This is the week of Central Bank Meeting Minutes. After Tuesday’s RBA Minutes (and Lowe’s speech Monday) reminded the market the absence of a bias in no way restricts their policy options, yesterday we had the Minutes from this month’s BoE MPC meeting and the April 28-29 FOMC meeting. There were not big currency movements, but the Minutes and events since have the market re-thinking. The BoE Minutes of their Election Day meeting had a hawkish tinge, supporting sterling in the session, curious given what lies ahead for the Economy and the BoE. The Minutes also preceded the BoE’s Inflation Report with its lower growth forecasts and post-election boost to sterling, as well as a prospective sizeable post-Election Fiscal tightening amounting to £70bn (4% of GDP). The BoE will now be re-calibrating the BoE’s growth and inflation path lower, Governor Carney recently emphasised the deflationary impact of Sterling’s rise and still to factor in the Fiscal tightening once details are known.
The FOMC Minutes continued to see narrowly balanced risks to the outlook and wondering aloud about the expected temporary nature of the Q1 slowdown. As of April, they considered June unlikely for lift-off and that’s what procured a lot of headline wire coverage. There were plenty of reasons discussed as to why Q1 weakness would/might be temporary, including the weather and the West Coast labour dispute. (We’d add the dollar’s strength and the shale oil industry slowdown too, though these are less temporary.). As something of a counter, against the main headlines of June being “unlikely”, “a few” did and officials didn’t rule out June. The Minutes highlight that every meeting is “live”. The prospective data flow will tell the story and this week’s Housing Starts/Permits was one the first more positive signs of re-growth of the US economy for some time. The Fed’s Evans (voter, a noted dove) was speaking and said a trigger for an earlier Fed rate rise (than his 2016 preference) would be a rise in core inflation substantially above 1.5 (core PCE currently 1.3%) or a jobless rate sustainably at 5% (currently 5.4% and falling). He has not closed his mind to a rate rise this year
This morning on the economic front we have German and Euro-Zone Manufacturing PMI at 8.30 am and 9.00 am respectively. This is followed at 9.30 am by UK Retail Sales. At 12.30 we have the latest ECB Minutes and these will be a market mover. This is followed at 1.30 pm by US Weekly Jobless Claims. Finally on what is a very busy day for economic data we have US Manufacturing PMI, Philly Fed Index and Existing Home Sales at 2.45 pm and 3.00 pm respectively. Later this evening the Fed’s Fischer and Williams will speak at different conferences.
June S&P 500
Unfortunately the market just missed both my buy and sell levels by two handles each in what was a very volatile trading session following the release by the Fed of the latest FOMC Minutes. I am still flat and today I will lower my sell level slightly to 2129/2134 with a 2138 stop. If I am taken short and subsequently stopped out of any long position I will be a more aggressive seller in front of 2145 with a 2152 stop. As I am very nervous of this market which in my opinion can rollover at any given moment I will also lower my buy level to 2109/2114 with a tight 2103 stop.
EUR/USD
The Euro plan worked well yesterday as by the time the London markets opened the Euro was trading at the middle of my buy range at 1.1095 with a 1.1062 low before having a nice rally following the Fed Minutes release which enabled me to cover this position at 1.1140 and I am now flat. As I mentioned in yesterday’s commentary the Euro has two major supports at 1.1050 and 1.0820. While the first support may get tested and broken I do not believe the 1.08 level will be broken as the US economic data does not justify a rate hike at this stage. Today I will again be a small buyer from 1.1040/1.1080 with a 1.1015 stop. Despite the negative price action I do not want to be short the Euro at this time.
June Dollar Index
Shortly after the London markets opened the Dollar traded higher to my 95.80 sell level. I am still short and today I will lower my stop on this position to 96.30. If I am stopped out of this trade I will be a more aggressive seller in front of 96.60 with a 97.10 stop. I still do not want to be long the Dollar at this time.
June DAX
The DAX plan worked very well yesterday as shortly after the DAX opened, the market traded higher to my 11880 sell level before having a very nice sell-off which enabled me to cover this position as outlined in my Platinum Service at 11795 and I am now flat. Today I will again look to fade this market and I will still be a small seller on any rally higher to 11890/11950 with a 12010 stop. Despite the positive price action I do not want to be long the DAX at this time.
June FTSE
No change as I am still a buyer on any dip lower to 6900/6930 with a tight 6885 stop. I will also be a small seller on any further rally higher to 7030/7060 with a 7085 stop.
Dow Rolling Contract
Just like the S&P above the Dow also missed my sell level by 20 points before trading lower and I am still flat. Today I will lower my sell level slightly to 18340/18390 with an 18430 stop. Given the fact that we still have two confirmed Hindenburg’s on the clock I do not want to be long the Dow at this time.
June BUND
The Bund plan also worked well yesterday as shortly after the Bund opened it was trading at my 154.30 sell level before having a nice sell-off which enabled me to cover this position as again outlined in my Platinum Service at 153.60 and I am now flat. This 154.00/154.40 is very strong resistance and today I will again be a small seller from 154.20/154.45 with a tight 154.65 stop. I still do not want to be long the Bund at this time as we have seen from the last two weeks trading that the Bund has the capacity to roll over again to the downside as most Hedge and Pension Funds are trapped long above the market.
Gold Rolling Contract
No change as I am still long in small size at 1212 with the same 1199 stop. Again if I am stopped out of this trade I will be a more aggressive buyer in front of 1190 with the same 1170 stop.
Silver Rolling Contract
No change as I am still long at 17.10 with the same 16.80 stop. Again if I am stopped out of this trade I will be a more aggressive buyer in front of 16.50 with the same 15.90 stop. Remember a break and close over 18.00/18.50 is extremely bullish.
Recent Comments