After a long week we finally arrive to the main event of the week namely the ECB Interest Rate decision and amount of asset purchases at 12.45 pm followed by the key press conference at 1.30 pm with ECB President Dragi. Ahead of this meeting and after the US Markets had closed last night the New Zealand Central Bank (RBNZ) cut is policy rate by 25bps to 2.25%. Ahead of this announcement the market was pricing in less than a 30% chance of a rate cut. Reaction to the announcement has seen the NZD/USD drop nearly 1.5% to .6665. The Statement notes that further easing may be required ‘to ensure future average inflation settles near the middle of the target range’, meaning we could have another rate cut at its next meeting in April rather than wait until the June meeting.
To mark my 1000th issue of Tradernoble Daily Commentary I am offering a special 2 year rate of Euro 2500 for my Platinum Daily Commentary which includes 1/4 updated emails throughout the trading day. This offer is open to both new and existing members and if anyone is interested please email me on bryan@tradernoble.com for details.
For anybody following my Platinum Service it made 145 points yesterday and is now ahead by 945 points for March having made 2265 points in February and 3365 points in January. Since I started this service last June it has made over 21,000 points.
Looking at yesterday’s trading session, global equities edged a little higher buoyed by a modest rebound in oil prices. The lack of safe haven demand saw global Bond Yields move back to the top of their recent ranges, while in currencies commodity linked currencies were the outperformer against the US Dollar.
On the seventh anniversary of the US equity bull market energy stocks led the gains on both sides of the Atlantic which helped reduce its losses from Tuesday’s trading session. The Euro Stoxx closed 0.5% higher while the S&P closed up 0.6%.
I would suggest that the equity gains yesterday are reflective of a cautious market ahead of today’s ECB Meeting. Consistent with this view, the Euro price action was quite telling. As equity markets edged higher after I posted yesterday morning the Euro weakened against the US Dollar, however as the equity rally faded later in the session the Euro rallied back above 1.10 thus quickly reducing most of its losses. In theory further stimulus from the ECB today should be risk positive and weaken the Euro, however given question marks over the effectiveness of unorthodox policy measures, uncertainty is pretty high. Today the devil will be in the details.
In terms of data releases yesterday, UK Manufacturing came in a lot better than expected at +0.7% versus a consensus reading of just +0.2%. Meanwhile in the US Inventories for January rose 0.3% versus 0.2% expected.
This morning on the economic front we already had the release of Spanish Retail Sales yoy which printed +2.0% versus +3.3% expected. The Euro has weakened a touch on this news. As mentioned above we have the ECB Policy decision at 12.45 pm and this is followed at 1.30 pm by the Dragi press conference. Also at 1.30 pm we get the release of the US Weekly Jobless Claims and this is followed at 2.50 pm by the Bloomberg Consumer Confidence. Finally at 7.00 pm we have the Federal Budget Balance.
March S&P 500
Unfortunately the S&P missed my 1978 buy level yesterday afternoon with a 1978.50 low print before the market rallied as the 1970/1980 area has now become strong resistance after the ¾ tests of his area that we have had over the past week. I am still flat the market and today I will raise my buy level to 1976/1982 with a wider 1969 stop. My only interest in selling the market is still on a rally higher to 2005/2010 with a 2016 stop. Again if I am taken short and subsequently stopped out of this position I will be a more aggressive seller in front of 2030 with a 2042 stop.
EUR/USD
Just like the S&P above the Euro missed my 1.0940 buy level with a 1.0946 low print before subsequently rallying back over 1.10 and I am still flat. Naturally the Euro is trading lower this morning as we wait to see what Dragi will do later. If he disappoints then we are going to see a huge move higher in the Euro which could be similar to what happened after the ECB underperformed with their QE at the December 3 meeting last year. Just like the NFP lat Friday I am going to wait to trade the Euro until we get the Dragi press conference later. If The Euro falls I will be a buyer from 1.0860/1.0900 with a 1.0820 stop. I still do not want to be short the Euro at this time as to me the risk/reward is for the Euro to move higher especially as the Bundesbank have made it clear they are now happy with the present policy of negative interest rates.
March Dollar Index
My short 97.45 Dollar position taken before I posted worked well yesterday as the Dollar subsequently traded lower to 96.90 which enabled me to cover this position at my 97.15 T/P level and I am now flat. Today I will again look to sell the Dollar on any rally higher 97.90.98.40 with a 98.75 stop.
March DAX
Yesterday could have been so much better in terms of point’s gains but yet again the DAX missed my buy level by a few points before trading higher and I am still flat. Today given the expected volatility surrounding the ECB rate decision and QE and the fact that on December 3 when the ECB again disappointed with the market expectations I am going to stay flat the DAX as I want to observe the price action before making my next trade especially as we are having such a good month and I do not want to take unnecessary risk.
March FTSE
The FTSE continues to underperform the US markets at this time as Gold and the mining stocks start to look weak again. I am still flat the market and today I will still look to buy the FTSE on any dip lower to 6050/6080 with a 6025 stop. Despite the weak price action I do not want to be short the market at this time.
Dow Rolling Contract
Yesterday was not my day for the Indices as yet again the Dow missed my buy level by 30 points before having a nice 100 point rally and I am still flat. The MO improved yesterday to close at +220 so there is still plenty of room for this market to rally further. Again with the FOMC Meeting next Wednesday the downside is limited in my view ahead of this key event. Today I will move buy level slightly higher to 16910/16960 with a 16850 stop.
June BUND
My long 162.50 Bund position worked well yesterday as the market had a nice rally which enabled me to cover this position at my 162.75 revised T/P level as outlined earlier to my Platinum Members and I am now flat. Today I will again look to buy the Bund on any dip lower to 161.50/161.80 with a 161.10 stop. I will also look to sell the Bund on any rally higher to 163.00/163.40 with a 163.70 stop.
Gold Rolling Contract
Thankfully I lower my Gold buy level yesterday as the market quickly sold off to my 1245 buy level after I posted before having a nice rally to 1258 which enabled me to cover this position at my 1254 T/P level and I am now flat. As mentioned in the FTSE above Gold is again under pressure as profit taking finally kicks in. Today I will again look to buy Gold on any further dip lower to 1228/1235 with a 1221 stop.
Silver Rolling Contract
No change as I am still long at 15.40 with the same 14.95 stop.
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