US equities have managed to end the day with modest gains while main European equity Indices posted gains between 0.20% and 0.55%. After yesterday’s rally, US Treasury yields are a little bit higher across the curve with the 10y note currently trading at 2.363%, 3.5bps higher relative to where I marked prices 24 hours ago. The US Dollar has been supported by the move higher in UST yields and is stronger against all G10 currencies barring the Japanese Yen. That said, US equities closed in positive territory after a quiet trading session, and 10Y UST edging higher later in the session. I would not be surprised to see USD/JPY make some gains today.
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For anyone following my Platinum Service it made 35 points yesterday and is now ahead by 111 points for April, having made 1335 points in March, 1481 in February and 1734 in January. The previous seven months saw gains of 1351, 1971, 1582, 1142, 1782, 1682 and 2550 points respectively. Since I started this Platinum Service in June 2015 it has averaged a monthly gain of over 1750 points.
In Australia, Governor Lowe spoke at the RBA Board Dinner and similar to yesterday’s Statement his remarks were focused on the labour and housing markets. The Governor noted that the labour market’s conditions remain pretty soft and added that “we will want to see an improvement here before we can be confident that growth in the overall economy is strengthening”. As for the housing market he reiterated the Bank’s support for the need of additional strengthening in lending standards, but then he also said that other arms of policy need to do more in order to address housing supply issues (infrastructure, land release – and not mentioned, even immigration and/or foreign investment, none of which are RBA policy levers).
Meanwhile the AUD and NZD are at the bottom of the pile, down 0.57% and 0.58% respectively. The move lower in the AUD was sparked by the RBA policy announcement early yesterday morning. As expected the RBA left the Cash Rate unchanged, but the acknowledgement of a weaker labour market, together with clear stress on macro-prudential restraints were seen as an excuse to sell the AUD, even though earlier in the day the AUD had been boosted by better than expected trade data ($3.6bn surplus vs $1.6bn exp.). The technical break below 0.7580 was also factor weighing on the AUD, later on Governor’s remarks did little to arrest the slide with pair trading to a low of 0.7548 about two hours after he spoke. This morning the AUD has regained a little bit of ground and it has settled just above 0.7570.
As for commodities, oil prices have edged closed to 2% seemingly boosted by a Bloomberg survey suggesting US crude supplies probably fell by 150k barrels last week, (the EIA report is out this afternoon). Iron ore, copper and gold are little change while met. coal is the outstanding performer, up 10.3% amid supply disruption in Australia following cyclone Debbie.
Data releases were largely ignored when released yesterday. The March UK Construction PMI was a little bit weaker (52.2 vs. 52.5 exp.) and Euro-Zone Retail Sales for February a touch stronger (0.7% vs. 0.5% exp.). The US Trade Balance for February narrowed a little further than consensus to $43.6bn versus 48.5bn in January.
This morning on the economic front we have German, Euro-Zone and UK Markit Services/Composite PMI at 8.55 am, 9.00 am and 9.30 am respectively. Also at 9.30 am we have UK Unit Labour Costs. This is followed at 1.15 pm by the US ADP Employment Change and this number will be closed watched by the markets ahead of Friday’s Non Farm Payrolls. Next we have US Services PMI at 2.45 pm and the ISM Non-Manufacturing at 3.00 pm. Finally at 7.00 pm we have the Minutes from the last FOMC Meeting. In spite of the overabundance of Fed speakers since the March 14-15 FOMC meeting, the Minutes are still likely to gather a fair bit of market’s attention. The market will be on the lookout for any clues on the Fed’s Balance sheet unwind strategy as well as any signs that might reflect a bias for a faster approach to lifting the Funds Rate.
June S&P 500
Yesterday was another frustrating trading session of fine margins with the S&P just missing my 2344 buy level with a 2344.75 low print before rallying back to 2360.I am still flat the S&P which I would expect to stay quiet ahead of Friday’s Non-Farm Payrolls. The last 48 hours have again emphasised how difficult it is to be short the S&P for any length of time as buyers just keep ‘’buying the dip’’ despite the extreme sentiment levels towards the US stock market. Today I will now raise my buy level to 2342/2348 with a 2337 stop. I will also raise my sell level to 2367/2373 with a 2378 stop.
Unfortunately the Euro just missed my 1.0630 buy level with a 1.0635 low print shortly before lunch and I am still flat. The Euro continues to have strong support at its three month trend line from 1.0620/1.0650 and today I will move my buy level slightly higher to 1.0625/1.0655 with a 1.0695 stop. Given the importance of this trend line support I still do not want to be short the Euro at this time.
June Dollar Index
No change as I am still a seller on any rally higher to 100.85/101.20 with the same 101.50 stop. Next Friday is a big day for the Dollar because if we get a weaker NFP release especially with weak Average Earnings then we may see an extended sell-off in the US Dollar. Remember the US Dollar had a rare Downside Key Month Reversal in January and this KDR will continue to weigh on the US Dollar.
I am still flat the DAX following Monday’s Downside Key Day Reversal. I am not going to chase this market higher and I will leave my buy level unchanged from 12100/12150 with the same 12045 stop. However I will raise my sell level slightly to 12370/12430 with a 12480 stop.
The FTSE continues to hold strong support at the 7180 important Head and Shoulders Neckline as mentioned in yesterday’s commentary. I cannot see this level being broken ahead of Friday and for this reason I will leave my buy level unchanged from 7200/7230 with the same 7170 stop. The weakness in Sterling is helping the FTSE at this time and for this reason I will now raise my sell level slightly to 7310/7340 with a 7365 stop.
Dow Rolling Contract
The Dow having missed my 20540 buy level eventually hit my 20710 sell level just before the New York close. As I wanted to bank some points for yesterday’s trading session, I emailed my Platinum Members earlier this morning to cut this position at my revised 20675 T/P level and I am now flat. Similar to the S&P above I would expect the Dow to trade in a narrow range ahead of the Payroll data on Friday. Today I will move my buy level higher to 20510/20580 with a 20460 stop. My only interest in selling the Dow today is on a further rally higher to 20780/20840 with a 20890 stop. The 20850 should be strong resistance and any test of this level will initially lead to a decent sell-off first.
Frustratingly the Bund missed my 162.75 sell level with a 162.72 high print before spending the rest of yesterday’s trading session trading lower and I am still flat. The Bund is severely overbought and due a correction. Today I will l raise my sell level to 162.90/163.20 with a 163.45 stop. I will still be a buyer on any dip lower to 161.55/161.85 with the same 161.35 tight stop.
Gold Rolling Contract
Yet again Gold has met strong resistance at the 1260/1265 area. There is no doubt that some major player is selling Gold in this area. However the more tests that we have of this range the weaker the resistance will become and in my opinion it is only a matter of time before we break and close over 1265. As mentioned yesterday the next target level is 1281 ahead of very strong resistance at 1300. Today I will leave my buy level unchanged at 1243/1250 with the same 1237 tight stop.
Silver Rolling Contract
Silver traded in a very narrow range yesterday as I am still long at 18.30 with the same 17.75 stop. If Silver rallies today I will then raise my stop on this position to 17.90. Remember Silver has very strong support from 17.70/18.00 and in my opinion it is only a matter of time before we hit $19 and then the early July 2016 high at 21.03.