The USD/JPY has held on to the gains it made yesterday with the Nikkei closing up 1.3% this morning after PM Abe asked for a study look at how Japan might lower the Corporate Tax rate. European Equities continued to outperform the US Stock markets after a better than expected Industrial Production report at +0.7% and a larger than expected lift in the German ZEW Survey for August.
As the US session unfolded yesterday some support for the US Dollar emerged. Whilst the July Retail Sales revealed an ever so slight miss of 0.1%, core Retail Sales printed stronger than expected thus confirming a positive start for consumption in Q3 leading to a modest gain in the US Dollar Index. Later in the session, Atlanta Fed President Lockhart (a non-voting dove) talked about QE Tapering as starting ‘soon’ and that a decision to proceed, whether it be September, October or December, ought to be thought of as a cautious first step. These comments led to 10 Year US Treasuries rising to 2.72% whilst US Stocks, after a rocky start, closed higher.
This morning is a very busy day for economic data with UK Unemployment Rate at 9.30 am, followed by the Bank of England MPC Minutes. Later this morning we have Euro-Zone GDP including Germany and France whilst at 1.30 pm we have US PPI and MBA Mortgage Applications. Later this afternoon the New York Fed releases it’s Household Debt Credit Report.
September S&P 500
The S&P continued to under-perform the European Indices as it digested the latest comments on ‘tapering’ from Atlanta Fed President Lockhart. The market worked very well yesterday as shortly after the US session opened the S&P fell to my 1684 buy level with a 1679.5 low before having a nice rally and I was able to cover this position at 1691 and I am now flat. Today I will still be a small seller on any rally to 1697/1701 with a 1704 stop whilst, as I said yesterday, if I am taken short and subsequently stopped out I will be a more aggressive seller in front of 1712 with a 1715 stop. I will also leave my buy area the same at 1680/1684 with a 1677 stop.
Euro/USD
The big question for me in the Euro is ‘did we put in a top at the 1.3400 level last week or will we have another test of this level before we go lower?’. Today we have a lot of economic data from Germany and the Euro-Zone although yesterday, despite strong data, the Euro actually fell. In trading, it dropped down to my 1.3245 buy level and given the importance of this morning”s data I have covered this position at 1.3265 and I am now flat.. Today I will be a small seller on any rally to 1.3300/1.3330 with a 1.3345 stop. If I am taken short and subsequently stopped out I will be a more aggressive seller from 1.3375/1.3400 with a 1.3420 stop. I will also be a small buyer on any dip to 1.3190/1.3215 with a 1.3175 stop.
September FTSE
Yesterday was unfortunate with the FTSE trade as I had my stop too tight at 6545 on my 6570 long position and, after the market stopped me out, it then rallied and is now back above 6600. Today as long as the FTSE can stay over 6540 this market is bullish and I will use any sell off to 6550/6570 to buy the market with a 6525 stop. My only interest in shorting the FTSE is on a rally to 6660 with a 6695 stop.
September DAX
The DAX trade worked well as after lunch the market dropped down to my 8390 buy level before having a nice rally and I was able to cover this position at 8440 and I am now flat. Today I will lower my buy level to 8340/8370 in small with a 8295 stop.
September BUND
The Bund just missed my sell level yesterday before having a nasty sell off because, as I have been speculating over the last few days, a closing break of 142.00 would be very bearish. The Bund is now very over-sold and I will be a small buyer on any dip to 140.25/140.50 with a 139.95 stop. I will also use any rally to 141.60/141.90 to go short with a 142.05 stop.
Gold Rolling Contract
Overnight Gold has dropped down to my 1318 buy level and I am now long with the same 1309 stop level. If I am stopped out I will be a more aggressive buyer in front of 1295 with a 1288 stop.
Silver Rolling Contract
Silver has also dropped down to my 21.25 buy level overnight. I will raise my stop to 20.95 on this position.
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