As expected the ECB left its key interest rates and QE programme unchanged, but a more optimistic Draghi has helped the EUR to rally while at the same time it has also pushed Bond Yields higher. Commodities have remained under pressure and it has been the key driver for the underperformance of the Australian Dollar and other commodity linked currencies. The ECB statement and forecasts had no major surprises and resulted in a fairly muted reaction by the market. The forward guidance in the statement was unchanged (“interest rates will stay low, or lower for an extended period of time”) and the only notable tweak in the forecasts was the 2017 inflation uplift to 1.7% from 1.4% previously. But 45 minutes later in the press conference an upbeat Draghi boosted the Euro and pushed core Global Yields higher as he ever so slightly suggested the ECB door could be opening to the possibility of a change in policy stance in the future.
To mark my 1300th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2750 for my Platinum Service which includes 1/4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested can you please contact me on email@example.com for details.
For anyone following my Platinum Service it made 130 points yesterday and is now ahead by 356 points for March, having made 1481 points in February, 1734 in January, 1351 in December, 1971 in November and 1582 in October. The previous four months saw gains of 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1800 points.
Draghi noted that further measures to support the Euro Zone economy have become less likely given the threats to its recovery have become less severe and while he also noted that “There is no sign of a convincing upward trend in underlying inflation,”, he then added that “There is no longer that sense of urgency in taking further actions,” .
The Euro jumped about 60p to 106.15 on Draghi’s comments but the move quickly faded and now it trades about 20pips lower at 105.92. In contrast reaction in the Bond market has been more lasting. 10y bunds have ended the day close to yesterday’s highs (up 5.6bps to 0.421%) and 10y UST yield have continued to creep up and briefly traded above 2.60%.
Meanwhile commodities and not just oil, have remained under pressure. 20 days ago iron ore was close to $95 now is at $86.8, oil was at $54.5 and now is at 48.96.and copper is also down almost 8% from its mid-February peak.
Unsurprisingly then commodity linked currencies are the G10 underperformers. The AUD (-0.33%) traded below 0.75c last night before finding some support, CAD is also down 0.2% and NZD is -0.30%. The latter appears to be finding some support at 0.6890 and it has traded mostly sideways in the last few hours. Finally, European equities ended the day mildly in positive territory and US equities after a late evening sell-off rallied in the last hour to end the day essentially unchanged.
This morning on the economic front we already had the release of the German Trade Balance which came in at EUR 14,8 BLN versus 18 BLN expected. At 9.30 am we have UK Industrial Production, Manufacturing Production, Construction Output and the Trade Balance. Next we have the highlight of the day namely the US Non Farm Payrolls at 1.30 pm. After Wednesday’s stronger than expected ADP print (298k vs 200k exp.), the market is looking for a 200k NFP print this afternoon but the ‘whisper number’ is probably closer to 250k. Meanwhile the consensus is looking for the Unemployment Rate to slide 0.1% to 4.7% and for Average Hourly Earnings to rebound +0.3% in the month taking the annual reading to 2.7% from 2.5% previously. Finally we have the UK NIESR GDP Estimate at 3.00 pm and the US Monthly Budget Statement at 7.00 pm.
March S&P 500
My S&P plan worked really well yesterday with the market hitting my 2354 buy level before rallying to a 2373.50 high print so far this morning. This rally enabled me to cover this position at my 2360 T/P level and I am now flat. The main reason why I have been so stubborn in not shorting the S&P was because of the large negative reading for the McClellan Oscillator which in my opinion is one of the best technical signals we have for the market. It is incredible that with the Dow only less than 1.5% from its all-time high that the MO has such a negative print. This morning when the MO was released for last night’s close which showed the MO at a very oversold reading of -266, the S&P rallied further. As usual ahead of the NFP data I will stay flat and after we get the release and in particular I will be looking the Average Earnings Component I will look to buy the S&P on any dip lower to 2359/2365 with a 2353 stop. My only interest in selling the S&P is still on a rally higher to 2394/2400 with a 2406 stop which I believe will be tested next week ahead of the FOMC Meeting on Wednesday and the March Quarterly Expiration on Friday. Just to note the US will move their clocks forward by one hour this weekend. It means for the next three weeks until we move our clocks forward that the US Futures Market will re-open at 10.00 pm on Sunday evening and close one hour earlier at 8.15 pm during this time frame.
The Euro continues to trade between 1.0500 and 1.0640 ahead of the NFP today and the FOMC next Wednesday. Given Dragi’s comments yesterday I believe that the Euro has limited downside potential as long as we stay above the early January low at 10341 and that the market continues to be a buy on dips. Today I will move my buy level higher to 1.0515/1.0550 with a 1.0485 stop.
March Dollar Index
No change as I am still a seller on any rally higher to 102.40/102.80 with a 103.10 stop. I still do not want to be long the Dollar at this time.
Unfortunately the DAX just missed my buy level before rallying strongly. As I have mentioned over the past few days the price action in the DAX is positive and today I will now raise my buy level to 11900/11960 with a 11845 stop. The DAX has strong resistance at its 5.5 year trend line from 12135/12175 and today I will be a small seller in this area with a 12210 stop.
My FTSE plan worked well with the market trading lower to my 7260 buy level before rallying strongly and this move higher enabled me to cover this position at my revised 7290 T/P level and I am now flat. With Sterling continuing to weaken all dips in the FTSE are a buy and today I will again look to buy the FTSE on any dip lower to 7280/7310 with a 7250 stop.
Dow Rolling Contract
My Dow plan also worked well with the market hitting my 20790 buy level before rallying back over 20900 this morning after last night’s MO was released. This rally higher enabled me to cover this long position at my 20850 T/P level and I am now flat. Today I will continue to look to sell the Dow on any rally higher to 21140/21200 with the same 21260 stop. I will also look to buy the Dow on any dip lower to 20770/20845 with a 20720 stop.
My Bund plan did not work well as just as I posted yesterday morning I was stopped out of my long 160.80 position at 160.35. Subsequently at Dragi’s press conference the BUND in one red candle hit my second buy level at 159.90. I am still long and I will leave my stop unchanged at 159.45. I will now lower my T/P level on this position to 160.10.
Gold Rolling Contract
Initially after Gold hit my 1203 buy level the market rallied to 1208 and this rally enabled me to cover this position at my revised 1205.50 T/P level. Subsequently I emailed my Platinum Members to re-buy Gold on any dip lower to 1190/1198. I have now bought Gold in small size at 1196 and I will add into this position on any move lower to 1189 with the same 1183 stop. As I am long Silver I will now lower my T/P level on this trade to 1200. Gold is severely oversold but I have to respect the fact that it broke and closed below its 500 day moving average at 1203.
Silver Rolling Contract
Silver is now trading a hefty 9% lower than the highs made last week in what can only be described as a rout. Yesterday’s move lower saw me add to my original 17.32 position at 17.00 for an average buy level at 17.16. Given the importance of the 16.60 support level I have now lowered my stop on this position to 16.55.
Following our successful live trading sessions over the US Non-Farm Payrolls in 2016, Paul Wallace and I are hosting are next event in London for the April NFP data on April 7th. All details of this event are on the following link and if any of my members would like to attend please click on the £150 link which is £100 off the main rate.