Not a massive past 24 hours for currency markets and markets in general, though with risk-off tinges; stocks were flat in Europe and softer into the US close after both the S&P and Dow both closed lower after significant Key Day Reversals. The US Dollar in somewhat stronger this morning, though most against the Commodity/Oil currencies, the Canadian Dollar coming in for the most selling, down around 1%, with the $A long for the ride, down 0.66%, not helped by yesterday’s over 3% decline in Chinese equities.
For anybody following my new Platinum Service it made a hard earned 170 points yesterday and is now ahead by 1292 points for October. The previous four months saw gains of 2833, 2195, 1810 and 3045 points respectively.
A growth downgrade from the Bank of Canada, and a further decline in Oil prices yesterday from a larger than expected rise in weekly US Oil Inventories were both headwinds for the C$. Expected rate inaction from the Bank of Canada transpired, but it was their downgrade to growth from the continued weakness in Oil prices saw some C$ weakness, the BoC now expecting growth of 2% next year (down from 2.3%) with soft Oil prices cutting further into capital spending and growth. The BOC cut ¾% off next year’s growth to 2%, up from just 1% this year.
The appetite for the Aussie Dollar was also trimmed, and despite supportive comments yesterday from Federal Treasury Secretary John Fraser appearing before a Senate committee hearing. He related more upbeat recent news about the domestic economy from more positive business feedback on business conditions, an indication he wouldn’t be voting for a RBA rate cut anytime soon on domestic economic grounds. To quote Fraser: “my own feeling, to be honest, is that things have been picking up somewhat. It’s been happening for the last couple months or so” he said, continuing that “I can’t put a figure on it, it’s just I don’t get beat up like I did when I first came into the job.” It’s in the last two or three months or so.
This morning on the economic front the ECB will publish its latest Monthly Report at 9.00 am. At 9.20 am the Bank of England’s Cuncliffe speaks at an economic event in London. This is followed at 9.30 am by UK Retail Sales. At 12.45 we have the main event of the day namely the ECB Rate decision and Asset Purchases. On the policy front the ECB is expected to leave rates unchanged and the meeting outcome should be relatively uneventful. As always though, the market will be alert to the possibility if not probability of any policy leaning surprise from ECB President Draghi on the QE front. At 1.30 pm we have the Chicago Fed National Activity Index and the Weekly Jobless Claims. At 2.00 pm we have the FHFA House Price Index. Also at 1.30 pm we have the ECB Press Conference with ECB President Dragi and this certainly will be a market mover. This is followed at 3.00 pm by Euro Zone Consumer Confidence and US Existing Home Sales/ Leading Indicators. Finally at 4.00 pm we have the Kansas Fed Manufacturing Activity Index.
December S&P 500
The S&P just missed breaking the key 2035/2050 major resistance area before as expected running into trouble with a significant Key Day Reversal to the downside as the market having traded higher then broke late to close on its low. Yesterday the S&P plan worked well as the market traded lower to my 2013 buy level before having a nice 10 Handle rally to 2023 which enabled me to T/P on this position at 2018 as outlined earlier to my Platinum Members and I am now flat. The big question this morning as I write this commentary is whether to trust this Key Day Reversal or is another fake move lower before again reversing to the upside. As we have the key FOMC Meeting next Wednesday it is difficult to get too excited about lower prices at this time. Today I will be a small buyer on any further dip lower to 1999/2005 with a 1994 stop. I do not want to be short the S&P at this time especially ahead of the ECB Rate decision later this afternoon.
EUR/USD
The Euro has hardly moved since last Thursday afternoon as literally the market has gone on hold ahead of the ECB and Dragi later today. I am still flat the Euro and today I will be a buyer on any QE talk from the ECB from 1.1220/1.1250 with a 1.1180 stop. I am hoping the Euro trades lower today as it will give a good opportunity to get long ahead of next week where in my opinion I just cannot see the Fed hiking rates at this time which should in turn weaken the US Dollar.
December Dollar Index
I am still flat the Dollar and today I will use any rally higher to 95.60/95.90 to go short with a 96.20 stop. I will also leave my buy level unchanged at 93.60/93.90 with the same 93.30 stop.
December DAX
The DAX is going to difficult to call today. If we get more QE from the ECB then the DAX will fly while on the other hand if the ECB disappoints then the market will get hit to the downside. Today I will leave my buy level unchanged at 9990/10040 with a 9950 stop. I still do not want to be short the DAX at this time as the price action continues to be bullish for the moment.
December FTSE
The FTSE plan also worked well yesterday as shortly after the market traded higher to my 6355 sell level the FTSE got hit for 70 points. Unfortunately I emailed all my Platinum Members to cut their short position way too early at 6340 as I had too many open positions at that stage. Today I will again look to go short on any rally higher to 6345/6375 with a tight 6390 stop. I still do not want to be long the market at this time.
Dow Rolling Contract
The Dow plan worked well yesterday as the market traded higher to my 17280sell level shortly after I posted before having a nice sell-off which enabled me to cover this position at my 17210 T/P level and I am now flat. As expected the Dow ran into trouble at the 17250/17350 major resistance area and the 62% retracement of the whole down move. Today I will again look to go short on any spike higher to 17250/17310 with a 17360 stop.
December BUND
My long 156.10 BUND position finally worked out as the BUND had a nice rally to 156.75 which enabled me to cover this position at my 156.25 T/P level and I am now flat. Today I will again look to buy the market on any dip lower to 155.70/156.10 with a 155.45 stop. The 155.60/156.00 area is strong resistance and this is why I will continue to be a buyer in this area. Remember I will be a very strong seller on any spike higher to 158.70/159.20 over the coming days/weeks with a 159.50 stop.
Gold Rolling Contract
As I had a very good trading day and the fact that I was already long Silver and sceptical of the sustainability of the recent rise in Gold I decided to cover my long 1164 position for a small gain at 1166 and I am now flat. Today I will move my buy level lower to 1145/1152 with an 1139 stop. Remember a break and close below 1150 could be very bearish.
Silver Rolling Contract
No change as I am still long at 15.88 with the same tight 15.60 stop. If I am stopped out of this position I will be a more aggressive buyer in front of 15.30 with the same 14.80 stop.
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