Today will be the first real trading day of the Second Quarter and the first day in the build up for Friday's Jobs report, The Non-Farm Payrolls. Yesterday's price action was muted from a combination of low volume and Trader's adopting a wait and see approach to this week's Three risk events; The BOJ two day meeting, ECB Press conference and the Job's report.
The American Markets were open on Monday whilst the European bourses remained closed. We saw the release of the ISM Manufacturing Index which came in at 51.3 from a forecast of 54.2. This can normally be seen as a good indicator for the Jobs report on Friday and we saw some Dollar weakness and position squaring ahead of the key risk events. USD/JPY sold off to 92.50 but found a bid there and has now retraced back to 93.4, with an Asian High of 93.697. The EUR/USD also managed to retrace some ground but only down to this Dollar weakness we saw on Monday, we reached session highs of 1.2873 but have sold off since then and now trade just under the 1.28 handle. The Euro definitely remains a sell on any rally with some Analysts calling for 1.15 inside the next 6 Month. Near term support can be seen at 1.2750 with reported barrier option interest here, but realistically it looks like we are going to test the November 2012 lows of 1.2690 in the coming days or weeks. If we do not see a bounce here we may see further declines quickly as Euro bulls may start to throw in the Towel. More rhetoric about Cyrpus, The Slovenian problems and Strong American Data weigh all the risks to the downside in this pair.
The Dax rallied nearly 150 points in Yesterdays session on weak Eurozone Manufacturing. This doesn't quite make sense. There could be a few reasons for this move however, A rotation into Equities for big funds who are not getting any proper return from bonds and commodities or has the market started to price in an Interest Rate cut for the ECB tomorrow which would be negative for the Euro and Bonds but Positive for Stocks.
Gold has been in a tight range for the last 2 weeks, stuck between 1612 and 1590, It finally broke through resistance at 1590 yesterday and has sold off to 1567 with no real resistance now until the 2013 low of 1555. Funds are liquidating positions in Precious metals and putting money to work in the Stock Market because the returns are so much better and a further decline in the Price of Gold could be seen if we break through this important 1555 level. Gold Retraced to its 50% Fibonacci level following its 2013 drop and if it can not find support now it is poised to test the 1525 level.
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