Good Morning Traders
We have seen a solid week of gains for all the bulls out there with European stocks posting their biggest four day gain since early January. Across the water the US equity market has continued to make new historic heights and previous highs are now acting as support levels as we test these new levels. In yesterdays US trading session we saw initial Jobless claims falling more than previously estimated by analysts. The important thing we need to look at now is the next move and what we expect to see during today's trading session. I think today could be seen as a great opportunity for bulls to take some money off the table and lock in some gains ahead of the two day Ecofin meeting extension starting today. This meeting amongst European finance leaders should be treated with caution by traders as the agenda includes; bailout extensions for Portugal and Ireland, the ballooning Cypriot bailout and the issue of Slovenia is sure to raise an element of uncertainty.
Already this morning we have seen a lower open across the board, and I would expect to see this direction hold throughout the days trading session.
In terms of the FX markets the EUR has struggled overnight coming off its highs against some of the major pairs. The EURUSD touched the 1.31400 handle in yesterdays session but now trades slightly lower around the 1.30700 level. It looks to me as though the EURUSD pair is on course to the 1.32-1.33 in the short term, and it is also interesting to note that all the analysts calling for 1.16-1 levels on the pair are no where to be seen these days. One of the big stories of the week has been the JPY weakness off the back of Kurodas aggressive monetary easing policies. The EURJPY pair broke through the 130 handle and traded above the 131.100 handle for a brief period, however there has been some EUR weakness overnight and in the early morning session so the pair trades currently at 129.900. One thing we will be keeping a close eye on is the USDJPY we were all expecting to see a test of the 100 level but we fell just short of this a few times during the week, At the time of writing the pair trades below 99.300 so a test of this level is unlikely today but we expect to see the barrier broken in the short term.
In conclusion, the play all week has been to buy the dips and trading has been relatively straight forward however I would be a bit weary today adopting that approach as we could see some profit taking going into the weekend. Things in North Korea look to be getting serious and we have the European leaders meeting in Europe so lets just take a cautious stance in today's trading session and wait for opportunities.