The USD is weaker across the board, helped by comments from German Chancellor Merkel that she and ECB president Dragi are singing from the same hymn sheet. The continued sell off in US Treasury Bonds, albeit modest, is not wholly contingent upon hopes that the Fed will pull the trigger on additional QE as early as the mid September FOMC meeting. Housing Starts were weaker than expected yesterday but building permits rose 6.8% offsetting any disappointment. The Weekly Jobless no’s rose by just 2k to 366k pushing the four week average down by over 5,000 and boding well ahead of the August Payroll number due on September 7th. Equity gains have been all the more impressive given the further slump in the shares of Facebook which are now sub $20. Globally, risk appetite and equity market strength has been helped by the 4% gain in the IBEX yesterday. The latter has responded well to news that Spain would draw down a tranche of EU emergency cash as part of the bank recapitalisation process. Also helpful are comments from a spokesman for Merkel indicating that everything is on the table when she meets Greek PM, Samaras, next week. The only data of note due today is the University Of Michigan Consumer Sentiment at 3pm.
Sept S&P 500
The good news filtering out of Europe yesterday has helped the S&P to trade out of its very tight range that has prevailed over the last 10 days. I was quickly stopped out of my 1409 short at 1413 and I am now flat again. It is clear to me that Merkel and Dragi are doing everything they can to prevent a further meltdown in Europe and this makes it very difficult to short the market. Today I will look to go long from 1406/1410 with a 1404 stop and I still want to go short the first time we test the 1420/1425 area with a 1427 stop. I have been in the US for the last couple of weeks and I am very surprised how strong the residential property market is. If this continues, the unemployment rate will start to fall as the spin-off from the rising property market filters through to the rest of the economy.
Sept FTSE
This is the one equity market that is struggling to gain any momentum. I will leave my sell area the same at 5860/5880 with a 5900 stop. If I am taken short I will look to take profit from 5800/5820.
EURO/USD
The Euro continues to trade in this 1.2250/1.2400 area that has prevailed over the last 3 weeks. It is clear to me that it is going to take something major for the Euro to break 1.20 and that the ECB will do everything it can to defend this level. I still prefer to wait and see what happens but if we break and close over 1.2450 I will get bullish. I will continue to look to sell from 1.2420/1.2440 with a 1.2460 stop. Otherwise I am happy to stand aside.
Sept BUND
The Bund just missed my buy area before it rallied 100 pips and I am still flat. I will raise my buy order to 141.00/141.30 with a stop below yesterdays low at 140.80.
USD/JPY
This currency pair is proving to be very frustrating as I have been correct in calling for the Yen to weaken but I not been able to get on board. The USD/JPY is now at the top of its Bollinger Band. I will leave my buy order the same at .7840/.7870 hoping we get a correction over the next few days in order to get long. If I am taken long I will leave my stop at .7820.
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