Breakfast Blog

Good Morning Traders,
                                    As we mentioned last night it really was a crazy day yesterday with the Market revolving Completely around the saga in Cyprus and the threat of possible contagion. What is going to happen now....will Russia bail them out? Will the ECB? A potential exit from the Eurozone? If they leave the Eurozone does this set a benchmark for other struggling countries to do the same? These are all questions that the market needs answers for and until we have some answers their will be no direction. The Market will simply switch from Risk on to Risk off depending on what news we see regarding the situation.
We saw the S&P 500 sell off to 1538 yesterday afternoon but this dip was quickly bought and sits at 1554 now in the premarket as i type. The EUR/USD hit 3 month lows at 1.2844 yesterday as it traded below the 200 Day Moving Average briefly but caught a bid tone later in the day and sits at the 1.29 handle now waiting for a catalyst to give it direction.
We don't have much news today during the European session except for the U.K. budget speech and minutes from the last BOE meeting and Unemployment change so expect the pound to be lively during this news. Sterling undoubtedly has further downside considering their new Governor Mark Carney's fiscal mantra towards further easing. However we are looking for a level closer to 1.52 to enter a short position not the 1.508 spot price we have now.
This evening we have the FOMC minutes and Ben Bernanke speaking so this will be very volatile for the Dollar and the Equity Indices. The Market is classifying this as a big risk event given the incredibly strong U.S. Data we have seen throughout the first 10 weeks of 2013 and their has been whispers of a an early exit or tapering of the quantitative easing program. This will quite simply not happen and the Market still doesn't realise it. The Fed will simply keep plowing ahead with 85 Billion a month in Asset purchases until we see the  unemployment rate drop to 6% or very close to this. America simply can not risk taking liquidity out of the system at this stage when other countries are burning their currencies. A good strategy to adopt for the upcoming months is to fade any "No QE" move for example a sell off in Gold or Equities.
Some levels to look out for on the EUR/USD are 1.2920 topside and the 200 Day MA at 1.2875 on the downside, but the Market is trading on Macro developments today so technical levels may not be very effective.
Good luck in the Markets
Lowkey