The last 24 hours saw a lower Euro and a much weaker Japanese Yen, the USD/JPY rising above 121 and consolidating around 121.70 in early trade this morning. The Yen was on the back foot after the final reading for Japanese Q4 GDP was released and revised down to 0.4% from 0.6%, suggesting a tepid recovery from the technical recession of the prior two quarters. Bank of Japan’s Deputy Governor, Nakaso, was yesterday quoted saying the ‘effects of a weaker yen on boosting export volume is finally coming into play’. He also hinted the BoJ stands ready to take further action if inflation expectations decline, comments pointing to an official downside bias to the Yen.
At the other end of the spectrum, the GBP/USD has had a strong showing for no reason seemingly than a technical rebound from key support levels close to 1.5000 against the backdrop of a fairly lethargic US Dollar. Certainly it was no reflection of England’s cricketing performance at the World Cup, bundled out yesterday by Bangladesh and not making the Quarter Finals.
It was a light day for economic data with only the Euro-Zone Sentix Investor Confidence and the Fed’s Composite Labour Market Conditions Index, both of which rose. Bonds were stronger however as the ECB’s QE Programme officially kicked off, stronger not only in Europe but also in the US despite strength in US stocks with the Dow closing 0.8% higher after last Friday’s near 300 point sell-off.
Cleveland Fed President Loretta Mester said last night that the US economy is strong enough for a rate rise but does not know when it is coming. She is reasonably confident that inflation will pick back up to 2% by the end of 2016 and is comfortable with the lift-off in this half-year as it soon will be time to start raising rates. These views will not be too far away from the mark as a representation of FOMC views as they prepare for next week’s meeting and prepare the market for rate lift-off.
This morning on the economic front we already had CPI from China which came in stronger than expected with a rise of 1.4%. We have no data due from the Euro-Zone this morning while at 1.00pm we have the US NFIB Small Business Optimism.
March S&P 500
The S&P plan worked out very well yesterday as both my buy and sell levels got triggered. Just after I posted the S&P was trading at my 2067 buy level and after a nice rally ensued after the US markets opened, I was able to cover this position at 2075. Subsequently the S&P traded higher to my 2079 sell level with a 2082 high. This morning the market is opening lower which has enabled me to cover this short position at 2071 and I am now flat. The key support level for the market comes in at 2060/2067 and today I will again be a small buyer on any further move lower to 2061/2066 with a 2057 stop. If the S&P breaks 2055 I will again look to go short in front of 2062 with a 2068 stop. I will also be a small seller today on any rally back to 2079/2084 with a 2088 stop.
EUR/USD
My long 1.0855 Euro position worked out well yesterday as by the time I posted the Euro was trading at 1.0895 which enabled me to cover this position and I am now flat. The Euro is opening weaker this morning on more concerns on debt talks between Greece and its creditors. Sentiment towards the Euro continues to be at an all-time low as one support after another gets taken out. The Euro is now well below its Bollinger Band and today I will again try the buy side from 1.0720/1.0770 with a 1.0685 stop.
June US Dollar Index
I have now rolled to the June contract which is trading at a premium of a very sizeable 70 points to the March Contract. This morning the June Contract is trading at 99.05 and I have gone short here with a 99.50 stop. If I am stopped out of this trade I will be a more aggressive seller in front of 99.85 with a 100.30 stop.
March DAX
The sell-off in the Euro is making it very difficult to be short the DAX as Europe is finally getting a real competitive advantage from the weaker currency. Yesterday after I posted the DAX traded higher to my 11570 sell level and after a nice move lower this morning I have covered this position at 11530 and I am now flat. It is incredible to see how much the DAX has moved higher so far in 2015 especially when the S&P is now flat for year. I will continue with my strategy of selling rallies with a tight stop as the DAX is extremely overbought on both a Daily and Weekly basis. The next major key resistance for the DAX is from 11760/11820 and I will certainly be an aggressive seller in this region. Today I will be a small seller on any further rally to 11630/11670 with a 11710 stop. The key support level to watch for the DAX is from 11380/11420 and today I will be a small buyer in this area with a tight 11350 stop.
March FTSE
No change as I am still long at 6860 with the same 6825 stop. I am nervous holding this position as the FTSE could not rally with the other major Indices yesterday. However as I have a tight stop on this position I will leave my stop at the same price.
Dow Rolling Contract
Finally the Dow traded higher to my 17980 sell level. Despite the Dow getting a boost from Apple joining its ranks at the expense of AT&T, I have no doubt that the now very strong Dollar will prove to be a major headwind for earnings in a lot of the Dow stocks. This morning the move lower in the Dow has enabled me to cover half of my short position at 17920 and I will lower my stop to 18040 on the other half which is just above yesterday’s high print.
June BUND
The Bund plan did not work out well yesterday as the Bund is now trading at new all-time highs on the back of QE finally starting in the Euro-Zone yesterday. Shortly after I posted the market traded higher to my 157.25 sell level before stopping me out of this position at 157.60 this morning and I am now flat. Today I will again try the short side from 157.65/158.00 with a 158.30 stop as I will continue with my strategy of selling rallies with a tight stop.
Gold Rolling Contract
Overnight Gold traded lower to my 1160 buy level. I am still long with the same 1149 stop. If I am stopped out of this long position I will be a more aggressive buyer in front of 1135 with a 1128 stop.
Silver Rolling Contract
No change as I am still long at 15.75 with the same 14.90 stop as Silver continues to trade stronger than Gold at this time.
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