Yesterday it was currencies that were very much at the centre of global market attention. The USD/JPY finally broke 100 and traded up to 101.20 overnight with broad based Dollar demand seeing the AUD/USD taking out a 10-month old range low whilst the Euro also fell 1% against the Dollar. An unexpected albeit modest drop in the US Weekly Jobless Claims (4k) was a fundamental catalyst for the initial moves in New York via higher US Treasury Yields. In addition ‘stop loss’ buying above 100 in USD/JPY, accompanied by flows from Macro Hedge Funds, accounted for much of the subsequent price action. There has been some attempt to pin the blame for Dollar strength on the fact that one of the most dovish FOMC members, Chicago Fed President Evans, seemed to suggest that tapering of Fed QE could commence as early as this Autumn. The US stock markets finished slightly lower yesterday with the S&P and Dow losing 0.4% and 0.1% respectively.
Today on the economic front we have German and UK Trade data this morning whilst Canada has it’s April Employment Report and it will be interesting to see if it can keep up the string of upside surprises.The US has its Monthly Budget Statement and later, Fed Chairman Bernanke is due to speak at the Chicago-Fed’s Annual Conference along with Chicago President Evans.
June S&P 500
Finally we get some two way price action in the S&P as the market has so far rejected the important 1630 resistance area. It traded up to my 1629 sell level with a 1632 high and I was able to take a gain at 1622 and I am now flat. I am still convinced that, due to all the reasons that I have outlined all week, the S&P will put in some of a short term top over the next week and that we should see a reasonable decline. Today I will be a small seller again on any further rally to 1626/1630 with a 1633 stop which is just above yesterday’s high. If I am taken short and subsequently stopped out I will be a small seller again if the market drops five handles from what ever high is put in with a stop at just above this new high. Again I am only interested in buying the market on any dip to 1593/1597 with a 1589 stop.
Euro/USD
Having nailed the high at 1.3190 on Wednesday I go and ruin this lovely position by covering at 1.3150 and going long at this level only to be quickly stopped out at 1.3120 and I am now flat. Again it shows how important it is to have stops in the market. As I write this commentary the Euro is just breaking support at 1.3030 and the next main support is at 1.2950/1.2975 where I will be a small buyer with a 1.2930 stop. A break and close below 1.2950 will be short term bearish. The next resistance level is at 1.3070/1.3100 and I will be a small seller here with a 1.3120 stop.
June DAX
This move in the Dax is just relentless as every single resistance level is being taken out and all the shorts in the market are getting killed. The Dax did not hit any of my levels yesterday but is finally breaking the 8330 level as I write this commentary. Today I will look to reset my short position on any further rally to 8360/8400 with a 8420 stop but given the volatility I will only trade in small size.
June FTSE
The FTSE also continues to trade higher and I was stopped out of my 6560 short position at 6575 for a small loss. The FTSE is at my new sell level this morning at 6595 and I have gone short here again . This 6600/6620 is huge resistance and I would expect the market to run into trouble here. I will leave a 6630 stop on this position as I look for the FTSE to trade back to at least 6520.
June BUND
The Bund worked well and I have been able to take profit this morning at 145.30 on my 145.90 short position taken yesterday morning and I am now flat. If the Bund rallies back to 145.70/146.00 I will look to sell again with a 146.20 stop.
Gold Rolling Contract
Gold also worked very well yesterday and I was able to take profit at 1456 on my 1472 short position and I am now flat. As I have been saying all week this 1470/1485 is huge resistance and I will be a small seller again in this region with a tight 1492 stop.
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