In an otherwise quiet Monday session, Eurozone markets have been cheered by reports that Greek Finance Minister Yanis Varoufakis has been removed from the debt-deal negotiation table by his prime minister. Varoufakis’ hard-ball tactics have been a source of huge frustration for the Brussels group of international creditors. The appointment of a more conventional negotiator, more familiar with the European bureaucracy, has stoked optimism that a deal will be reached before large payments are due in May. The news helped EUR/USD break above 1.09 early this afternoon (high of 1.0927) to its highest level in three weeks. Headlines quoting Greek PM Tsipras are hitting the wires as we write, Tsipras reported saying that German chancellor Merkel is willing to find solution for Greece and that a Greek default would represent a failure for Europe.
Gains for EUR/USD are very mild in relation to some other currencies however, where it the commodity sensitive currencies that have fared best (CAD, NOK, NZD and AUD in that order). CAD and NOK’s G10 leadership positions have come despite renewed slippage in oil prices, with Brent and WTI grades both off around $0.50 on the day. Hard commodities in contrast are continuing their recovery, the China iron ore import price for the 62% fines grade up another $1.28, to $59.0. Exchange traded metals are also up about 1% (LMEX index).
The Japanese Yen, in contrast, is very marginally weaker over the past 24 hours, following a ratings downgrade from Fitch (to A from A+) and which puts it below both Moody’s and S&Ps current rating. That said, there are very few, if any, recorded instances where ratings downgrades to Japan have had durable negative impact on the currency.
The main news out of the United Sates Monday has been Apple’s Q2 results – just reported after the close – showing EPS of $2.33 against the $2.16 street estimate and 33% up on the same period of last year. In January Apple had warned that dollar appreciation was likely to take about $2bn off its top-line revenue, so there is some relief the hit does not appear to be larger. Together with an announced expansion of its capital return programmer by $70bn to $200bn, Apple’s shares price has risen by over 1% in the 30 minutes since reporting.
Economic news overnight has been sparse, the only things to note being the Markit US Services PMI, which slipped to 57.8 from 59.2, beneath the 58.8 expected, and the Dallas Fed Manufacturing Activity survey, which improved marginally to 16 from -17.4 but beneath the expected -12. The run up in the AUD/USD rate overnight, from around 0.7820 to above 0.7860, came directly on the back of the Services PMI release, albeit assisted by favourable EUR/USD tailwinds.
This morning on the economic front we have UK GDP and the BBA Loans For House Purchase with both due to be released at 9.30 am. This is followed at 3.00 pm by the only US data, namely Consumer Confidence and the Richmond Fed Manufacturing Index.
June S and P 500
The idea of selling rallies in the S&P continues to work very well yesterday as shortly before 3.00 pm the S&P spiked to my 2120 sell level before having a nasty sell-off into the close which enabled me to cover this position at 2110. The market continued to sell-off after I covered my short position with the S&P eventually hitting my 2103 buy level. I am still long and I will leave my stop the same at 2095 on this position. As I mentioned yesterday as long as the S&P can hold the 2090 support level then the buyers are in control but a break and close below here will be short-term bearish. I will also be a small seller on any further rally to 2113/2118 with a 2122 stop which is just above yesterday’s high.
EUR/USD
The Euro plan worked very well yesterday as shortly after I posted the Euro traded lower to my 1.0840 buy level where it remained until just after lunch when the Euro spiked on Greece which enabled me to cover this position at 1.0890 and I am now flat. The fact that the Euro has now closed over 1.0850 for two consecutive days is encouraging and for that reason I will again be a small buyer on any dip lower to 1.0840/1.0870 with a wider 1.0795 stop. I do not want to be short the Euro at this time as a break and close over 1.1050 will be very constructive.
June US Dollar Index
The idea of selling rallies in the Dollar continues to work well as yesterday soon after I posted the Dollar spiked to my 97.40 sell level before having a nice sell-off on the Greek news which enabled me to cover this position at 96.90 and I am now flat. Today I will again look to go short on any spike higher to 97.20/97.50 with a tight 97.80 stop.
June DAX
For a change I was very lucky with my buy level in the DAX yesterday as soon after I posted the DAX traded lower to my 11780 buy level before having a 250 point rally off this buy level which enabled me to cover this position way too early at 11920 and I am now flat. Yesterday’s price action was very encouraging despite the stronger Euro and today I will again look to buy the market on any dip to 11910/11950 with a 11870 stop. My only interest in selling the DAX is on a rally to 12110/12160 in very small size with a 12210 stop.
June FTSE
The FTSE had a wild trading session yesterday as nervousness start to kick in ahead of next week’s General Election. Shortly after I posted the market traded higher to my 7060 sell level before having a nice sell-off which enabled me to cover this position at 7020 and I am now flat. Today I will again look to go short on any rally back to 7070/7095 with a tighter 7115 stop. Naturally I still do not want to be long the market at this time.
Dow Rolling Contract
The Dow plan also worked well yesterday as shortly after the lunch spiked to my 18150 sell level with a 18180 high before having a nice sell-off into the close which enabled me to cover this position at 18090 and I am now flat. Today I will again be a seller on any rally back to 18130/18170 with a tight 18210 stop. With three conformed Hindenburg Omen’s still on the clock I do not want to be long the Dow at this time.
June BUND
No change as I am still a small seller on any rally higher to 159.50.159.80 with a 160.10 stop.
Gold Rolling Contract
Very frustrating as just as I was stopped out of my long 1191 position on Friday at 1183, Gold decides to have a $25 rally yesterday and I am still flat. Remember the key level to watch for Gold is still from 1220/1230 as a break and close over here will be very positive and should lead to an acceleration higher. Today I will move my buy level higher to 1188/1197 with a 1176 stop which is just below the recent low over the past few days.
Silver Rolling Contract
No change as I am still long at 15.80. Today I will raise my stop to a breakeven.
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