The US Dollar was mostly on the back foot recently, not so much from dollar-specific negatives but more a mix of factors strengthening other major currencies. Yesterday it was the turn of Sterling to step up to the plate as new BoE Governor, Carney, in his first press conference presenting the Bank’s latest inflation report laid out future guidance for BoE Policy and also raising growth forecasts.The Governor set a benchmark of a 7.0% Unemployment Rate before policy would be tightened which, based upon the BoE’s own forecasts, would not occur until late 2013. By the same token Carney said that this was not a promise to keep rates low. The market also noted that the Bank’s report had raised it’s 2014 growth estimates from 1.9% to 2.7% but there is still a strong possibility that their inflation forecasts, two years out, would exceed their 2% target. It was also noted that the current Unemployment rate of 7.8% is not that far above the 7% threshold.
In post-report trading Sterling, after an initial negative reaction reaching a low below 1.5250, later rallied to around 1.55. The Euro also rallied after a stronger German Industrial Production report which jumped 2.4%, way above the 0.3% expected. The Yen has also continued to strengthen, which in turn is weighing on the Nikkei, with US Dollar/Yen in the low 96’s.
This morning, in terms of economic data, we have German Trade Balance and the ECB publishes its Monthly Report. This is followed at 1.30 pm in the US by the Weekly Jobless Claims which are expected to weaken to 335k from last week’s unexpected fall to 326k.
September S&P 500
The S&P, having been down earlier in the day, tried to mount a rally into the close which it did but still closed down 0.4%. The market has generated another Hindenburg Omen observation over the last few days to go with the last confirmed Omen (there is a good explanation of the Omen here at http://en.wikipedia.org/wiki/Hindenburg_Omen ) which last occurred on May 31st. This led to a nasty sell-off in the market before it recovered it’s composure in July and went on to make new highs but for now it is another reason to proceed with caution.
Yesterday the market did not reach my sell level and so today I am going to raise it to 1693/1698 with the same 1702 stop. The 1680 level is good support and I will be a small buyer on any dip to 1680/1684 with a 1678 stop.
Euro/USD
The Euro traded up to my 1.3340 sell level and I am now short in very small size with a 1.3420 stop. I have to leave a wider stop as there is large resistance from 1.3350/1.3400. I will also be a small buyer on any dip to 1.3220/1.3250 with a 1.3195 stop.
September FTSE
The FTSE was ‘all over the map’ after Governor Carney delivered his first press conference. It rallied strongly initially but then spent the rest of the day trading lower and in the process closed below the very important 6500 support zone. I was stopped out of my 6510 long position at 6485 and I am now flat. Today I will be a seller on any rally to 6510/6530 with a 6545 stop. I do not want to be long at this time.
September Dax
No change to the plan as I do not want to chase this market lower and I am still a seller on any rally to 8330/8360 with the same 8380 stop.
September BUND
The Bund plan worked well yesterday, as shortly after I posted the market traded up to my 142.30 sell level before selling off on the stronger Industrial Production data and I was able to cover this position at 141.90 and I am now flat. Today I will be a small seller from 142.55/142.80 with a 143.10 stop.
Gold Rolling Contract
Gold has had a nice bounce off the 1270 support zone. This market is really frustrating traders at the moment they are running scared every time they have a position. Today I will be a small buyer from 1273/1280 with a 1268 stop.
Silver Rolling Contract
Silver just missed my 19.10 stop before having a nice rally into the New York close and I am still long at 19.72. I will leave my stop the same at 19.10 and I am impressed at how well it has rallied off this key 19.10 support level. I will leave my stop the same at 19.10 and I will raise it to 19.70 if we break 20.00.
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