Client Note -- Monday trade brought with it a lot of wheel-spinning, a large dose of expectancy, and an overpromise and under-delivery in regard to the potential reaction to the European banking stress-test results. Recent trade desk client notes had warned of the reaction to the EBST being muted, as those pulling the strings tempered expectancy with reality, and worked hard to deliver the message in a very controlled format.Now that the noise has abated, the attention turns to risk ratios and earnings reports as the European markets prepare for six weeks of vacation-level volume that may at least reduce the intraday volatility that has two or three 30 minute candles carrying most of the daily 2% moves in most markets. Global markets were far from correlated in early trade, with the USD coming under pressure from most currencies, in-line with 4-hour chart trend and momentum reads that have the dollar index struggling to break 82.70 resistance. A test of 81.00, which is some 200-300 pips away on each of the major pairs, is the next main area of support for the dollar, but only if the S&P futures market can hold 1100 on a weekly chart close. With a break and hold of 1100, a test of 1100 looks to be achievable, and that from a technical perspective will free the equity market up for a potential 4%-5% move before the next main resistance area kicks in. The short side of the S&P market looks to be well supported at 1075, with a weekly close below that area drawing in 1050 and 1025. Forex trader will have noted that global correlations are weak at the moment, but still favoring the long side of risk in the near term. Forex Movers -- GBP looks to be the most bullish currency at the moment, running on the back of economic outlooks that have stabilized, and a sanitation that comes from being widely immune from banking stress-test fever. 1.5250 is major support with 1.5550 major 200-day SMA resistance. CAD has found buyers against the USD as commodity trading links aid the interest rate differential in the near term. AUD now has to re-test support at 0.8950 just one last time it seems, so that traders know the 200-day SMA will be a solid foundation from which to move higher.
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