Anyone who happened to have taken a midweek vacation to another planet could be forgiven for walking into their office this morning and muttering the effect that ‘So the Fed was a non-event then?’ The EUR/USD and which on Wednesday night managed to trade on five different big figures inside two hours following the FOMC announcement to above 1.10 is back on a 1.06 handle again this morning.
Since EUR/USD is regarded as singularly the most liquid currency pair in the world, let no one be under any illusion that the impact on liquidity from increased regulation and reduced global participation by some of the world’s biggest investment banks, plus events such as the SNB’s shock decision to abandon the CHF ceiling in January, already extends well beyond the credit market sphere.
One of the more intelligent observations that I have seen on the FX market events of the past 48 hours is that while the speed and scale of the initial US Dollar sell-off was testament to extremely stretched long Dollar positioning among the speculative community, the scale of the subsequent retracement tells us that many professional end users of Foreign Exchange – corporate and intuitional investors – were not. Hence their evident enthusiasm for grabbing the opportunity to buy Dollars at much better levels.
Tonight’s IMM positioning data will be instructive in telling us just how long the speculative Futures Market was heading into the FOMC, given the data will be for the week through last Tuesday and after the prior week’s numbers showed record speculative Dollar longs versus G10 Currencies. Part of the reason for full retracement of EUR gains has been Euro-Zone specific, with Greek related stresses re-intensifying amid news of record deposit outflows from Greek banks, and latest rhetoric from EU Officials. Though yesterday’s take up of the 3rd LTRO at EUR82.6bn was a bit lighter than expected, it nevertheless highlights the heavy lifting still to be done by QE if the ECB is to achieve its ambitions of a EUR1tn balance sheet expansion. 10 Year German Bund Yield made a new record low yesterday of just 0.17%.
US economic data yesterday saw the Philly Fed Index slightly underperform expectations at 5.0 versus 7.0 expected but Jobless Claims failed to show any weather related jump, printing 291K, little changed. In the UK, dovish comments from the BoE’s MPC’s Haldane – that a rate cut was as likely as a rate hike – hurt Sterling as well as giving a fillip to UK rate markets.
This morning on the economic front we have Euro-Zone Current Account at 9.00 am. This is followed at 9.30 am by UK Public Finances. As today is Contract Expiration for the March Futures and Options Contracts we have no economic data scheduled from the US.
June S&P 500
The idea of buying dips on the week of Futures and Options Expiration again has paid dividends this morning. Yesterday after I posted the S&P traded lower to my 2080 buy level and after a nice rally this morning I have been able to cover this position at 2086 and I am now flat. Today I will again be a small buyer on any dip lower to 2076/2081 with a 2073 stop. I still do not want to be short the S&P today especially as we continue to hold the key 2070/2075 support for the June Contract.
EUR/USD
The Euro plan also worked well yesterday as the market had a nice sell-off shortly after I posted to 1.0650. Subsequently the Euro has rallied overnight which has enabled me to cover this position at 1.0690 and I am now flat. Today I will again be a small buyer on any dip lower to 1.0620/1.0660 with a 1.0595 stop. Again if I am taken long and subsequently stopped out of any long position I will be a more aggressive buyer in front of 1.0540 with a 1.0460 stop which is just below last Friday’s spike lower.
June Dollar Index
My short 99.45 Dollar position also worked well yesterday as the market had a nice sell-off just after I posted which enabled me to cover this trade at 98.90. The Dollar Index is back trading higher again this morning and I have gone short again at 99.35. I will leave a 99.80 stop on this position and if I am stopped out of this trade, I will be a more aggressive seller in front of 100.30 with a 100.70 stop.
June DAX
The DAX plan also worked well yesterday as the DAX started to sell-off soon after I posted which enabled me to go long at 11870. The DAX subsequently had a decent rally which enabled me to cover this position at 11940 and I am now flat. This morning the DAX is opening higher and I will again look to but the market on any dip lower to 11880/11920 with a 11830 stop. I still do not want to be short the DAX at this time.
June FTSE
Shortly after I posted yesterday the FTSE traded lower to my 6880 buy level and after a nice rally overnight I have been able to cover this position at 6920 and I am now flat. Today I will again look to buy the market on any dip lower to 6850/6880 with the same 6825 tight stop. I still do not want to be short the FTSE at the time as the price action continues to tell you to only buy dips.
Dow Rolling Contract
Once we get the March Contract Expirations out of the way later today it is going to be very interesting to see the reaction to the stock markets and more specifically the Dow especially since we have three confirmed Hindenburg Omen signals since last December. I am still flat the Dow and today I will lower my sell level slightly to 18120/18170 with a 18220 stop. I still do not want to be long the Dow at this time.
June BUND
Shortly after I posted yesterday the Bud made a new contract high with the Yield on the German Bund falling again to a now incredible 17bp. The rally in the Bund continued to my 158.90 sell level. I am still short and today I will lower my stop slightly to 159.30. If I am stopped out of this trade I will be a more aggressive seller in front of 159.50 with a 159.80 stop.
Gold Rolling Contract
Yesterday after I posted Gold just missed my 1159 buy level with a 1160 low and I am still flat. Today I will raise my buy level slightly to 1155/1162 with a 1148 stop.
Silver Rolling Contract
Silver had a nice 3% rally yesterday but unfortunately just missed my 15.80 buy level before mounting this rally and I am still flat. Today I will raise my buy level to 15.80/16.10 with a 15.40 stop.
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