Good Morning Traders
Well Friday's NFP data was poor and it left a lot of analysts in shock, with the headline number of 88,000k coming in well below the expected 190,000k of new jobs added. Despite this poor reading the US economy still remains one of the few economies where the economic data is still porting numbers well above Europe and the UK. One thing traders and investors alike should take from this poor reading, is that the FED is likely to push back talk of the tapering of QE towards the end of this year. This week kicks off earning season, so all eyes will now be looking at whether the US equity markets are too high relative to valuations and future earnings estimates. Closer to home we have growth forecasts from the French and Spanish governments both expected to be revised down from previous expectations. In Italy we are likely to see the new government fiasco put on hold until the summer, as a new election can only take place after the election of a new president which is due to be rolled out in may, the markets continue to remain remarkably relaxed, reflected by the sharp decline in bond yields on Friday. We are likely to see some headlines creep up in relation to the Portuguese bailout, as we saw the rejection of the €1.3bn EU austerity measures by the Portuguese government.
In terms of the FX market, we saw the EURUSD pair move back above the 200MDA off the back of the poor NFP, sentiment has changed now for the EUR and we should look to move higher as long as we trade above the 1.2875 handle. If we can hold this level we will be targeting 1.3040 (100MDA) and potentially 1.3170. In terms of cable the bullish engulfing candle we saw a few weeks ago keeps the outlook positive and a push beyond 1.5230 targets a move higher to the 1.5420 level. I think at these levels we may see some sellers come into the market looking to short this pair on the back of Carney entering the frame this summer and he is expected to increase the monetary easing policy of the BOE.
In conclusion, there is plenty of news out this week so expect some wild swings and keep on top of that economic calender so you know what to expect and when, other than that happy trading.
@lowkeyCapital
Monday, 8 April 2013
Friday, 5 April 2013
Breakfast Blog
Good Morning, Happy Friday,
Well yesterday was one for the history books. A day of massive moves in the Forex Markets. Largest one-day gain for EUR/JPY since 2008! (498 pips). After Mario Draghi kept interest rates on hold he warned of downside risk to the Eurozone and set up the start of his press conference in a dovish manner but their was no follow through with his Dovish tone or downside in any Euro pair. The Euro initially climbed to 1.2835 after the interest rates were kept unchanged but started selling as soon as he mentioned "downside risk", the market was hoping for some indication about the ECB taking action and although he left the door open, he was vague and emphasized there was little the ECB could do. The Market had been pricing in an upcoming rate cut all week and with no clear sign it sparked a spectacular turnaround in EUR/USD . From 1.2750, the pair shot to 1.2934. The last leg of the move come from a break of the 200-DMA at 1.2893.
Early in US Trading, USD/JPY took another leg higher adding another 100 pips to 96.41. Cable went along for the ride, jumping nearly 200 pips from the lows to 1.5232 from the 1.5045 lows.
Overall it was an intense day of trading with some gigantic moves in all the Yen crosses salted with major volatility in the Euro and Pound. If we had days like that more often we could sit on a beach in St Barts and do this all day!!
Looking at Equities, The Dax along with some of the other European bourses sold off heavily after Draghi left rates unchanged. If you remember on Tuesday the Dax rallied nearly 150 points on bad economic news and that move has been nearly paired now. To be honest I am nearly sure that the 7770 will be tested this morning. This is where the move began and generally when a market gets let down like this its back to where it came from. There is a trendline at 7855 which was broken yesterday and last Thursday and this will provide resistance.
Is it just us or have the European Equities started to cry out for easing? The European Markets are behaving exactly like the American stock Market did prior to QE3, rallying on bad news because of the likelihood of more or continued Quantitative Easing or more acomodating Monetary Policy. Yesterday the DAX, IBEX and the FTSE all fell hard when their respective central banks failed to deliver more liquidity support. We are very bearish on European stocks for this reason as we believe the ECB will definitely not deliver a cut at the May meeting and with only a chance of doing so at the June meeting. For this reason additional capital may flow out of European stocks and into the S&P 500.
This just proves the fact that every Stock Market is revolving around central bank policies and yesterday just re-instated the fact to not fight this fact but to just go with the flow.
Yesterdays reversal candle on the Daily chart of the EURUSD was extremely strong. A huge Dragon Fly doji, with 200 points in the difference between the lows and highs. It technically looks extremely bullish and from a fundamental perspective with the Japanese burning their currency and the Americans doing likewise it would not take much good news for the Euro to be squeezed much higher against the Dollar. Some medium term upside targets could be around the 1.33- 1.34 area. The break of the 200 Day moving Average will allow traders to start buying dips as opposed to selling rallies. However a break below the 200 DMA at 1.2893 would look bearish again showing the pair hasn't the ability to bounce. It will be tricky for the next few days until we get some direction. Hopefully the American Non Farm Payroll's data at 13 30 GMT today will give the Dollar and thus the Euro some direction near term. A poor number which is likely considering this weeks soft Data may cause another Euro squeeze with Funds and traders Dollars and buying back Euro short positions.
Good luck today and have a great weekend.
Thursday, 4 April 2013
Good Morning Traders
These next two days could be potentially the most volatile days of the trading month as we will be waiting to hear from the ECB and the BOE on Interest rate decisions early this afternoon, we have the NFP tomorrow from the US and on top of all this we have the BOJ governor Kuroda meeting for the first time of his leadership campaign. Overnight in the Asian trading session we saw a big move in the USDJPY pair as investors are expecting Kuroda to adopt an aggressive monetary easing programme in an effort to achieve his 2% inflation target, At the time of writing the pair sits at 95.40 and we should be looking at 100 as a target over the medium/long term. The graph below will give you a graphical representation of the big move we saw overnight.
We saw a report out this morning from Citi bank which stated that the 'fair value' of the EURUSD pair for the moment is 1.26, we have seen the significant move to the downside in the pair over the last couple of months and we would be hoping that the previous resistance levels below 1.30 can hold for the pair, but any additional negative sentiment from the eurozone will inevitably cause a move to the downside targeting this 1.26 level. We will be keeping a close eye on the ECB interest rate decision this afternoon, and we are not expecting to see any change from the .25% existing rate, but Draghi might drop a few hints of a rate change over the coming weeks and traders will need to be prepared for the volatile swings that a statement of this nature could bring with it.
Across the water in the US we saw bad economic data (ADP: 158,000) which caused a sell off in the US equity markets as traders are expecting a lower than expected NFP number tomorrow. At one stage the SPX was down 20 points but selling was met by buying power and the index recovered with a strong bounce and it looks to have stabilised this morning.
In terms of advice for traders today, we would be looking to sit on the sidelines as we know the dangers of trading these big news releases, swings can be aggressive and we like the JPY play against the USD and the EUR but we would wait to buy on weakness as the big move came overnight (Seen Below).
Happy Trading
@lowkeycapital
These next two days could be potentially the most volatile days of the trading month as we will be waiting to hear from the ECB and the BOE on Interest rate decisions early this afternoon, we have the NFP tomorrow from the US and on top of all this we have the BOJ governor Kuroda meeting for the first time of his leadership campaign. Overnight in the Asian trading session we saw a big move in the USDJPY pair as investors are expecting Kuroda to adopt an aggressive monetary easing programme in an effort to achieve his 2% inflation target, At the time of writing the pair sits at 95.40 and we should be looking at 100 as a target over the medium/long term. The graph below will give you a graphical representation of the big move we saw overnight.
We saw a report out this morning from Citi bank which stated that the 'fair value' of the EURUSD pair for the moment is 1.26, we have seen the significant move to the downside in the pair over the last couple of months and we would be hoping that the previous resistance levels below 1.30 can hold for the pair, but any additional negative sentiment from the eurozone will inevitably cause a move to the downside targeting this 1.26 level. We will be keeping a close eye on the ECB interest rate decision this afternoon, and we are not expecting to see any change from the .25% existing rate, but Draghi might drop a few hints of a rate change over the coming weeks and traders will need to be prepared for the volatile swings that a statement of this nature could bring with it.
Across the water in the US we saw bad economic data (ADP: 158,000) which caused a sell off in the US equity markets as traders are expecting a lower than expected NFP number tomorrow. At one stage the SPX was down 20 points but selling was met by buying power and the index recovered with a strong bounce and it looks to have stabilised this morning.
In terms of advice for traders today, we would be looking to sit on the sidelines as we know the dangers of trading these big news releases, swings can be aggressive and we like the JPY play against the USD and the EUR but we would wait to buy on weakness as the big move came overnight (Seen Below).
Happy Trading
@lowkeycapital
BOJ Meeting
The Bank of Japan kept overnight rates at 0.0-0.1% and introduces quantitative qualitative easing, pledging to buy JPY 7trl of bonds per month-a faster rate than expected. 40 year JGB's are now eligible for bond purchases and the BOJ are to double the holdings of JGB's and ETF's in two years . with the aim of increasing the monetary base at an annual pace of JPY 60-70trl. The BOJ unanimously agreed to bring forward the timing of open-ended asset purchases and extending the duration of JGB's targetted.
Here is the move from this mornings announcement.
Here is the move from this mornings announcement.
Wednesday, 3 April 2013
Cable Weekly Chart
Cable's weekly chart set up for a further decline, Some poor economic data over the last couple of weeks combined with the new incoming Governor's potential for an aggressive easing program may see declines towards 1.42 in the coming months. On the weekly chart we saw selling off the important 1.526 level which was a previous support now turned resistance. This may cap the bounce in Cable and would require some very good Fundamental news to breach.
Breakfast Blog
Good Morning Traders,
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.
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.
Tuesday, 2 April 2013
Breakfast Blog
Good Morning Traders
Hope everyone is well and recovering after the extended weekend. Things have started off the new quarter relatively quiet in the first few hours of trading. The only major thing to note so far is that the USD is trading a bit softer but we do have a significant amount of US data out later on in the week which should help with a bit of direction and get the ball rolling again. It will be interesting to see if the strong USD and a strong SPX will continue as it has last month. In terms of things a bit closer to home the Euro is off its lows but we will be continuing our 'Selling Rallies' psychology as there is plenty of turmoil still surrounding the eurozone and we would not be looking to hold any long positions until we get some conformation that things are improving.
Lets keep money off the table until we can establish the mood across the markets, there has been a lot talk of profit taking as soon as the SPX made its new high, and we shall wait for the respective triggers before placing any trades. Also just to note that we are back on our usual timing sequence as the clocks went forward over the weekend.
Hope everyone is well and recovering after the extended weekend. Things have started off the new quarter relatively quiet in the first few hours of trading. The only major thing to note so far is that the USD is trading a bit softer but we do have a significant amount of US data out later on in the week which should help with a bit of direction and get the ball rolling again. It will be interesting to see if the strong USD and a strong SPX will continue as it has last month. In terms of things a bit closer to home the Euro is off its lows but we will be continuing our 'Selling Rallies' psychology as there is plenty of turmoil still surrounding the eurozone and we would not be looking to hold any long positions until we get some conformation that things are improving.
Lets keep money off the table until we can establish the mood across the markets, there has been a lot talk of profit taking as soon as the SPX made its new high, and we shall wait for the respective triggers before placing any trades. Also just to note that we are back on our usual timing sequence as the clocks went forward over the weekend.
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