The past 24 hours has seen the US Dollar move higher across the board, with the Dollar Index closing up 0.50%. The Euro has tested 1.10 and is currently trading just above this level as we await the Key US Employment Report at 1.30 pm. The Dollar rose despite little in the way of any surprise from the ECB and a higher than expected Weekly Jobless Claims, even if it was affected by the harsher than expected weather that caused a plane to overshoot the runway at La Guardia and close the airport.
The ECB left rates unchanged as entirely expected and confirmed they would commence buying Euro-denominated public sector securities in the secondary market from next Monday. They will continue these purchases at least until they see a sustained adjustment in the path of inflation consistent with inflation below but close to 2%. The ECB revised up its growth forecasts for this year and next to 1.5% and 1.9% from 1.0% and 1.5% previously. However they cut Inflation forecasts with inflation seen as flat this year and 1.5% for 2016. The forecast for 2015 was revised down mainly due to lower Oil prices and the 2016 revised slightly higher due to the recent Monetary Policy measures.
This morning Fed Member Williams has already been speaking on the news wires. He says that he expects to see a series of 25bp rate rises but not at every Fed Meeting. He said the Fed should remove the word ‘patient’ at the March Meeting, with the removal of ‘patient’ not meaning that the Fed would stop giving forward guidance.
This morning on the economic front we have already had German Industrial Production which came in slightly better than expected at +0.6%. At 9.30 am the Bank of England/ GIK will give their inflation forecasts for the next twelve months. At 10.00 am we have Euro-Zone GDP. This is followed by the main event of the week, namely the US Non-Farm Payrolls Report which is expected to rise 245K from last month’s 275K rise. The Unemployment Rate is expected to fall to 5.6% from 5.7% last month. Also at 1.30 pm the US will release its Trade Balance for January.
March S&P 500
The S&P plan worked well yesterday as late in the afternoon session the market traded lower to my 2093 buy level before having a nice rally into the close which enabled me to cover this position at 2099 and I am now flat. The fact that we have Non-Farm Payrolls at 1.30 pm I will stay flat until this data is released. If it comes in weaker than expected I will again be a small buyer from 2087/2092 with a 2083 stop which is just below this week’s low print. My only interest in selling the market is still on a rally to 2114/2120 with the same 2125 stop. Again if I am taken short and subsequently stopped out of any short position, I will use my Five Handle Rule to go short again with a stop above whatever new high is printed. Remember as long as the S&P stays over the now very key support at 2067/2072 it is very difficult to be short the market. Only when we break this support will I look to put on a more strategic short position.
EUR/USD
The Euro plan also worked well yesterday as after ECB President Dragi finished his press conference the Euro traded lower to my 1.1000 buy level before having a small rally which enabled me to cover this position at 1.1030 and I am now flat. The Euro is opening slightly lower this morning on Fed Member Evan’s comments to Reuters about the Fed starting a serious of 25bp rate hikes. Today I will again be a small buyer on any dip lower to 1.0950/1.0990 with a 1.0925 stop. If the Payrolls come in weaker than expected there is every chance of a large sell-off in the US Dollar as the market is now entirely positioned in been long the Dollar at this time.
US Dollar Index
Finally after Dragi finished his press conference the Dollar Index traded higher to my 96.50 sell level. I am still short and today I will raise my stop on this position to 97.10 as I want to give this trade some room to move especially with the Employment data due later.
March DAX
After yesterday’s announcement that the ECB would finally start QE next Monday the DAX rose and closed at yet another all-time high. The DAX is now very overbought on both a Daily and Weekly basis, with yesterday’s move resulting in me going short at 11500. However the fact that we have the US Payroll data at 1.30 pm I have decided to cover this position this morning for a small loss at 11515 and I am now flat. Given how overbought and overextended the DAX is I am still looking for a sell extreme to develop that lasts longer than last Tuesday’s one day wonder. My only interest in selling the DAX today is on a rally to 11540/11580 with an 11620 stop. Naturally I do not want to be long the market at this time.
March FTSE
Late yesterday afternoon the FTSE finally traded higher to my 6950 sell level. I am still short and today I will lower my stop slightly to 6990 on this position. If I am stopped out of this trade I will be a more aggressive seller in front of 7020 with a 7050 stop. My only interest in buying the FTSE is still on a dip to 6860/6890 with a 6835 stop.
Dow Rolling Contract
No change as I am still flat and will only look to sell the market on a spike higher to 18210/18260 with a 18310 stop. The stronger Dollar is definitely making the US less competitive and I firmly believe that this will start to weigh on earnings going forward as most of the economic data released so far in 2015 has disappointed.
June BUND
When I was doing my research this morning one amazing statistic came to hand. The Euro-Zone has now got EUR1.9trillion of debt with a negative interest rate. This is incredible and when Bond Yields eventually rise, the affects could be really nasty.
Yesterday after I posted the Bund rallied to my 157.15 sell level on the announcement that QE will start next Monday. I am still short and I will leave my stop the same at 157.50. If I am stopped out of this trade I will be a more aggressive seller in front of 157.80 with a 158.20 stop.
Gold Rolling Contract
No Change as I am still a small buyer between 1190/1197 with the same 1183 stop.
Silver Rolling Contract
No change as I am still long from last Tuesday at 16.40 with the same 15.90 stop. Again if I am stopped out of this trade I will be a more aggressive buyer in front of 15.60 with a 14.90 stop.
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