Most of the focus was on the US Dollar over the past 24 hours following the release of the March Retail Sales Report. It was a slight miss, but much less so than the previous two reports. Headline Sales rose 0.9% and even stripping out autos and gas, sales rose 0.5%, growth in March missing the consensus by 0.1-0.2%. The Atlanta Fed’s so-called ‘nowcast’ of current Quarter GDP which is based on real time updates from GDP partials such as yesterday’s Retail Sales, was upgraded slightly to +0.2% from 0.1% despite a lower estimate for Q1 Consumption of 1.9 down from 2.1% with higher inventories the offset. The March Small Business Optimism Index gave up three points, adding some caution about the slowing pace of US growth so far this year.
The US Dollar lost some ground, down a net 0.65% with the majors thus making up some ground against the big Dollar. US Treasury Yields were a few points lower, the 10-year yield closing down 3bps to 1.90%. The move lower in Treasuries was reflected across the curve making it very unlikely that the Fed will hike rates at its June FOMC Meeting.
Sentiment for the Euro was helped by better than expected Feb Industrial Production data, while for Sterling it more than recovered lost ground after the UK core March CPI fell back to 1.0% y/y from 1.2%.
The IMF released its latest world growth forecasts in its World Economic Outlook yesterday, leaving its global growth forecasts for this year and next unchanged at 3.5% and 3.8%.
This morning on the economic front we already had Chinese GDP which came in below expectations at 7.0%. At 10.00 am we have the Euro-Zone Trade Balance and this is followed at 12.45 pm by the ECB Rate announcement and update on the QE situation. This is followed by the main event of the week at 1.30 pm namely the Dragi press conference and this will certainly have a market impact. Also at 1.30 pm we have the US Empire Manufacturing and at 2.15 pm we have US Industrial Production. The NAHB Housing Market Index will be released at 3.00 pm while at 7.00 pm the Fed will release its Beige Book. Finally at 9.00 pm we have the Net Long-Term TIC Flows which are also very important and potentially a market mover.
June S&P 500
The S&P plan worked out very well yesterday as shortly before lunch the S&P sold off to my 2081 buy level with a 2076 low before having a nice rally which enabled me to cover this position at 2088 and I am now flat. Today promises to be a volatile trading session especially given the fact the amount of economic data to be released later. So far in 2015 every sell-off is met by aggressive buying and yesterday was a continuation of that theme. As I mentioned countless times this year until we get a sell extreme that last a few days and at the same time break and close below the now major support at 2035/2040 it is very hard to be short the S&P for more than a few hours. Today I will again be a small buyer on any dip lower to 2078/2083 with a 2073 stop which is just below yesterday’s low. I will still look to sell on any rally higher to 2098/2103 with a tight 2107 stop.
EUR/USD
Unfortunately the Euro bottomed ahead of my 1.0520 buy level yesterday before having a 170 point rally and I am still flat. Thankfully the Euro is lower this morning as I still believe the Fed will not hike rates as high as the FX market is pricing in and it will be very interesting to get Dragi’s take on the Euro at his press conference at 1.30 pm. Today I will move my buy level higher to 1.0550/1.0580 with a 1.0520 stop which is just below yesterday’s low. Given the fact that sentiment remains at extreme levels towards the Euro I still do not want to be short the Euro at this time.
June US Dollar Index
The Dollar plan worked out very well yesterday as the Dollar was trading at my 99.95 sell level soon after I posted. Subsequently the Dollar got hit hard to the downside which enabled me to cover this short position at 98.80 and I am now flat. I still believe that the Dollar is extremely overbought and due a decent correction that lasts for more than a few trading sessions. For this reason I will again look to go short on any move higher to 99.40/99.70 with a 100.20 stop. If I am taken short and subsequently stopped out of this trade I will be a more aggressive seller in front of 100.40 with a 100.80 stop.
June DAX
The DAX plan also worked well as soon after lunch the DAX traded lower to my 12280 buy level before having a very quick rally which enabled me to cover this position at 12330 and I am now flat. The DAX has had an extraordinary move higher so far in 2015 and there is no doubt that the price action is telling me that the 12400 is going to be a major hurdle to break at least for the time being. The DAX has some support at the 12150/12200 level and today I will be a small buyer in this area with a 12120 stop. I will also lower my sell level to 17360/17395 with a 17430 stop.
June FTSE
The FTSE traded in a very narrow range yesterday and I am still flat. With three weeks to go to the UK General Election I am expecting volatility to pick up in both directions. Today I will still be a small seller from 7070/7095 with a 7120 stop. I will leave my buy level unchanged at 6970/6995 with a tight 6955 stop.
Dow Rolling Contract
Unfortunately the Dow just missed my sell level yesterday before have a nice sell-off and I am still flat. Given the amount of economic data due out of the US later and especially when the Fed releases its Beige Book at 7.00 pm I am going to raise my sell level to 18110/18160 with a 18190 stop as the Beige Book release has the potential to move the market in both directions. For this reason I will be a small buyer on any dip lower to 17890/17930 with a tight 17850 stop.
June BUND
No change as I am still a small seller on any further rally to 159.70/160.00 with a 160.20 stop.
Gold Rolling Contract
The Gold plan also worked out very well yesterday as shortly before lunch Gold traded lower to my 1186 buy level before having a nice rally which enabled me to cover this position at 1196 and I am now flat. Today I will again be a small buyer on any further dip lower to 1177/1185 with an 1169 stop.
Silver Rolling Contract
No change as I am still long from last week at 16.40 with the same 15.90 stop. Again if I am stopped out of this position I will be a more aggressive buyer in front of 15.60 with the same wider 14.90 stop.
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