U.S. equity markets are expected to open better this morning due to a pick-up in demand for higher yielding assets. Investors are also feeling more confident in the long side following last Friday’s better than expected Non-Farm Payrolls Report. The lack of fresh major economic news until at least Thursday could keep the indices on course for further upside action. The daily March E-mini S&P 500 chart indicates the possibility of a rally to 1156.00 by March 12th.
June Treasury Bonds are expected to be under pressure today. Traders are still adjusting positions following last Friday’s improved jobs news. Investors are factoring in the prospect of an interest rate hike by the Fed before the end of the year. The daily chart suggests that a move to 116’04 is likely. Watch for a technical bounce on the first test of this level.
Despite the weaker Dollar, April Gold is trading lower. This market is having trouble attracting buyers at a 50% level at $1136.75. Liquidation by traders hoping for the demise of the Euro may be holding back gains. Should upside momentum increase, look for a short-term rally to $1158.50.
June Crude Oil continues to climb. The weaker Dollar and the higher Euro are the driving forces behind this rally. The supply and demand picture remains suspect.
The U.S. Dollar is under pressure overnight against most major currencies except the Japanese Yen. Trading has been light and less volatile than last week’s trading conditions. Shortly before the New York session opening, the Dollar is mounting a slight comeback and trading off its lows against a few of its majors.
The lack of event risk is likely to make the movement of the Dollar the catalyst and market direction driver this week. The first major report is Thursday’s Weekly Jobless Claims, followed by Friday’s Retail Sales Report.
Risk appetite was up overnight, driven by strong demand from Asia, favoring riskier, higher yielding currencies. This is helping to drive up the March Australian Dollar and March New Zealand Dollar while putting the lower-yielding Japanese Yen.
The primary driver of the Forex markets overnight is speculation that European nations would rescue Greece financially if needed. Traders are reacting positively to comments from French President Nicholas. Over the weekend he said that the Euro Region nations are “ready” to help Greece. He also added however, “if it were necessary”. These comments drove the March Euro higher as they reduced the perceived risk of debt defaults throughout Europe. His comments also seemed to backup claims reported by the Wall Street Journal over a week ago that both France and Germany stand ready to provide up to $41 billion in bailout money provided the Greek government stay on course to reduce its debt load.
Last week, the Euro turned its trend to up on the daily chart after Greece agreed to make massive budget cuts. This helped to instill a little confidence in the country’s finances. In addition, a Greek 10-year bond auction went off without a hitch, further indicating renewed confidence in Greece’s ability to recover from its financial crisis.
The combination of fiscally responsible measures and the technical change in trend is an indication that investors are getting comfortable that Greece’s problems are not going to spill over into other sovereign nations such as Portugal or Spain.
Adding further to speculation that the tide may be turning up in the Euro is the news that net shorts dropped the week-ending March 2nd in the CFTC’s Commitment of Traders Report. This week’s net short figure showed a drop to 66,770 open positions versus 71,623 from late February. There are still a tremendous amount of shorts in the market, so this change most likely reflects light position paring. Should the major hedge funds all decide to head for the exits at the same time, look for a huge short-covering rally.
Both the March Swiss Franc and the New Zealand Dollar are higher. The Swiss Franc is trading higher because the stronger Euro reduces the possibility of a Swiss National Bank intervention. In addition, the SNB meets later this week on March 11th. Short-covering due to oversold conditions are helping to drive the New Zealand Dollar higher. On March 10th, the Reserve Bank of New Zealand meets to discuss monetary policy. It is expected to leave interest rates unchanged due to the weak economy.
The March Canadian Dollar is rising as global investor demand is picking up for the Canadian Dollar. Traders have been encouraged to buy the Canadian Dollar due to the relative safety of the Canadian banking system. In addition, last week it was reported that Canadian GDP rose more than expected. The chart indicates that .9777 is the next upside target. This would put the market at a price which triggered a Bank of Canada verbal intervention in January.
Finally, the March British Pound has been see-sawing overnight. It is possible that the current short-covering rally could move up into a 50% level at 1.5297 before new selling pressure begins. The British Pound continues to remain weak because of the weak U.K. economy, the widening budget deficit, a dovish monetary policy and political uncertainty.
Contact Us:
Local: 312-896-3930
Toll Free: 800-971-2440
DISCLAIMER: Futures and options trading involves substantial risk of loss and is not suitable for every investor. The valuation of futures and options may fluctuate, and, as a result, clients may lose more than their original investment. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. In no event should the content of this correspondence be construed as an express or implied promise, guarantee or implication by or from Brewer Futures Group, LLC, Brewer Investment Group, LLC, or their subsidiaries and affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of options and/or futures positions such as “spread” or “straddle” trades may be just as risky as simple long and short positions. Past results are no indication of future performance.
Information provided in this correspondence is intended solely for informational purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.
