflaidi.com/ products/ sub01/ access/ ?a=575 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/ products/

Swiss KOF leading indicator fell in December to 0.01 from November's 0.34 which is the weakest print since mid 2009 and marks 8th month of gradual deterioration. CHF ignored the news and trades slightly stronger against the EUR at 1.2198 and also the USD at 0.9330.

WTI pushed nearly to 101.60 earlier during the session which underpinned the CAD. USDCAD fell from 1.02 to 1.0163. Despite higher oil, gold and silver remain under pressure.

Patrik Urban

Consumer Confidence & Latest Premium Trades

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December 27, 2011 07:12 ET: USD is little changed as markets continue to trade in a narrow range. European equities are higher by about 0.5% and the relative strength winner is CHF. US consumer confidence & housing prices are due. Link to latest Premium trades is found below.

The only fundamental news out of Europe this morning was Swiss UBS consumption indicator that fell in November to 0.81 from previous 0.9. The Franc sold on the news but quickly recovered its losses and is currently trading stronger against the EUR and the USD as well. EURCHF trades right above 1.22 support while USDCHF trades near 0.9330.

An interesting development came yesterday when China and Japan unveiled a currency deal that allows their companies to exchange Chinese currency Yuan directly into Japanese Yen without having to use USD in the process. This step will cut costs between two major Asian economies, boost trade and strengthen Yuan's global role. It will also allow Japanese firms to raise a debt that is denominated in Chinese Yuan (CNY). CNY closed today at 6.3223 against the USD, slightly lower compared to Monday's 6.3198.

Pressure on periphery bonds is reappearing again as Italian 10 year yield moved back above 7% and reached 7.14% high. Italian-German spread reached 5.20% high before pulling back to 5.14%.

Tuesdays Premium Intermarket Insights are found here: http://ashraflaidi.com/ products/ sub01/ access/ ?a=575 Nonsubscribers can obtain a free 1-week trial here: http://ashraflaidi.com/ products/
With UK and Canada still on holidays, volatility is likely to remain subdued.

The NY session will bring S&P/CS composite index due at 9:00 am ET which is seen lower at -3.2% in October from -3.59% in September followed by December consumer confidence and Richmond FED manufacturing due at 10:00 am.

US Dec Consumer confidence is expected to rise to 58.5 from 56 while manufacturing sector in Richmond is anticipated higher at 6 from previous 0. This could be the first month with positive growth indicating improving conditions since June.

Patrik Urban

10 Year Gilt Yield At Record Lows Below 2%

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December 23, 2011 08:26 ET: UK net mortgage lending at record low, new mortgage approvals decline. Index of services fell, 10 year Gilt yield at lows. SNB reassures 1.20 floor for EURCHF. Durable goods, personal income and spending and Canadian GDP are next.

Currencies are trading in narrow ranges ahead of Christmas break. European equities rose by about 0.6% to 1%. Many European exchanges close early today, bonds and gold trading will end one hour earlier than usual so liquidity is likely to be thin.

UK net mortgage lending reached a record low in November at GBP 0.32 bln from October's GBP 0.825 bln. New mortgage approvals declined slightly to 34.78K from previous 35.2K. The index of services declined to -0.7% in October from a previous unchanged print which pushed the 10 year Gilt yield to record low below 2%.GBPUSD has been stuck within 1.5650 1.5720 range for a few days and it currently trades around 1.5670.

Quarterly SNB bulleting reiterated that the SNB will enforce EURCHF floor at 1.20 and is ready to take further measures if needed. EURCHF is slightly higher trading around 1.2235 after it found support at 1.22.

The NY session will kick off at 8:30 am ET with durable goods orders that are seen higher in November at 2% from previous -0.5%. Personal income is expected steady at 0.4% and personal spending should rise to 0.3% from 0.1%.

Canadian GDP which is due at the same time should rise in November 0.1% from 0.2% m/m and 2.7% from previous 3% y/y. USDCAD has been steadily falling since 12/19 and trades below 1.02.

November new home sales due at 10:00 am is anticipated higher at 315K from previous 307K.

Patrik Urban

US Consumer Weighs on Growth Revision

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December 22, 2011 08:23 ET: US jobless claims hit fresh 3-year lows at 364K, final US Q3 GDP revised down to 1.8% from 2.0% partly due to personal consumption revision to 7% from 2.3%. UK final GDP revised higher q/q; UK current account deficit at record highs; French downgrade rumor reappears again. Market turns to final Q3 GDP, UOM consumer sentiment, leading indicators and house price index.

USD is mixed in the ongoing session. It is weaker against AUD, NZD and CAD. Relative strength winner is AUD. European equities are higher by 1% to 1.4%.

Riskier assets were higher across the board when the rumor about French downgrade reappeared yet again. Markets quickly sold off but were able to recover.

Italian PM and finance minister Mario Monti called for the senate to approve the budget today. He said that passing of the austerity measures means Italy can face the crisis but warns that the situation is still critical.

UK final Q3 GDP was revised higher to 0.6% from 0.5% q/q and remained unrevised at 0.5% y/y. However, Q2 growth was lowered to 0% from 0.1% q/q. Any improvement in sentiment towards the GBP is likely to be negated by current account deficit that widened considerably in Q3 to the highest level on record to GBP 15.2 bln from GBP 7.4 bln. Current account as a proportion to GDP reached 20+ year high. Considering that most analysts predict zero or close to zero growth in Q4, the Q3 revision higher is likely to be quickly forgotten. GBPUSD trades back below 1.57 nevertheless above 1.5650 support.

CHF continues to fall further, albeit at a slow pace, as Swiss finance minister examines further measures to weaken the Franc. However, Swiss parliament has rejected motions that would allow negative interest rates. EURCHF trades around 1.2230, not far from a session highs.

US final Q3 GDP was revised down to 1.8% from 2.0% partly due to personal consumption revision to 7% from 2.3%. US jobless claims hit fresh 3-year lows at 364K. The news is helping stocks to push up further, alongside a boost to oil prices.

The final December university of Michigan consumer sentiment due at 9:55 am ET should see and increase to 68 from initial 67.7.
November leading indicators are seen lower at 0.3% from previous 0.9% and October house price index is expected to decline to 0.2% from 0.9%. Both indicators are due at 10:00 am.

The latest PREMIUM TRADES show Ashrafs strategy of favouring CAD & oil continues to make up for those unfilled trades. Here are is direct access to those remaining trades http://ashraflaidi.com/ products/ sub01/ access/ ?a=573 Non-members, can get a Free Trial here http://ashraflaidi.com/ products/ sub01/

Patrik Urban

Euro Tries to Hold on to Strong LTRO Boost

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December 21, 2011 08:01 ET: Riskier assets soared after the LTRO announcement but declined equally quickly; 3 year LTRO allotted nearly EUR 490 bln; MPC minutes reveal unanimous votes, some members note that more QE may be needed. UK net public borrowing soared. Market turns to Canadian retail sales, US existing home sales, Eurozone confidence and later to NZ GDP. New Wednesday Premium Trades are up focus on US crude & CAD.

USD was initially lower across the board, especially immediately after the ECB LTRO was announced. However, sentiment reversed sharply and the USD was able to recover all losses. Biggest relative strength loser is CHF. Major European equities are higher by 0.5% to 1%.

Euro was inching higher ahead of the ECB LTRO announcement. In its first three year LTRO, the ECB allotted EUR 489.2 bln considerably more than expected EUR 300 bln which caused a spike higher in riskier assets. In its three months LTRO, the ECB allotted almost EUR 30 bln. EURUSD soared nearly to the 1.32 figure immediately after the release but has quickly given up its gains perhaps as the market could become concerned that banks would overexpose themselves to the Eurozone debt.

Periphery-German 10 year yield spreads widened again after they narrowed following the ECB announcement. Bunds traders note that low liquidity is causing choppy price action.

BoEs MPC minutes revealed that all members voted to hold rates steady during the 12/8 MPC meeting and that they agreed there was a little merit in changing asset buying. However, some noted that the outlook has deteriorated and that more QE may well be needed. In other news, public sector net borrowing has jumped in November to GBP 15.2 bln from previous GBP 3 bln. However, this increase was expected. GBPUSD trades below 1.57 after reaching a high at 1.5770.

Most of Tuesdays premium longs in Aussie, ES and CAD were unfilled due to rapid market moves, while both of the gold shorts were stopped out. Here are Wednesdays premium trades contain with a focus on oil, Aussie and CAD CAD http://ashraflaidi.com/ products/ sub01/ access/ ?a=573 Nonsubscribers can click here: http://ashraflaidi.com/ products/ sub01/

The NY session starts at 8:30 am ET with Canadian retail sales that are seen lower at 0.5% in October from 1% in September. Core sales are also seen lower at 0.3% from 0.5%.

US existing home sales are due at 10:00 am and are anticipated to rise in November to 5.09M from 4.97M. December Eurozone consumer confidence which is due at the same time is expected to decline to -21 from -20.4

Later in the session at 4:45 pm New Zealand will announce Q3 GDP growth that should reach 0.6% from 0.1% q/q and 2.2% from 1.5% y/y.

Patrik Urban

Sentiment Improves On Positive Data And Solid Spanish Auction

German IFO improves, GfK confidence remains steady and PPI slows. Spanish bill auction results in significantly lower yield, UK CBI retail sales improve, Canadian CPI lower. Market turns to housing market data.

The greenback is lower across the board in the ongoing session as positive data improved sentiment. The relative strength winners are NZD, AUD and CHF. Major European equities are higher by about 1%.

The common currency is bid and trades nearly 100 points above today's lows boosted by German IFO business climate that improved in December to 107.2 from previous 106.6. Other components also helped to underpin riskier assets as expectations improved to 98.4 from 97.3 and current assessment remained steady at 116.7 better than expected 116. German PPI rose 5.2% in November, slightly lower compared to previous 5.3% and finally GfK consumer confidence survey remained steady at 5.6.

Another reason for the improved risk appetite came from Spain as it exceeded its target EUR 3.5-4.5 bln and sold EUR 5.64 bln worth of bills today with significantly lower yields compared to the previous auction. 6 month bill sold at 2.43% from previous 5.23% and 3 month bill sold at 1.73% compared to 5.11%. Bid to cover was solid 4.06 and 2.86 respectively. 10 year periphery-German spreads started to narrow immediately after the auction.

In other news, Swedish Riksbank cut its repo rate 25 bps to 1.75% as expected citing slowing economy and deteriorating outlook.

In the UK, December CBI retail sales bested expectations and reached the highest point since May as data improved to +9 in December from previous -19. and Canadian CPI slowed in November to 0.1% from previous 0.2% (core CPI 0.1% from 0.3%) m/m but remained steady at 2.9% (core steady at 2.1%) y/y.

The US session will bring building permits that are seen slightly lower in November at 635K from previous 644K and housing starts that are expected higher at 635K from 628K in October. Both are due at 8:30 am ET.

By the end of the trading session at 4:45 pm ET New Zealand will release current account deficit that should widen in Q3 considerably to NZD -3.77 bln from NZD -0.92 bln.

Patrik Urban

Awaiting Draghi's Testimony

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December 19, 2011 08:54 ET: European finance ministers hold a conference call; Eurozone current account deficit widened and construction output fell; BoEs Paul Fisher comments weigh in on the GBP. Canadian wholesale sales edge up, NAHB housing market awaited as well as ECB president Mario Draghi's testimony.

USD is mixed in the ongoing US session; weaker against NZD, CAD and CHF and stronger against GBP. The relative strength winner is CAD followed by CHF. Major European equities are higher by about 0.5% to 0.7%.

European finance ministers will hold a conference call today scheduled to begin at 9:30 am ET in which they will discuss EUR 200 bln in bilateral IMF loans and details of the fiscal union, such as stricter budget rules, negotiated at the EU summit on 12/9. Considering that market sentiment deteriorated rapidly after the EU summit, it would be surprising to see any lasting optimism based on the result of today's conference call.

On the data front, Eurozone seasonally adjusted current account deficit widened to EUR -7.5 bln in October from EUR +2.2 bln in September while the non seasonally adjusted deficit widened to EUR -1.7 bln from previous EUR -0.7 bln. Eurozone construction output fell in October -1.4% from previous -1.5% m/m and -2.8% after +0.1% y/y . September was revised lower to -1.5% from -1.3%.

GBP weakened slightly after BOE's policy maker Paul Fisher said that present situation is potentially more dangerous than 2008 and that downside risks from Eurozone are bigger than inflation. He further said that UK banks are not as robust as the BOE would like. GBPUSD oscillates around the 1.55 figure.

Canadian wholesale sales rose 0.9% in October from previous +0.5%. US NAHB housing market index due at 10:00 am ET is seen at 21 in December from 20.

Market volatility could increase at 10:30 am ET when ECB president Mario Draghi testifies before the EU economic and monetary committee. This comes one day after Draghis interview to the FT warning about the consequences of nations leaving the Eurozone as well as the breakup of the single currency area.

7 of Fridays Premium trades are in progress. 1 EURUSD long & 1 AUDNZD short hit all targets. The latter trade has stood for 2 weeks. Direct access to these trades is found here: http://ashraflaidi.com/ products/ sub01/ access/ ?a=571 Non Subscribers can click on here: http://ashraflaidi.com/ products/ sub01/

Patrik Urban