As the ECB begins its EUR60bn per month QE path, the Euro has hit an 11-year low earlier this morning. It was not that Euro-Zone data was the catalyst as Retail Sales in January were higher after strong German Retail Sales were reported on Tuesday, and the Services PMI was barely revised. Nor did the US data especially provide a new spur for the US Dollar. The ISM Non-Manufacturing Index for February held up. The ADP Employment was in line with expectations while the Fed’s Beige Book last night reported moderate/modest expansion in the main across the US and in most sectors.
Not that these US economic reports did the US Dollar any harm either. The Beige Book had no mention of the stronger Dollar, the West Coast dock strike or any weather effects. It was interesting that Boston was upbeat despite the awful weather that the City has experienced nearly every day so far in 2015.
Elsewhere the Bank of Canada left rates on hold, as widely expected, though the absence of a follow up cut to the January surprise moved calmed traders nerves, with the USD/CAD falling 0.75% against a generally stronger US Dollar. There were also some rumblings in Switzerland with the Finance Minister wanting a new minimum exchange rate, in other words a new floor for the Swiss Franc against the Euro. This resulted in the Swiss Franc appreciating a little against the Euro yesterday and at the same time was losing some ground against the US Dollar.
Overnight China announced that it was setting its economic target rate at its lowest level in 15 years at 7% which was down from 7.5% last year. In a statement from Premier Li who said that China will keep Monetary Policy prudent while Fiscal Policy will remain proactive.
This morning on the economic front we already had German Factory Orders which came in much weaker than expected at -3.9%. At 12.00 pm the UK will announce its latest Bank Rate and Asset Purchases. This is followed at 12.45 pm by the ECB Rate announcement and very important Dragi press conference to follow at 1.30 pm. This promises to be lively given how weak the Euro is trading as QE starts in the Euro-Zone. At the same time the US will release its latest Weekly Jobless Claims, and Non-Farm Productivity. Finally at 3.00 pm we have US Factory Orders.
March S&P 500
The S&P plan worked out very well yesterday as shortly after I posted the S&P got hit which eventually allowed me to go long the market at 2091. The market made a low at 2085.50 before reversing course which enabled me to cover this position at 2098 and I am now flat. The turnaround in the S&P was helped by the DAX advancing which occurred after the Euro started to weaken. The weakening Euro now makes the Euro-Zone economy very competitive and I was surprised that there was no mention of the stronger Dollar in the Beige Book. Today I will again look to buy the S&P on any dip lower to 2088/2093 with the same 2084 stop. The fact that we have Non-farm Payrolls tomorrow I cannot see the S&P selling off ahead of this major economic release. My only interest in selling the S&P is still on a rally to 2115/2120 with a 2125 stop.
EUR/USD
As I mentioned in yesterday’s commentary a break and close below 1.1080 will be short term bearish and so far this is proving to be the case. As I posted yesterday morning the Euro was trading at my 1.1115 buy level before stopping me out of this position in the afternoon at 1.1080 and I am now flat. Today’s ECB Rate announcement and especially President Dragi’s press conference which follows at 1.30 pm promises to be volatile for the markets. I am going to stay flat until Dragi speaks. If the Euro weakens further from here I will be a more aggressive buyer from 1.0970/1.1010 with a 1.0940 stop. Despite the negative price action I do not want to be short the Euro at this time.
US Dollar Index
This morning the Dollar Index is trying to break its next key resistance at 96.00/96.50 area. However with the Dollar trading outside its Bollinger Band and at the top of its Williams Index it makes it very difficult for me to buy the Dollar and this one of the reasons why today’s press conference can be so important. Today I will be a small seller from 96.30/96.60 with a 96.85 stop.
March DAX
The last two trading sessions have been very volatile for the DAX. Shortly after I posted yesterday morning the DAX was trading at 11240 which enabled me to cover my 11320 short position. Later on in the session the DAX rallied again to my 11320 sell level and after another sell-off I was able to cover this position at 11260 and I am now flat. I must say that I am amazed that the DAX is back trading near all-time highs but the optimism ahead of today’s ECB Meeting is huge. Today I will again look to go short from 11475/11525 with a 11560 stop.
March FTSE
The FTSE plan also worked well as just as I posted the FTSE was trading at my 6830 buy level. This turned out to be the low of the day and after a nice rally ensued I was able to cover this position at 6880 and I am now flat. Today I will be a small seller on any further rally to 6950/6980 with a 7010 stop. I will also still be a small buyer on any dip lower to 6850/6880 with a 6825 stop which is just below yesterday’s low.
Dow Rolling Contract
With the Non-Farm Payrolls due tomorrow it is very difficult to see a sell-off in the Dow ahead of this key announcement. I am still flat the Dow and today I will leave my sell level the same at 18220/18270 with an 18320 stop. My strategy is still to sell rallies in the Dow especially with the Dollar so strong, as this is definitely going to effect the profitability of a lot of the major Dow stocks.
June BUND
No change as my only interest in selling the Bund is still on a rally to 156.95/157.30 with the same 157.50 stop.
Gold Rolling Contract
No change as I am still a buyer on any dip lower to 1190/1197 with the same 1183 stop.
Silver Rolling Contract
I am still long from last Tuesday at 16.40 with the same 15.90 stop. Again if I am stopped out of this position I will be a more aggressive buyer on any dip lower to 15.60 with a 14.90 stop.
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