The Cypriot Parliament has voted to reject the proposed bank deposit levy. Despite modifying the tax so that depositors with less than €20,000 would be exempted, no MP voted for the bill with 36 voting against and 19 abstaining. Market sentiment had been soft ahead of the vote with European and US Equity markets, along with the Euro, all lower. After the announcement, the Euro hit a 3 month low of 1.2845 before all risk markets rebounded to where they were this time yesterday morning. This is in response to the ECB announcement that it would provide liquidity to Cyprus, as needed, within the
existing rules however the uncertainty in Cyprus will continue to cause headaches for investors. The failure to agree on some form of deposit tax maintains the pressure on Cyprus but the consequences of voting in favour of the package are hardly favourable either. Sterling has held up admirably since the Cyprus news broke with it re-assuming something of a return to its safe haven status in times of EU trouble. Outside of Cyprus the economic news yesterday was positive with US Housing Starts and Permits making further gains in February whilst the German Zew Survey rose to 13.6 in March from 5.2 last month.
Today on the economic front is very busy for the UK. The BOE Minutes for the March meeting are unlikely to see any change in the 6-3 vote from February whilst this afternoon the UK Chancellor delivers his 2013 Budget speech. At 10.00 am this morning we have Euro-Zone Consumer Confidence whilst all eyes will be on the FOMC rate announcement and press conference from Bernanke at 6.15 pm.
June S&P 500
It was very frustrating to be stopped out of my 1542 long position at 1537 with the market now back at 1548 as I do this commentary. I should have left a larger stop given the increased volatility but lesson learned. Today, as long as the S&P stays over 1525 the market is bullish and I still feel we will break the 2007 highs at 1565 before the market runs into trouble. Today is FOMC day and as I said yesterday I do not want to be short ahead
of this announcement and press conference that follows. Today I am a small buyer on any dip to 1539/1544 with a larger stop at 1528 which is just below the low made early Monday morning.
June DOW
After I posted yesterday morning the Dow traded down to my 14380 buy level. Unlike the S&P above I was able to take profit at 14420 before the market sold off and I did not do another trade and I am still flat. I still like the Dow here and I will use any sell off to 14360/14390 to reset my long position with a 14310 stop which is just below yesterdays low. I do not want to be short at this time.
June BUND
The Bund worked really well yesterday and I was able to take profit at 14440 on my 14390 long position from Monday and I am now flat. I still like the Bund and I will use any sell off to 143.90/144.20 to reset my long position with a tight 143.70 stop.
Euro/USD
Just like the S&P I had my stop too tight and I was stopped out of my 1.2890 long position at 1.2860 and I am now flat. The Euro managed to close over the very important 1.2875 level but only just. The Euro is very oversold here and the market is going to be determined on one hand by what Cyprus does and on the other side by what the Fed announces at its FOMC meeting this evening. For these reasons I am going to stand aside in the Euro today as I do not see a good risk reward trade at this time.
GBP/USD (Cable)
Cable continues to consolidate its rebound off the 1.4825 low made last week. All eyes will be on the BOE Minutes released this morning followed by the UK Budget this afternoon. I am going to leave my buy levels the same as yesterday. I am a small buyer on any dip to 1.4980/1.5010 with a 1.4950 stop. I do not want to be short at this time.
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