With equity markets again trading in a narrow range, market action yesterday was in the FX markets amid confusion over the G7’s stance on the Yen’s recent decline. The G7 released a statement that reaffirmed that exchange rates should be market determined, albeit with individual countries free to pursue domestic objectives. This was taken by the market as implicit approval of Japans efforts to combat deflation and weaken the Yen. The USD/JPY pushed as a result to 33 month highs over 94.40. But it appears the market had it wrong. A G7 official later hit the newswires saying the statement was misinterpreted and the G7 was indeed worried about excess moves in the Yen. USD/JPY fell to 93.30 and this large fall in USD/JPY kicked started a bout of broad Dollar weakness. President Obama in his State of the Union address overnight focused on gun control, changes to immigration and the need to avoid automatic spending cuts.
This morning is a busy day for economic data. The UK releases it’s BOE Quarterly Inflation Report and will be interesting to see how Sterling reacts to this report given the recent volatility in her currency. In the Euro-Zone we have Industrial Production followed by both Italy and Germany selling Bonds. In the US we have Retail Sales and Business Inventories. The Feds Plosser and Lacker also give speeches later.
March S&P 500
The S&P continues to grind higher to my 1530 target with very little pull back. As I keep saying until we get a sell extreme it is very hard to pick a top in this market. The fact we closed over the recent congestion zone of 1508/1512 means we are still bullish and this morning I am a small buyer on any dip to 1510/1514 with a 1508 stop which is just below
yesterdays low. I will still look to go short in the 1527/1532 area with a 1535 stop.
Euro/USD
Again very unlucky as the market just missed my buy level before taking off on the release of the statement from the G7 official (please see market commentary above). At least we have the right view in not been short the Euro especially after Wledmanns comments on Monday. This morning I am a small buyer from 1.3440/1.3460 with a 1.3420 stop which is just below the low made overnight. Again I do not want to sell at this time.
GBP/USD (Cable)
Cable worked really well as just after I posted yesterday morning we traded down to a new low for this move at 1.5570. I went long at 1.5580 and I took a really nice gain at 1.5640 and I am now flat. Cable is now back inside the Bollinger Band and the Williams Index is now on a buy signal, but a lot depends on the BOE Inflation report this morning to determine the next move. I will look to reset my long position again on any dip to
1.5580/1.5610 with a 1.5550 stop which is just below yesterdays low.
March DAX
The Dax continues to trade in a narrow range and this morning I have raised my buy level to 7610/7630 with a 7590 stop which is just below yesterdays low. Again given the under performance of the Dax I do not want to be short this market.
March FTSE
The FTSE had a nice rally yesterday and the market is back on a buy signal. This morning I am a buyer on any dip to 6270/6290 with a tight 6255 stop.
March Nasdaq 100 Rolling Contract
Patience is required here as I still expect the market to trade up to my 2800/2820 sell level over the next few days. If I am taken short I will leave a 2840 stop on this position.
Recent Comments