Morning Update

Good Morning Traders,
                                    Another Rollercoaster ride in the markets yesterday with some technical damage being done in the Major European bourses. The Dax was down nearly 2% at one stage yesterday but the bounce back ability of the American stock market roughly halved its losses. A combination of more Cyprus rheotric, poor European data, Italian Downgrade rumours and a poor Italian debt Auction saw a very heavy session for all European asset classes. This also weighed on American stock Futures with the S&P 500 opening at the lows of the day at 1551 but closing at the highs of the day at 1563, a couple of points shy of the all time highs. Surely today we must see this 1566 level broken, what a perfect American first quarter of trading that would be.
Yesterday morning the Dax broke a very important trendline at 7855 tripping stops and sold off to 7755 before bouncing back in the afternoon. This trendline break shows a top is probably in place and a retest of this 7855 level would prove a great place to establish a short position.
Yesterday we saw European periphery bond yields climbing again on political uncertainty, Cyprus and contagion fears. We also believe it is a flow rotational issue where investors are liquidating positions in bonds and putting the money to work in stocks, specifically the American stock Market.
Moving onto currencies. The Euro lagged yesterday breaking through barriers at 1.2825 and 1.2800 in the EUR/USD pair, selling off to a new year to date low of 1.2750. The buyers came in here and this morning we are seeing a relieve rally with the Euro back over the 1.28 handle as I type. The Euro is a sell on any rally as some analysts are calling 1.15 in the coming months. Anywhere near the 200 day moving average at 1.2881 would be a great sell but i doubt we may see this level again for a long time.
USD/JPY looks to have based around the 94 handle and has been a period of consolidation with Japanese firms repatriating Yen for their Financial year end. We believe that next week and the start of the new quarter will bring further Easing and further Yen weakening. A medium target of 100 for this pair in the coming weeks/months is very achievable and these levels look strong. Trendline support at 93.55 proved very strong when tested on Monday and will most likely not be tested again.
This is the last trading day of the Month and the last quarter so expect some volatility as funds, traders and investors square their positions. For the Next quarter we believe a lot of investors will establishing short Yen and Euro positions and we may see more flow rotation into American Stocks. If this is the Case we will see more Dollar strength and if the correlation remains between the S&P 500 and the Dollar it may not be the "Sell in May and go away" story that we generally see in the Market.
Some touted levels on the EUR/USD are 1.2750 on the downside, strong buying here along with Barrier related interest, Topside offers can be seen at 1.2820 all the way up to the 200 Day MA at 1.2881.
USD/JPY see's strong bids at the 94 handle and selling pressure from Japanese exporters at 94.75 through to the 95 handle.
Good Luck in the Markets, See you in Q2!!!