Major currencies were showing greater volatility than other asset classes yesterday. EUR/USD has taken up the mantle from USD/JPY and JPY crosses and has fallen hard after EU Finance Minister, Junker, described the 10% rally in EUR/USD in the past six months as leaving it dangerously overvalued. The German DAX followed the Euro lower after a negative outcome for German GDP in Q4 was confirmed. In the US, Retail Sales showed a better than expected rise for both the headline and core components in December. PPI was a bit softer than expected. In stocks, current trading patterns suggest that a consolidation phase is underway after the strong run up in the first two weeks of January. Still there are lingering concerns that US Debt Ceiling and Fiscal Cliff issues will return and dampen growth in America. Also midst the US earnings season, tepid reports have put investors back on their heels and today’s reports from Goldman Sachs and JP Morgan could be very important.
Today on the Economic front we have Euro-Zone CPI at 10.00 followed in the US by CPI, the TICS data which will be closely watched. At 2.15 pm we have Industrial Production and Capacity Utilisation followed by the NAHB Housing Index at 3.00 pm.
March S&P 500
Another very quiet day for the S&P as we await the earnings reports from Goldman Sachs and JP Morgan today. The S&P traded up to my 1464 sell level and as I said yesterday I am going to try and give this trade some room to move. I will leave my stop the same at 1473 and I will look to take profit on any dip back to 1447/1451. I do not want to be long at this time.
Eur/USD
The Euro worked really well and I was able to take a nice profit at 1.3320 on my 1.3390 short and I am now flat. This morning the Euro continues to fall on Junkers comments and I am a small buyer from 1.3190/1.3220 with a 1.3175 stop. I will only look to short the market if we trade back to 1.3330/1.3350 with a 1.3365 stop.
March FTSE
The FTSE worked really well as I was able to take profit at 6075 on my 6060 long position and then I went short at 6080. I will lower my stop to 6090 which is just above yesterday’s high. This 6070/6100 resistance level is crucial and the market has had a large sell off from this level every time we have tested this area over the last few years. I will look to take profit on any dip back to 6020/6035.
March DAX
I have not traded the DAX over the last couple of weeks as I did not feel I had an edge here. However the DAX is trading heavy and continues to under perform the other Equity Indices. Obviously the weak economic no’s from Germany are not helping. This morning I think the DAX is starting to breakdown and I am a seller from 7680/7710 with a tight 7725 stop.
March BUND
The Bund continues to rally and I really believe we have put in a temporary base at the 142.00/142.50 area. Today I am raising my buy level to 143.10/143.30 with a 142.95 stop.
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