What an incredible 24 hours that we have just witnessed in both Currency and Equity markets with the EUR/USD which was trading at 1.1040 when I posted yesterday morning now trading at 1.0810. Meanwhile the German DAX has rallied over 300 points of its 11640 low. US Stocks which had recovered most of their intra-day lows again sold off into the close for the fourth consecutive trading session while US Treasury Yields closed higher.
Helpful to the US Dollar’s rally has been incoming US economic data, where US Weekly Jobless Claims fell to 282K versus 290K expected, levels consistent with ongoing 250K+ gains in US Non-Farm Payrolls and a declining Unemployment Rate. The next set of March Payroll Numbers are due next week on Good Friday when most markets will be closed bar the United States will be shut. That promises to be fun.
We also had an upside surprise in the Markit US Services PMI which printed 58.6 versus 57.1 last month, and which follows a strong Manufacturing sector version earlier this week. One counterpoint was the Kansas City Fed Manufacturing Activity Index which fell to -4 from 1. As well as providing support for the US Dollar, the data also helped US Bond yields push back higher, with additional impetus coming from a poorly received 7-year note auction. This served to see 10-year Treasuries poke back above 2.0% for the first time since last week’s immediate post-FOMC plunge.
Incoming Fed speak now has the sound of a scratched record about it. Dennis Lockhart repeating that June, July or September are all candidates for a first rate rise, and Charles Evans still calling for nothing before March 2016.
Elsewhere in Currencies, the Canadian Dollar sits at the top of the G10 leader board, encouraged by Yemen-related bounce in Oil prices, and comments from BoC Governor Poloz that are further seen to diminish chances of another rate cut as soon as April. Sterling received a boost from an upside surprise in UK February Retail Sales.
This morning on the economic front we have US GDP at 12.30 pm where the consensus is for a 2.4% rise. This is followed at 2.00 pm by the University of Michigan Consumer sentiment. Later this evening Fed Chair Yellen is due to speak on Monetary Policy in San Francisco and so if an excuse for inaction today is wanted, this will probably suffice.
June S&P 500
The S&P plan worked out well yesterday as the market had a nice rally off the 2038 support level (which in hindsight I should have bought the market here) to my 2057 sell level. Subsequently the market got hit hard which enabled me to cover this position at 2049, while at the same time retain half my macro 2068 short position from late Tuesday. Today my only interest in buying the S&P is on a dip to 2031/2036 with a 2027 stop and if I am taken long and subsequently stopped of any long position I will be a more aggressive buyer on any further dip to 2013/2018 with a 2008 stop. I will still be a small seller on any rally back to 2059/2065 with the same 2068 stop for both positions.
EUR/USD
The Euro plan really worked out well as just as I posted the Euro was trading at my 1.1040 sell level and after a huge sell-off I was able to cover this position at 1.0920 and I am now flat. The volatility in the Euro is just staggering in comparison to previous years. The Euro has good support from 1.0760/1.0800 and today I will be a small buyer in this area with a 1.0730 stop. I do not want to be short the Euro today as I want to see how the market reacts to this huge mover lower in the past 24 hours. The fact that Fed Chair Yellen is speaking in San Francisco this evening could lead to more US Dollar weakness especially if she is in any way dovish.
US Dollar Index
Unfortunately the Dollar just missed my 96.40 buy level after I posted yesterday and I am still flat. Today I will be a small seller on any further rally to 98.10/98.50 with a 98.80 stop. I do not want to be long the Dollar at these levels.
June DAX
The DAX plan worked unbelievably well as the market sold off soon after I posted yesterday which enabled me to go long at 11690. Subsequently the DAX had a massive 300 point rally off its 11640 low which enabled me to cover this position at 11850 and I am now flat. The 11940 is now key resistance for the DAX as a break and close over this level signals a move back to the all-time highs over 12240. With the market back above key support at 11800 I will look to buy the DAX on any dip lower to 11780/11830 with a 11745 stop.
June FTSE
The FTSE plan did not go according to plan yesterday as just after I posted I was stopped out of my 6920 long from Wednesday at 6855 and I am now flat. Today I will again try the long side on any dip lower to 6760/6790 with a 6745 stop. I still do not want to be short the FTSE at this time.
Dow Rolling Contract
I am glad that I stayed out of the Dow yesterday especially given the volatility and as a result I am still flat. Today I will be a small seller on any rally higher to 17800/17850 with an 17880 stop. My only interest in buying the Dow is still on a dip lower to 17480/17530 with a 17430 stop.
June BUND
No change as I am still a small seller on any rally higher to 158.85/159.15 with the same 159.40 stop.
Gold Rolling Contract
Gold is lower this morning as the market is having difficulty in trying to take out the now major resistance at 1220/1230. I am still flat and today I will still be a small buyer on any dip lower to 1188/1197 with a 1181 stop.
Silver Rolling Contract
No change as I am still long at 16.90 with the same 16.40 stop. Again a break of 17.60 will see me raise my stop to 17.30 on this position.
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