Breakfast Blog

Good Morning,
                       Europe's markets look set to open higher once again this morning as they look to claw back the ground from last week's sell off, helped in no small part by another wall of money. This time from japan in a search for a return as yields on JGB's plunge, while the Japanese currency has also dropped, pushing to within 50 pips of 100 for the first time since May 2009. There appeared to be some demand for European Government bonds, in particular peripheral bond with higher yields with Spain and Italy seeing their yields slide back despite the dire economic outlook in both economies, while yields in France fell as well in spite of the poor outlook there. It would appear that the the prospect of the implied backstop of Draghi's OMT program is prompting a much more "risk on" attitude amongst yield starved investors. Time will eventually tell whether this is a wise move, given Europe's continuing problems.
The American stock market rallied yesterday to close the gap from the NFP's on Friday helped by The JPY weakness and extremely thin volume. Yesterday was actually the lowest Non-holiday trading day and Lowest average trade size. This shows that no big investors or funds want to go long the market at these lofty levels as a sizable pull-back is inevitable and all heavy volume trades have come when selling the market recently. Home-builders were the best performers yesterday, up 2% on no news what so ever. Copper and oil rose 0.9%, the USD gained 0.25% broadly and the Vix held around the 13.5 mark.
The EUR/USD was in a range between 1.2990 and 1.3035 yesterday and during the overnight Asian session we saw it test higher to highs of 1.3066 but is on offer this morning as it is nearing the 1.30 handle as I type. The economic calendar is very sparse for European Data this morning and it would have been an ideal opportunity for it to rally against the Dollar with the FOMC minutes coming up tomorrow night. A New York think tank published a report yesterday on a very Dovish Minutes from this meeting, with the Fed not wanting to taper or reduce Asset purchases until 2 very strong jobs reports in a row were seen together.
This would essentially mean it will not be until Q3 or Q4 this year that we might potentially see a pull back in purchases because the Summer Months have been notoriously poor for Jobs numbers.
We have heard reports of good bids in the 1.2970-1.2980 level in the EURUSD and topside supply starting at 1.3050 all the way up to the 1.31 handle.  Looking at the Equities, the range in the S&P 500 we have been following is from 1538 (March low) and 1573(year to date intraday trading high). These will both provide good support and resistance levels to trade off.
Good luck in the Markets./