Yesterday was another trading session where the US Dollar continued to weaken whilst gains in Sterling, Euro and Japanese Yen were driven more by momentum and market ‘stops’ being triggered than any fundamental economic news. Earlier yesterday morning the Euro-Zone Inflation data did favour the Euro although it responded little. Euro-Zone core Inflation for June came in a point higher than expected at 0.8% year on year ahead of this week’s ECB Meeting.
Later in the session, US data was overall very solid but this did not support the US Dollar. The June Chicago PMI came in slightly below expectations at 62.6 versus 63.0 but at above 60.0 it is still very strong. The market was looking to sell the US Dollar and it did. The May Pending Home Sales Report came in very strong with a rise of 6.1% versus 1.5% expected whilst the Dallas Fed Manufacturing was also high at 11.4, versus 8.5 expected, but these releases also did not scupper US Dollar weakness.
San Francisco Fed President Williams was speaking a little later saying that Fed Fund Rates will not rise for some time and that the Fed could tolerate above target inflation giving priority to their employment objectives. These were dovish comments that kept the Dollar on the back foot.
This morning on the economic front we have UK PMI Manufacturing and the Halifax House Price Index. This is followed at 10.00 am by the Euro-Zone Unemployment Rate. At 3 pm we have us ISM Manufacturing/Prices Paid and Construction Spending.
September S&P 500
The S&P plan worked well yesterday on what was another very slow trading session ahead of the July 4th long weekend which will see many traders away from their desks from tomorrow. After I posted yesterday morning the S&P traded down to my 1949 buy level and after a nice rally after the US markets opened I was able to cover this position at 1955 and I am now flat. As I mentioned yesterday, this week is traditionally one of the strongest of the year. Today I will again be a small buyer on any dip to 1949/1953 with a 1946 stop which is just below yesterday’s low. I will still be a small seller on any rally to 1963/1967 with a 1971 stop.
Euro/USD
The Euro continues to trade higher as expected and if this continues it will make Dragi’s press conference following Thursday’s ECB Meeting very interesting. The Euro just missed my 1.3630 buy level before trading higher and I am still flat but thankfully we have not been short the Euro over the last few weeks as the dips continue to be bought. Today I will raise my buy level to 1.3650/1.3680 with a 1.3630 stop. I still do not want to be short the Euro at this time as I look for the Euro to retest the 1.3770/1.3800 resistance level.
US Dollar Index
Unfortunately I was stopped out of my long 80.25 position for a small loss at 79.90 and I am now flat. Today I will lower my buy level to 79.20/79.50 with a 78.80 stop which is just below last November’s low and key inflection point for the Dollar going forward as a break and close below 78.80 will be very bearish.
September DAX
The Dax plan also worked well yesterday as the market was selling off by the time I posted and was trading at my 9835 buy level. After a nice rally on the open this morning I was able to cover this position at 9870 and I am now flat. As I mentioned yesterday the two key levels for the Dax are 9810 on the downside and 9945 on the topside and a closing break of either level will give the next direction. Today I will be a small buyer from 9800/9830 with a 9785 stop. I will also be a small seller on any rally to 9895/9925 with a 9950 stop.
September FTSE
The FTSE plan also worked well yesterday as after I posted it traded down to my 6695 buy level with a 6682 low and after a nice rally this morning I have covered this position at 6725 and I am now flat. I still like the FTSE especially given the fact that we are at the start of a new month which sees a lot of new monies looking for a home. Today I will be a buyer on any dip to 6695/6710 with a 6675 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
After I posted yesterday morning the Dow was trading again at my 16790 buy level and I was able to cover this position at 16840 after the US markets opened and I am now flat. Even though the Dow closed lower yesterday the advance/decline ratio was still positive and as long as it can stay over the key support at 16580/16620 it is very difficult to go short the market. Today I will again be a small buyer on any dip to 16770/16800 with a 16745 stop. I still do not want to be short the Dow at this time.
September BUND
For the third consecutive day the Bund has traded in a very narrow range and I am still short at 146.85 with the same 147.25 stop. I will give this position one more day to perform or else I will stand aside and take another look.
Gold Rolling Contract
Unfortunately I lowered my buy level yesterday morning which meant that I was not long for the big move in Gold over the last 24 hours. I still believe that it will trade at least to 1370 but I felt we would have a sell-off before trading higher. Today I will raise my buy level to 1314/1320 with a 1306 stop which is just below yesterday’s low.
Silver Rolling Contract
Silver is underperforming Gold at time but I still believe that it will soon play catch-up. After I posted yesterday morning Silver traded down to my 20.80 buy level. I am still long and I will raise my stop on this position to 20.45.
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