Today is a very important day as we have the ECB meeting this morning followed by the press conference from President Dragi at 1.30 pm. His last press conference caused the Euro to move up almost 300 points that afternoon and there is a lot of speculation going into this meeting. The French Finance Minister expressed some concerns regarding Euro strength but the German Government said it did not see the Euro as overvalued. Chancellor Merkel went one step further saying that Euro appreciation is not a bad thing. This is likely to be the attitude taken by the ECB this morning, seeing a higher Euro as a vote of confidence in its policies. With the Euro-Zone Economy stable, the ECB is unlikely to act and their are two main reasons for this are: 1) the stabilization of Euro-Zone activity is consistent with the ECB’s outlook and 2) the transmission of easy monetary conditions to the real economy in the periphery remains impaired with Euro-Zone financial markets achieving partial reintegration.
European Equities ended a lot weaker yesterday despite the 0.8% increase in German Factory Orders with the Dax not appreciating the strong Euro. Spanish PM, Rajoy continues to face intense pressure to resign whilst markets are also worried about Berlusconi’s comeback in Italy. Bond Yields in Spain and Italy continue to firm with Spanish Bonds now at 5.45% up from 5.16% a week ago, whilst Italian Bonds now yield 4.60% versus 4.17% a week ago.
This morning is very important for the UK as new Bank of England boss, Mark Carney is due to address the Treasury Select Committee at 9.45 am and it will be interesting to see how the Cable (GBP/USD) reacts. Following the results of the meetings from the BOE and ECB we have the Weekly Jobless Nos from the US together with Consumer Credit No’s.
March S&P 500
A relatively quiet day for the S&P with the Cash and Futures market both closing over the 1500 level. US Equities stayed reasonably well bid despite the sell off in European Equities, helped by rumours that Apple was buying back some of is stock. After I posted yesterday the S& dropped down to my 1506 buy level. Luckily the market just missed my 1499 stop with a 1499.25 low and I am still long I will lower my stop to 1498 as I still believe we will have a test of the important 1525/1530 resistance zone first before heading lower. I do not want to be short at this time unless we break and close below Mondays low at 1490.
Euro/USD
The Euro dropped down to my 1.3500 buy level and I went long here and I took a nice gain at 1.3535 and I am now flat. I am very reluctant to to do any trade in the Euro ahead of Dragi’s Press conference. I am only interested in buying the market if we drop down to 1.3450/1.3480 with a 1.3440 stop. I do not want to short the Euro preferring instead to go long the US Dollar via the US Dollar Index.
March Dollar Index
No change I still want to buy the Index on any drop to 79.20/79.40 with a 78.95 stop.This may take time to achieve my target and I prefer to wait as the Euro versus the US Dollar has become very difficult to trade, given the volatility.
March FTSE
The FTSE traded down to my 6250 buy level and just like the S&P, I am still long. I will raise my stop this morning to 6235 and I will look to take profit in front of 6300.
March DAX
Yesterday showed the importance of stops as I was stopped out of my 7660 long position at 7635 before the Dax fell another 100 points. It is amazing, despite the huge rally in both the US Indices and the FTSE for the year, that it is now down almost 1% this year. The Dax does not like the strong Euro and this is why it is under-performing against the other Indices. This morning I will look to re-buy on any further dip to 7550/7570 in small size with a 7530 stop which is just below yesterdays low.
March BUND
The Bund traded up to my 142.60 sell level and I am now short at this price. I will look to take profit in front of 142.10 and I will lower my stop to 142.80.
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