The last 24 hours was one of US$ weakness and $A strength, trades that gathered momentum early in the London session, a session marked by a big miss on US consumer confidence. The Euro has tested 1.10, while the AUD/USD is up over 2% trading above 0.80 this morning, the Bloomberg US$ spot index off 0.59% and the Aussie higher on the crosses. The US$ selling was underway before the consumer confidence report hit the screen but had another leg down in its wake. Even a miss on UK GDP that printed at 0.3% for Q1 (against 0.5% expected) was a mere speed bump in US$ selling against sterling. We also note that the Euro was not harmed by reports that Ireland was planning tax cuts and spending increases in its 2016 Budget, indications the Republic has turned the corner. Reported yesterday, Irish retail volumes (+9.2% y/y) and property prices (+16.8% y/y) surged in March. There’s been lots of analysts’ soul searching why the Conference Board measure of consumer confidence did not move in step with modest rise in the UoM measure. We would note that the Conference Board measure is often watched for what it says about US consumers’ perceptions of the job market.
On that score the “Jobs Plentiful Index” (Jobs plentiful-jobs hard to get net balance) worsened to -7.3 from -4.5, the lowest since December and not unlike overall confidence. Regionally, most broad multi-state survey areas in fact rose but the West Central region was fell 13 points, the region that includes Oklahoma and Texas, affected by the downturn in oil and gas. The Dallas Fed Manufacturing index has also moved into contractionary territory this year. In the wash up, the AUD is at the top of the FX leader board this morning, spot iron ore price up again yesterday by $0.79 to $59.88/t and higher on the crosses. Gold and metal prices rose somewhat too, though the softness in the $US would explain a good deal of that. China yesterday announced measures to support local government financing that might delay rate lift-off.
This morning on the economic front we have Euro-Zone Business Climate Indicator and Consumer Confidence at 10.00 am. This is followed by German regional CPIs which are to be released early this morning ahead of the preliminary Germany CPI for April at 1.00 pm. The Business Climate Indicator is expected to ease to 0.2 from 0.23. And then the focus hones in on the US, first with GDP which is due at 1.30 pm where the consensus is for a 1.0% rise from last Quarter’s 2.2% increase. This is followed at 3.00 pm by Pending Home Sales. Later at 7.00 pm we have the FOMC announcement. This is the key event of the evening and for me there are three things for me to watch out of the FOMC.
1) How the statement characterises the economy and we’d expect some downgrade from “growth has moderated somewhat”;
2) How they describe the factors behind the slowing and the relative importance of the weather;
3) An update from March’s statement when they removed patient but said April was “unlikely”; will they say the same that about June? That seems likely and an open book beyond then, the Fed totally dependent on the data flow and how temporary the slowdown is.
June S&P 500
Unfortunately my long 2103 position taken late on Monday evening was stopped out yesterday at 2095 as just after the S&P bottomed at 2089 before having a nice 23 handle rally into the close. In hindsight with the FOMC Meeting due this evening I should have used my’ 5 Handle Rule’ to rebuy the market as yet again no matter how awful the economic data the market will as usual always rally into this meeting. As I am writing this commentary there is no plan as yet for Fed Chair Yellen to hold a press conference after the FOMC Statement is released. Today I will move my sell level higher to 2116/2122 with a 2126 stop. I will also still be a small buyer on any dip to 2094/2100 with a wider 2087 stop which is just below yesterday’s low.
EUR/USD
The Euro plan worked well yesterday as shortly after I posted the Euro traded lower to my 1.0870 buy level before having a very nice rally on the weak US Consumer Confidence release which enabled me to cover this position at 1.0960 and I am now flat. The big question today is how the Dollar will react to the GDP Number at 1.30 pm and then what reaction it will have following the FOMC Statement at 7.00 pm. In my opinion it is only a matter of time before the Euro takes out the key 1.1050 resistance area and trades higher to at least 1.13 as the US economic data is not Dollar supportive at present, and this is why today is such a key day for the Dollar going forward. Today I will again be a small buyer on any dip lower to 1.0890/1.0930 with a wider 1.0840 stop. I still do not want to be short the Euro at this time.
June Dollar Index
Unfortunately the Dollar just missed my 97.20 sell level by a few points after I posted yesterday morning and I am still flat. Today I will move my sell level lower to 96.60/96.90 with a 97.30 stop. This morning the Dollar is approaching key support at 95.80 and a break and close below here will be at least short-term bearish.
June DAX
The DAX had another wild trading session as all of Monday’s gains were wiped out mainly on the back of the stronger Euro. The DAX has nearly become a reflection of what is going on in the FX market as opposed to corporate earnings and valuations. Yesterday after I posted the DAX traded lower to my 11920 buy level before eventually stopping me out of this position at 11870 and I am now flat. Today my only interest in buying the DAX is on a dip to 11770.11810 with a 11740 stop. I will also move my sell level lower to 11950/12000 with a 12070 stop which is just above yesterday’s high.
June FTSE
I am still flat the FTSE as the market just missed my 7070 sell level before trading lower. Today I will lower my sell level slightly to 7035/7065 with a 7095 stop. I still do not want to be long the FTSE t this time.
Dow Rolling Contract
Just before the close the Dow traded higher to my 18130 sell level before having a small sell-off this morning. With US GDP and the FOMC later I have decided to cover this short position at 18105 and I am now flat. Today my only interest in selling the Dow is on a rally to 18170/18220 with a 18265 stop. I still do not want to be long the Dow at this time.
June BUND
No change as I am still a small seller on any further rally to 159.50/159.80 with the same 160.10 stop.
Gold Rolling Contract
Gold just missed my 1197 buy level with a 1199 low and I am still flat. Today I will raise my buy level to 1197/1205 with a 1189 stop as in my opinion it is only a matter of time before Gold breaks higher.
Silver Rolling Contract
My long 15.80 Silver position has finally worked out and after a nice rally I have been able to cover this position at 16.60 and I am now flat. Today I will again be a small buyer on any dip lower to 16.10/16.45 with a 15.75 stop.
Recent Comments