The US Dollar has strengthened further this morning after the US FOMC Minutes from the January meeting showed rising concern about the risks of more Quantitative Easing. Several members indicated that the Fed should be prepared to vary the pace of the current $85 billion per month asset purchase programme, although there is still widespread opinion as to whether the purchases should be cut back before a substantial improvement in the labour market. The US Dollar has risen to a high of 81.40 this morning. from a low of 80.30 at the start of European trading yesterday morning, which is a substantial move, with Sterling continuing to be the weakest currency. Sterling has been slammed again after the BOE Minutes showed a surprising 6-3 vote (previously 8-1) to keep the Base Rate at 0.50% and asset purchases of £37 billion, with Governor King and Markets Director, Fisher joining David Miles in recommending a further £25 billion of stimulus. The MPC stands ready to provide additional monetary stimulus if warranted by the outlook for growth and inflation. Cable fell from 1.5440 to 1.5300 and later dipped to 1.5140 after the Fed Minutes. Equity markets were very strong yesterday morning after the better than expected Consumer Confidence Nos from the Euro-Zone but the markets turned nasty after the Fed Minutes were released.
Today is also a very busy day for economic data. This morning we have German and Euro-Zone PMI Manufacturing Services while France is to sell bonds. Later in the US we have a slew of data: CPI, Initial Jobless Claims, Bloomberg Consumer Comfort Index, Mortgage Delinquencies and Foreclosures, Existing Home Sales, Leading Indicators as well as the very important Philly Fed Report.
March S&P 500
What a day! We finally get the sell extreme that I have been looking for over the last two weeks after the FOMC Minutes were released. The S&P just missed my 1531 sell level with a 1530 high as I got greedy with my level having called for the market to top in the 1527/1532 resistance area. Even though we got the sell extreme yesterday the market needs to break and close below 1490 for me to get bearish. This morning I will look to buy the S&P from 1496/1501, in small, with a wider 1488 stop. Given the expected volatility I have to trade in smaller size with a larger stop.
Euro/USD
Yesterday was another example how important it is to have stops in the market. The Euro traded down to my 1.3360 buy level before doing nothing for hours until the FOMC Minutes were released stopping me out of my long position for a small loss at 1.3325 and I am now flat. The fact the Euro is below the very important 1.3250 level is crucial and technically the Euro looks very weak. Even though we are at the bottom of the Bollinger Band and Williams Index I will only look to buy the Euro in front of 1.3170 which is the high from last September and should offer good support. A break and close below 1.3170 and I think the bull move for the Euro is over. So today I am a buyer from 1.3170/1.3190 with a 1.3150 stop and I will also be a seller in small from 1.3250/1.3280 with a 1.3310 stop.
March FTSE
Very frustrating, as the FTSE rallied after the BOE Minutes were released to take me out of my 6360 short position, before the then market fell 100 points. The FTSE is now back at the very important 6270/6290 support zone and I am a small buyer here with a 6255 stop.
Gold Rolling Contract
No surprise to see that I was stopped out of my 1607 long position at 1595 and I am now flat. Again the importance of having stops in the market is key as Gold then fell 40 Dollars after I was stopped out. Gold is extremely oversold and at the bottom of the Bollinger Band this morning. The Daily Sentiment Index of traders has contracted to just 6% Bulls and the last time we had this low a reading, Gold rallied over 60 Dollars. This morning I am a very small buyer from 1550/1560 with a 1525 stop. The 1527/1547 is the next key support.
March BUND
The Bund is back above the very important 143.00/143.20 resistance area and this morning I am a buyer in this range with a 142.85 stop. I am looking for the Bund to retest the 143.70/144.20 resistance area.
GBP/USD (Cable)
Having not written about Cable for a while we are now at an interesting juncture. Cable is the most oversold that I have ever seen and I have bought the market here in small at 1.5190 with a 1.5120 stop which is just below the low made overnight.
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