Some US Dollar strength and higher Treasury Yields were the key themes yesterday with markets, for a change, paying attention to the stronger US data. The US Dollar rallied after the release of the US ADP Employment Report. It surprised to the upside with a 281k rise in its measure of Private Employment in June versus 201k expected. Whilst hardly a reliable leading indicator the market paid it some respect ahead of today’s Non Farm Payroll data.
Meanwhile Fed Chair, Yellen used her address to the IMF to hose down any notion that the Fed will use rate policy to address financial stability/asset bubble risks ‘a la’ Greenspan. She said financial stability should be addressed via macro-prudential tools rather than Monetary Policy. Yellen also played down financial instability risks saying that she saw only pockets of increased risk taking. Again this plays into the ‘lower for longer’ theme for US rates.
There was a fair amount of volatility in the Cable (GBP/USD) in yesterday’s trading session. It shot higher on the back of a stronger than expected UK Construction PMI which came in at 62.6 versus 59.8 expected, then succumbed to post ADP US Dollar strength before rallying again.
Today is a really important day for economic data on both sides of the Atlantic. This morning we have the Markit Services PMI from Germany, Euro-Zone and the UK at 8.55 am, 9.00 am and 9.30 am respectively. At 10.00 am we have Euro-Zone Retail Sales. This is followed at 12.45 pm by the ECB rate decision and at 1.30 pm we have Dragi’s press conference. Also at 1.30 pm we have the US Non Farm Payrolls where the consensus is for a 200k rise with the Unemployment Rate at 6.3%. The US Trade Balance and Weekly Jobless Claims will also be released at the same time whilst at 3 pm we have the ISM Non Manufacturing Composite.
September S&P 500
Yesterday was another extremely quiet trading session as the market gets ready for today’s Non Farm Payrolls at 1.30 pm. We have now gone 55 trading days since we have had a +/- 1% move in the S&P which is not good for day-traders. I am still flat the S&P and I will stay this way until we get the Payroll data out of the way. If we get a sell-off after the release I will still be a small buyer on any dip to 1957/1962 with a 1954 stop. I will also be a seller on any rally to 1976/1981 with a 1985 stop. Note that tomorrow the US Cash Equity markets are closed for the July 4th holiday and the markets will also close for a half day today as the Cash markets close at 6 pm with the Futures closing at 6.15 pm.
Euro/USD
No change as I am still long the Euro at 1.3675. Today I will lower my stop to 1.3635 to give this trade some room and if the market rallies ahead of the ECB Rate announcement I will also cover my position. If I am flat or stopped out of this position I will be a more aggressive buyer in front of 1.3580 with a 1.3550 stop. I still do not want to be short the Euro at this time and it is going to very interesting to see how the Euro reacts to Dragi’s press conference.
US Dollar Index
No change as I am still a buyer on any dip to 79.30/79.60 with a 78.95 stop.
September DAX
The Dax had another very quiet trading session yesterday as the market awaits today’s key ECB Rate decision and US Non Farm Payrolls. I covered my short 9920 position at 9900 yesterday and I am now flat. I am going to stay flat until we get today’s key data. If the market sells off I will be a buyer on any dip to 9840/9870 with a 9810 stop. Remember 9950 is key resistance and a break of this level will be very positive and for this reason I do not want to be short the Dax today especially with the US markets closing early for the long weekend.
September FTSE
Shortly after I posted yesterday the FTSE traded down to my 6750 buy level. I am still long as I really believe it is due to play some catch up with the rest of the major indices. Today I will raise my stop to a breakeven. A break and close over 6800 will be very positive.
Dow Rolling Contract
No change as I am still a buyer on any dip to 16895/16935 with a 16860 stop. I will also still look to sell the market on any rally to 17050/17080 with a 17110 stop.
September BUND
It was very frustrating yesterday because as soon as I covered my short 146.85 position for a small loss the Bund sold off! I am still flat. Today I will be a seller on any rally to 146.80/147.10 with a 147.30 stop. I still do not want to be long the Bund at this time.
Gold Rolling Contract
Gold is finding it very hard to kick on from the key 1320/1330 resistance level. I am still flat and, given the important data releases that we have later today, I am going to lower my buy level to 1307/1315 with a 1299 stop.
Silver Rolling Contract
No change as I am still long at 20.80 with the same 20.70 stop. Again if I am stopped out of this position I will be a more aggressive buyer in front of 20.50 with a 19.90 stop.
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