It was a down and up past 24 hours for the US Dollar, with the European session seeing a brief rally in the Euro as the Euro-Zone’s Manufacturing PMI was barely revised at 51 from its preliminary reading at 51.1 and with no ugly CPI headline or core surprise with the latter still at 0.6% y/y in February.
However once the US markets opened the US Dollar regained its composure against the Euro, and also against the USD/JPY with the cross poking through 120 very late in the New York session. For the US Dollar side of these trades, it was not so much from any spike higher in its economic reports but the absence of any bad news.
January Personal Spending dipped as consumers took the opportunity of lower energy prices to spend less in Dollar terms but increased real purchases by 0.3%. The Core PCE Deflator rose just 0.1% to 1.3% y/y, right in line with expectations, enough for the market to expect that inflation will over time gradually rise towards the Fed’s 2% target and underpinning rate lift-off from Q3. Meanwhile the Manufacturing PMI printed at 52.9 from 53.5, barely shy of the 53.0 expected. The market took some comfort that special factors had temporarily affected activity. The ISM Chairman noted in a Bloomberg interview that this print had been affected by the West Coast dock strike, though he noted it may take a few weeks for ports to normalise. He also said in his interview that no ISM Members had said that weather had been a factor.
Overnight the RBA (Australian Central Bank) left rates unchanged which has seen the Aussi Dollar strengthen as the market was looking for a rate cut.
This morning on the economic front we have already had German Retail Sales which came in at +2.9% versus 0.4% expected. The DAX is opening higher on this much stronger report. Otherwise it is extremely quiet day for economic releases with the only data of note due on either side of the Atlantic due at 9.30 am when the UK will release its latest Construction PMI.
March S&P 500
The S&P continues to trade in a very narrow range between 2102/2115 with this range persisting for five consecutive trading sessions. There is no doubt that the market is very overbought but with the market having traded lower for most of yesterday’s session, the S&P rose into the New York close helped by the NASDAQ closing back over 5000. I am still flat the S&P as so far none of my parameters are getting hit. Today I will raise my sell level slightly to 2118/2123 with the same 2126 stop. I will also raise my buy level to 2100/2105 with a tight 2095 stop.
EUR/USD
The Euro plan again worked well yesterday as the idea of selling into the now key 1.1250 resistance level continues to pay dividends. Yesterday after I posted the Euro traded higher to my 1.1235 sell level before having a nice sell-off which enabled me to cover this position at 1.1185 and I am now flat. Today I will again be a small seller on any rally higher to 1.1240/1.1270 with a 1.1295 stop. My only interest in buying the Euro is still on a dip to 1.1110/1.1140 with the same 1.1080 stop which is just below the spike lower in January.
US Dollar Index
Yesterday was another frustrating session for the Dollar as the market again just missed my 95.70 sell level before trading lower. Today I will again lower my sell level slightly to 95.60/95.90 with the same 96.25 stop. I still do not want to be long the Dollar at this time given how overextended this market is.
March DAX
Just like the Dollar Index above the DAX just missed my sell level before trading lower and I am still flat the market. As I do not want to chase this market lower, I will leave my sell level the same at 11480/11530 with an 11560 stop. Given how overbought the DAX is currently trading, I am looking for a sell extreme in this region, but the market really needs to break and close below 11325 for the market to get going on the downside.
March FTSE
Just after I posted yesterday morning the FTSE started to run out of steam. I am still flat and today I will lower my sell level to 6960/6990 with a 7020 stop. I will also be a small buyer on any further dip to 6870/6895 with a tight 6855 stop.
Dow Rolling Contract
The Dow plan also worked well yesterday as shortly after the US Markets opened the Dow spiked higher to my 18250 sell level before having a small sell-off which enabled me to cover this position at 18210 and I am now flat. I will continue with my strategy of selling rallies with a tight stop as I do not to get caught long the market at these overbought levels. For this reason, I will again be a seller today on any rally higher to 18280/18320 with an 18360 stop.
June BUND
I have now rolled to the June Contract which rolls at a discount of 221 points to the March Contract which expires tomorrow.
The March Bund plan worked out very well yesterday as shortly after I posted the Bund traded higher to my 159.60 sell level before having a nice sell-off which enabled me to cover this position at 159.20 and I am now flat.
Given the record low Bond Yields in Germany, I will continue with my strategy of selling rallies with a tight stop as this idea has worked out very well so far in 2015. Today in the June Contract I will be a small seller from 157.35/157.55 with a 157.75 stop.
Gold Rolling Contract
In contrast to the equity markets, Gold has traded in a nice range over the past few trading sessions and yesterday was no exception. Having covered my long 1205 position at 1219 early yesterday morning Gold traded lower to 1195.50 overnight and this move lower has enabled me to go long again at 1205. I am still long and I will leave my stop the same at 1195. Gold really needs to break and close over the now key resistance area at 1220/1230 for the market to again establish at least a short-term low.
Silver Rolling Contract
After I posted yesterday morning Silver followed Gold lower with the market eventually hitting my 16.40 buy level. I am still long and I will leave my stop the same at 15.90 which is just below the overnight low at 16.07. If I am stopped out of this position I will be a more aggressive buyer in front of 15.60 with a 14.90 stop.
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