Some positive sentiment returned to markets yesterday. There was little news out of Cyprus where officials are still weighing up bail out options and working on contingency plans for if there is a huge outflow of deposits when the banks re-open. But fears of contagion have eased for now and equity markets all pushed higher yesterday. US markets received a further boost after the FOMC announcement. The Fed maintained its $85 billion per month QE programme, though in his press conference Bernanke highlighted that the Fed could vary the pace of purchases depending on how the outlook evolved. The FOMC statement itself offered few surprises. The committee saw a return to moderate growth after the pause late last year whilst the housing and labour markets have improved although the unemployment rate remains elevated. But the Fed still sees downside risks to the outlook and also noted that Fiscal Policy has become somewhat more restrictive which means that very easy monetary policy will be maintained for some time. The Fed’s US growth forecasts have been revised down marginally with 2013 growth now 2.3% – 2.8%. The UK Budget was about as grim as expected but the risk of a consequent collapse in Sterling has not materialised. Downward revisions to UK growth forecasts and more austerity saw Cable (GBP/USD) briefly slide to 1.5040. Meanwhile the BOE Minutes vote was unchanged at 6 – 3 in March in favour of keeping asset purchases unchanged.
Today is a very busy one for economic data. This morning we have UK Retail Sales and Public Sector Net Borrowing followed in the Euro-Zone by PMI Manufacturing Services. Later in the US we have Initial Jobless Claims at 12.30 pm and existing Home Sales at 2.00 pm whilst later in the afternoon we have the Philly Fed Index.
June S&P 500
The S&P continues to trade higher in a very quiet market. I still believe that it will make new highs before we get a meaningful sell off and on a more long term basis I am looking for the S&P to top out somewhere between 1570/1585. I still do not want to be short here as I look for the market to finally make new highs and also it is very hard to fight the Fed as long as they continue their $85 billion per month of asset purchases. Today I am a buyer on any dip to 1541/1546 with a 1538 stop. If I am stopped out I will look to buy the market again on any 5 handle rally with a stop below whatever low is put in.
June DOW
No change from yesterday as I look to buy the market in small on any dip to 14360/14390 with a 14310 stop.
June BUND
The Bund worked well as we traded down to my buy level with a 143.95 low. I went long the Bund at 144.10 and I will look to take profit on any rally to 144.40/144.60. I will raise my stop to 144.00 which is just below this mornings low.
Euro/USD
The Euro continues to trade in a choppy fashion. As I have been saying the 1.2875 is the key level to watch and a break and close below here will be very bearish. The Euro looks very heavy and despite the continued asset purchases from the Fed, the Euro did not rally much and we are now back below 1.2900 as I write this commentary. I have no strong view here and I am going to stay flat and see how the Euro trades from here at this key
level before taking a new position.
GBP/USD (Cable)
I was very unlucky with Cable as the market just missed my buy level twice yesterday. I like Cable and I think the market has put in a reasonable bottom at 1.4825. This morning I will raise my buy level to 1.5050/1.5080 with a 1.5020 stop which is just below yesterday’s low.
June DAX
I will look to buy the Dax on any dip to 7870/7900 with a 7845 stop.
Recent Comments