Not big moves on the currency front yesterday, though the US Dollar was somewhat stronger as the ECB announced that it had turned on the liquidity spigot for Greece again and what data there was for the US was added a little more incremental evidence the economy is making further progress. The Euro remained on the defensive with ECB President Draghi hammering home his unwavering commitment to ultra-easy monetary policy with a fresh vow to use every tool available to respond to any “unwarranted tightening” in monetary conditions. (In other words, avoiding EUR appreciation, praying no doubt for Fed rate lift-off.) The Bloomberg spot dollar index closed higher by 0.37%, making gains against most of its major currency counterparts, excepting the Aussie, that’s tested back above 0.74.
For anybody following my New Platinum Service it made 35 points yesterday following Wednesday’s gain of 125 points and is now up over 1100 points for July. Last month it made a total of 3045 points.
Along with the AUD, Sterling retained its recent support, with Bank of England Governor Mark Carney doing nothing to stem that, saying that a decision on rates will be “in sharper relief” by year end. In the second (Senate) leg of her Congressional testimony, Fed Chair Yellen said she favours tightening in a “prudent and gradual manner” in her careful/cautious but deliberate style. Markets will be paying close attention to today’s US CPI, Housing Starts and Consumer Sentiment.
Canada’s CPI is also due on the heels of recent C$ weakness. As far other currencies, the NZD once again weakened as the market ramped up odds of a follow up cash rate cut at next week’s RBNZ meeting to over 100%, the market is tinkering with the outside possibility of a 50bps cut rather than 25 bps. It was the follow up of a softer Kiwi CPI yesterday in the wake of that mid-week further plunge in world dairy auction prices that kept the flightless bird on the back foot.
Chinese spot Iron Ore prices have been relatively steady in recent days, the Qingdao 62% fines price adding $0.11 yesterday to $50.66. The WSJ did an interview with RBA Board member John Edwards yesterday, Edwards acknowledging that Australia’s Unemployment Rate had been lower than expected and that the global outlook had improved a bit, Greece concluding its bailout negotiations and that the decline in China’s economy may have slowed on the most recent numbers. He welcomed the move lower in the $A toward its post float average, acknowledging the lower currency was beginning to produce some benefits for the Economy.
This morning on the economic front we have Euro-Zone Survey of Professional Forecasters and Construction Output at 9.00 am and 10.00 am respectively. This is followed at 1.30 pm by US CPI, Housing Starts and Building Permits. Finally at 3.00 pm we have the University of Michigan Consumer Sentiment.
September S&P 500
By the time the European markets opened yesterday morning the S&P was already trading in the middle of my sell range at 2113 before finally stopping me out of this position near the Chicago close for a small loss at 2118 and I am now flat. The S&P is now up over 50 Handles since the open last Sunday night and still has left a very sizeable ‘Open Gap’ from last Friday’s close at 2070 to Monday’s Day session low at 2086. The move over the past few days had led to the Williams Index giving a sell signal with its reading at just below zero. However we still are no where near the top of the Bollinger Band as yet. The big question is now whether the S&P is going to make new highs and trade up to its next key resistance from 2180/2210 or are we going to run into a brick wall near current price levels. As I have mentioned all year until we get a sell extreme that lasts and finally closes below the now major support at 2035 It is very difficult to be short this market for more than a few hours. Today I will try the sell side one more time from 2121/2126 with a 2131 stop. Given how over extended this market is trading I do not want to be long the S&P at this time. It is interesting the Dow was a significant ‘lagger’ yesterday afternoon with the stronger US Dollar certainly having an impact.
EUR/USD
Initially my long 1.0955 Euro plan did not work out as shortly after I posted yesterday morning I was stopped out of this position at 1.0910. Subsequently after ECB President Dragi’s press conference the Euro traded lower to my 1.0860 buy level before having a nice rally which enabled me to cover this position at 1.0910 as outlined to my Platinum Members and I am now flat. Today the Euro is trading at the bottom of both its Bollinger Band and Williams Index and for these reasons I will again be a small buyer from 1.0830/1.0870 with a 1.0795 stop. Given how oversold the Euro is trading I do not want to be short the Euro at this time.
September Dollar Index
My short 97.30 Dollar position from Wednesday was stopped out shortly after I posted at 97.70 and I am now flat. The Dollar has key resistance from 97.70/98.00 and a break and close over this level tonight could be significant. However the Dollar is overbought this morning and for this reason I will again be a small seller from 97.90/98.25 with a 98.45 stop.
September DAX
Thankfully I said in yesterday’s commentary to wait until we got the Dragi press conference over before looking to go short the DAX any by the time he had finished the DAX was already trading at 11750 and well past my indicated sell level. I am still flat and today I will again try the sell side on any rally higher to 11770/11820 with a tight 11850 stop. I will also be a small buyer on any dip lower to 11580/11630 with an 11545 stop as the 11600 should now as good support after breaking this level over the past two days.
September FTSE
Yesterday afternoon the FTSE finally traded higher to my 6750 sell level. I am still short and today I will lower my stop on this position to 6785. If I am stopped out of this position I will be a more aggressive seller in front of 6820 with a 6845 stop.
Dow Rolling Contract
The Dow plan finally worked out yesterday with the market trading higher to my 18150 sell level before having a nice sell-off into the close which enabled me to cover this position at 18080 as outlined earlier to my Platinum Members and I am now flat. There is no doubt the stronger US Dollar is having a negative impact on the Dow with the market not been able to make any head-way so far this year. Today I will again be a small seller on any rally higher to 18150/18210 with an 18240 stop.
September BUND
I am still flat the BUND and I am going to stay flat today as I do not see a low risk opportunity in the BUND at this time. I taught the BUND would have rallied on Dragi’s comments at his press conference but as I have mentioned over the past few weeks with so many Hedge and Pension Funds trapped long above the market it is very difficult for the BUND to rally.
Gold Rolling Contract
No change as Gold tests its 2015 low at 1141. I am still flat and today I will again be a small buyer from 1127/1135 with an 1119 stop. Remember I am looking for a buy extreme to emerge in Gold somewhere between 1080 and 1140 and this could be a powerful move higher.
Silver Rolling Contract
No change as I am still long at 15.05 with the same 14.40 stop.
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