Cable has been relatively choppy this week but overall has bounced a little from the double bottom made at 1.5912-13. We are currently trading above the 1.6060 level but have still failed to break back above the head and shoulder neckline.

Thoughts from the trading floor

Cable traded below the 159.40 level on both Monday and Tuesday but managed to only move lower by 20 ticks, making a double bottom at 1.5912-13 which is now key short term support. A break below here and further losses down to 1.5820 and then 1.5750 are expected. The previously broken head and shoulders neckline today comes in at 1.6140. As long as the market fails to close above here on a daily basis then technically the market still has a bearish outlook.

Despite weakness seen in the sterling currency in recent weeks the recent run up in stocks going into the end of the quarter has lead to some weakness in the dollar as risk assets have seen a sharp bid. Sterling against the Euro is still very weak and the recent bounce in Cable seems more to do with the weakness in the Dollar rather than Sterling strength. The market is still currently trading below the 1.6110 level and the aforementioned neckline. If we do continue to bounce and break above these levels then the next area of interest is 1.6260-80 with 1.6310 providing key resistance.

Cable does still seem to be suffering from a fear of more QE by the Bank Of England and still looks weak across the board. However moves today and early next week may be dictated by market sentiment elsewhere. If we see an unwind in some of the ‘window dressing’ moves we have seen in the equity markets the past few days that could lead to a weakening of risk assets including Oil, which would lift the Dollar against the major currencies. If however the moves we have seen recently are the start of a more protracted move higher in the equities then expect Cable to see some more gains in the coming sessions.

Bull View

The bulls defended the 1.5940 level well this week and will look to target 1.6140 to the upside. A close above the head and shoulders neckline is key if the market is to bounce further.

Bear View

The market has failed to break the 1.5940 level significantly so far but the bears will look for another retest in the coming sessions. A break below the daily double bottom will target 1.5820 and 1.5750.

Futex View

We are still bearish the sterling currency in the medium term but are wary of risk related trades affecting the strength of the Dollar. We will still look to sell into bounces up to 1.6110-40 but view the equity and Oil markets closely.

Focus on the Risk markets (Equities, commodities & USD) and Non-Farm Payrolls.

Today sees the release of the monthly US employment situation report. The build up to the number over the last two weeks has seen a steady move lower in the USD and the continuation of this trend may be pivotal on the release of this report. The headline Non-Farm payrolls number is expected at 190K, with the unemployment rate expected to remain steady at 8.9%.

Thoughts from the trading floor

Wednesday’s strong ADP number bodes well for the Non Farm Payrolls today, with last month’s ADP numbers correctly guessing the NFP number.

Risk markets have turned strong despite recent volatility. The continued weakness observed in the USD against most of its major high yielding currency pairs over the last 2 weeks has seen this tight relationship with equities return somewhat and so today’s reaction to the numbers may have a ‘tell’. The USD against low yielders should reflect recent developments of hawkish central banks. A good number should see the USD rally against them and a bad number sell-off. Last month, equities had an inverse relationship to the Euro currency after the kneejerk.

Interestingly last month, equities had a decent move lower (on the back of in line on the headline and a lower unemployment rate). A great deal of expectation had been built into the numbers at the time. However, the unemployment rate number seems to be driven by participants falling out of the labour force and thus the market may ignore it once the detailed breakdown of the report is out of the way.

We have started to see an interesting new dynamic emerge for the markets over the last 2 weeks. Increasingly hawkish FOMC voting members have started to cause broad based market reactions. There has been talk that the Fed may start to outline an exit strategy at the next FOMC meeting at the end of this month and it seems that any prospect of QE3 is quickly diminishing. Therefore a very strong number may be met with selling in equities after an initial move higher, and cause a sharp break down in bonds also. The inverse is may be true if the numbers are particularly weak.

Bull View

It is likely that the current trend higher in risk and lower in the USD will dominate markets. Perversely, a slightly weaker than expected NFP number may be required for risk bulls going into next week.

Bear View

The bears will see these moves over the last week as a potential sign markets are looking to turn and the NFP number may provide this catalyst. A weak close may signal a decent sell-off next week for equities regardless of a strong or weak number.

Futex View

We favour the bears. We see the markets primed for a short-term correction having rallied into the end of March on very thin volumes. Although we may need to wait until Monday for this to occur, especially if the numbers are particularly strong.

Commodity Overview
Focus on Oil

The Crude Oil market erupted last week under extreme volatility. The Libyan crisis and the capped oil production and distribution caused the market to spike higher. It topped at $103.41 for front month WTI under exceptionally poor liquidity conditions before retracing back below the $100 handle. 

Thoughts from the trading floor

From a technical perspective, WTI Crude Light Futures have experienced serious volatility over the past few trading sessions. The market has seen a break down in technical trading as fear gripped investors. The market spiked higher hitting £103.41 under extremely dire liquidity. The market has broadly entered a choppy trading range of $96.17 to $99.96, with a pivot point around $98.48. If captured by buyers or sellers, this could give a short-term direction to the market. Bulls will be looking to hold onto the current high prices, with resistance levels at $99.96, $101.00 and $103.41. Sellers will be looking to squeeze the market back down; a break below $94.98 could lead to snap selling back into the low $90 region. Please note that trading is expected to remain volatile. Traders should anticipate the overshooting of key levels and large momentum drives over the next week.

Last night the American Petroleum Institute reported that US oil inventories posted a gain of 519k barrels last week. This compares to the analyst estimate for the DOE number of 822K barrels. The API gasoline dropped -4898K, as similar to the estimate for the DOE number of -2798K. With not a lot of deviation between the DOE estimates and the API number, we expect the DOE release today to show a number inside of its expected range and to produce a subdued reaction.

As fighting in Libya continues, as much as 850,000 barrels a day of the country’s output has been shut down according to the International Energy Agency. Oil prices continue to rise as the unrest threatens to spread to other Middle Eastern countries. Iran, OPEC’s second largest producer, might be in danger next as protesters continued to clash with security forces in Tehran yesterday. Saudi Arabia’s Oil Chief, commented this week that the Kingdom is ‘ready to supply incremental changes in demand’ to cover any supply shortages from Libya.

Bull View

Bulls once again rode on the back of fear in the oil market to smash higher. It is all very well buyers making gains in the short term, but for a sustainable uptrend the market needs to build a strong value area foundation above the $100 mark.

Bear View

Bears were non-existent in holding back the market and rightly so with such bullish fundamental conditions. Sellers will look to creep back into the market if the Libyan crisis cools, rejecting some high prints in the market.

Futex View　

We are still bullish on the oil market. Conditions continue to be volatile which heightens both risk and opportunity. This situation is expected to remain in such a manner until the Middle Eastern tensions ease.

Last week equities came under pressure slipping off recent highs weighed on by the heightening uncertainty regarding European peripheral nations. This week we expect this saga to continue and dominate trader’s thoughts although we must be mindful of some key inflation data as well as the latest retail sales number from the US.

Thoughts from the trading floor

From a technical perspective equities look like they may have created an interim top as a double top has formed in the S&P 500 future at a large daily resistance level (1224.75). Should the market continue to trade below here support at 1193.00 will likely come under intense pressure. Below here further support can be found at 1180.00 a breach of here would likely see the market continue to drift lower with a medium term target for bears likely being around 1125.00.

Last week pressure rose on Ireland as government debt yields aggressively rallied. This culminated in rumors they they would need to seek aid to overcome their debt problems. Once these rumors took hold of the market Irish yields dropped and equities began to rally. However this proved to be only a short term reaction as the long term implications of a bailout became clear. The fear is that if Ireland accepts a bailout they will not be the only ones waiting in line and that Portugal would soon follow. Other nations would also likely find themselves under pressure putting significant strain on the Euro currency and its main backers Germany. This of course would have a very bearish outcome for equities.

This week will be on alert for another round of peripheral downgrades by the large credit rating agencies. Most under pressure will of course be Ireland and Portugal although Spain and Italy will also feel threatened. Such moves by the credit rating agencies often provide very good fast money trading opportunities as well as adding to the bearish bias.

Important events this week.

• Monday: Advanced Retail Sales (US)
• Wednesday: BOE Minutes, Housing Starts, CPI (US)
• Thursday: Retail Sales (UK), Initial Jobless Claims (US), Phili Fed

Bull View

Bulls will be concerned by the ongoing problems in Europe and will be hoping for a swift resolution to the difficulties in Ireland. Breaking the daily double top at 1224.75 must be their primary short term goal.

Bear View

Bears will be loving the ongoing European debt issues and will hope for a spread of the problem in to other peripheral nations. Any weakness in the US data this week will also aid their cause.

Futex View

We believe we are approaching the time to sell equities and have begun to tentatively play the market from the short side.

Last week the Bund continued to find itself under pressure as equities performed strongly. The US Ten Year has also found itself under pressure but has proven far more resilient likely aided by the pricing in of QE2. This week the main focus will be on all the macro data released from the US culminating in the Advanced GDP number on Friday.

Thoughts from the trading floor

From a technical perspective the Bund has weakened considerably over the last week in doing so breaking several daily support levels. Key daily support remains at 129.08, a breach of here could see the market slip down to 127.37. The US Ten Year has proven more robust and held onto the majority of recent gains. If recent highs at 127.220 are to be broken it is important bulls can hold onto ground above 126.020.

This week we will see some key macro numbers released including US consumer confidence, durable goods orders and Advanced GDP. Traders will be looking to these number to gauge how aggressive the Fed may be regarding the QE2 program. This will undoubtedly lead to the bond markets having extenuated moves off any out of line results providing great short term trading opportunities.

Last night a US TIPS Auction (inflation linked bond) produced a negative yield for the first time ever. The interpretation of this has to be that investors are very keen to protect themselves against future inflation spikes. In a strange way this is a vote of confidence for the Fed as investors believe they may win the battle to stimulate growth quickly and achieve some price elevation. From the perspective of the US Ten Year this is a bearish indicator, if investors opinion on future inflation levels is shifting demand at current yields in long dated debt could drop off sharply. 

Important events this week: 

• Tuesday: Consumer Confidence (US)
• Wednesday: Durable Goods Orders, Ne Home Sales (US)
• Friday: GDP (US), Chicago PMI

 Bull View

 Bulls will be concerned by the current weakness in the Bund. If they can hold above support at 129.08 this may form may base for a push higher. Weakness in this weeks data particularly US GDP would seriously aid their cause.

Bear View

Bears will feel that any further move by the Fed is now priced into the market and that the current buying is exhausted. Any shocks to the upside in macro data could result in aggressive selling as QE2 is priced out.

Futex View 

We continue to remain bullish until a point when fundamental data shows a concerted improvement. We also believe that further QE in both the UK and US remains very likely. This considered we will continue to buy pull-backs.

Over the last two weeks the Bund has traded sideways unable to gain any real momentum. The US Ten Year has proven slightly stronger, however currently bond markets appear to be waiting for the Fed to move on QE2. This week the focus will be on the latest US inflation data as well as the Advanced Retail Sales report.

Thoughts from the trading floor

From a technical perspective little has change over the last few weeks for the Bund. It has lost some of its upside momentum and now is trading in a sideways range  predominately between 131.00 and 132.00. There have been several attempts to break out of this area, however these have been met with solid rejections. If the Bund is to break to the upside it requires a daily close above 132.20, this may provide an opportunity for bulls to reassert themselves. To the same extent a close below 130.80 could result in some sustained selling. The US Ten Year has held onto its recent upward momentum and now must over come resistance at 127.210, if this can be achieved the next significant hurdle will come at 128.10.

This Friday will likely prove to be very busy as a raft of US macro data is released, headlined by the latest Retail Sales number. It is clear that currently the Fed is very aware of the frailty of the economic recovery and any weakness displayed on Friday will likely further heighten the demand for further QE. It is worth noting that on the same day Fed Chairman Ben Bernanke is giving a speech at the Boston Fed, where he is expected to comment further on possible monetary easing. From a traders perspective it seems that QE2 is almost fully priced into the bond and equity market's creating a scenario whereby the final announcement when it comes may provide short term selling rather than buying.

Important events this week.

• Thursday: PPI (US)
• Friday: CPI, Advanced Retail Sales, Michigan Confidence (All US)

Bull View

Bulls will be keen to see fundamental disappoint again on Friday, bringing closer an announcement of further QE. This would enable them to re-establish momentum recently lost in the Bund.

Bear View

Bears will feel that any further move by the Fed is now priced into the marklet and that the current buying is exhausted. Any shocks to the upside in macro data could result in aggressive selling as QE2 is priced out.

Futex View

We continue to remain bullish until a point when fundamental data shows a concerted improvement. We also believe that further QE in both the UK and US remains very likely. This considered we will continue to buy pull-backs.

The Crude Oil Market has experienced volatile trading over the last week. NYMEX Crude Light futures remain choppy with prices fluctuating between a range of $84.44 and $80.30.  Over the last week commodities across the board have taken a lift on the back of global fundamentals and a weaker dollar.

Thoughts from the trading floor

From the technical perspective, it still appears bullish, with buyers building a value area above strong support at $80.50. This may well lead to a short-term period of consolidation and choppy markets while buyers pause for breath and sellers try to regain a foothold in the market. Bulls will be looking to retest $84.44 and if broken will act as a starting point for a bigger upward leg. This would set the scene for additional gains to $85.62 and $87.15. Sellers will strive to force the market lower back towards $80.30 support, if broken there is scope for a deeper drop, towards for $79.69 and $78.05.

Due to US Bank Holiday the US the American Petroleum Institute will report today, last week saw a positive 4442K number. This compares to the analyst estimate for the DOE number on Thursday of 3088K barrels. The API gasoline was negative -4059K last week as similar to the estimate for the DOE number of -2646K. Their has been a large divergence between the Oil Inventories and gasoline numbers over the past several weeks, traders will be expecting these numbers to start converge back together.

OPEC hiked its forecast for world oil demand growth yesterday. The Organization of Petroleum Exporting Countries raised its demand growth estimate for 2010 from 1.2 to around 1.3 percent and held steady its forecast for next year. The cartel has estimated world oil growth of 1.13 million barrels per day or 1.34 of the whole of 2010. Saudi Arabia's oil minister said "The market is very well balanced, everybody is happy with the market, consumers, producers: very happy,” and “supply is adequate and the demand is quite active.” Yet OPEC will still be troubled by the uncertainty of countries struggling to recovery after the recession and further double dip worries.

Bull View

Bulls tested higher ground this week, yet where unable to hold the $84 region. They will be looking to further their gains and breach $84.44, opening the door to new higher ground.

Bear View

Bears have managed to hold off a break above $84.44, despite the market being able to firmly defend $82.98. Bears will be looking to push the market back down towards the $80 handle, if they have any hope of stopping the current uptrend.

Futex View

We are still bullish the Oil market, with a weaker dollar and major commodities we still firmly believe the momentum and trend still is up.

The Crude Oil Market powered higher last week. NYMEX Crude Light futures put in a positive week, climbing at a rapid pace topping $82.99 yesterday. The market appears to have caught up with equities performance, which the oil market has lagged behind over the last several weeks.

Thoughts from the trading floor

From a technical perspective, the market is very bullish with momentum indicators moving higher on the new buying impetus. Due to this strong move a bullish tone should be seen in the market over the coming days, as it is the dominate trend. Bulls will be looking to establish a foothold above $83.18 a key level, failure to break this level the potential for a double top looms. If broken, bulls will be targeting next resistance levels of $83.95, $85.62 and the August highs of $87.15. Bears will be looking to hold $83.18; it is interesting characteristics of NYMEX Crude light for it to over shoot double tops and double bottoms, catching out the late breakout trader. Bears will be taking this into account when playing the $83.18 level, but the momentum and the trend are strongly against them. If sellers are able to hold they should be looking to test support at $80.50 and the breakout start of $79.69 and $79.38. Theses levels are likely to be meet by fresh buying, from market participants who missed the upward move or those looking to add to current longs.

Last night the American Petroleum Institute reported that US oil inventories posted a large unexpected rise of 4442k barrels last week. This compares to the analyst estimate for the DOE number of -475K barrels. The API gasoline dropped -4059K, as similar to the estimate for the DOE number of -3469K. With such a divergence between the DOE estimates and the API number, we anticipate that a larger the expected positive number will shock the market.

The Oil Market has been driving higher on the back of fresh confidence. The new optimism has been largely on hope the US will introduce new intervention measures into the markets, following on the coattails of the Bank of Japan which early this week took drastic actions of new intervention. Also early last week saw a much stronger Non-manufacturing number supporting the market.

Bull View

Bulls have a firm control of the market, with the strong momentum of the recent drive, they will be hoping to push further breaking $83.18 and opening the door for a bigger upward leg.

Bear View

Bears have been completely taken back by the recent rally and need to regroup and hopefully put up some stiff defence at $82.98 and $83.18. If they are too turn the tide in their favour.

Futex View

We believe the market is on a strong bullish footing and will be looking for the market to test $83.18 and to drive straight through.

The Bank of Japan surprised markets by cutting interest rates to a target range of 0%-0.1% and announcing that they have set aside $60 billion to fund a programme to buy government bonds and other assets (Q.E.). The USD/JPY has seen volatile trade since the announcement.

Thoughts from the trading floor

The USD/JPY is currently trading around the 83.00 handle. From a technical perspective, the market is continuing its recent trend having rejected prices at the 86.00 handle. Furthermore, the market has now failed twice in the last 2 days to regain the 84.00 handle, which is pertinent given the bearish Yen announcement overnight. A further break below the 83.00 handle should eventually see multi-decade lows around 80.00. However the backdrop of even further Japanese intervention looms large and bulls will hope the 83.00 handle can provide firm psychological support as participants fear getting caught short the cross around these levels.

From a short-term perspective, the news announcement overnight should have been sharply bearish for the Yen (bullish for USD/JPY). However, the market failed around the 84.00 handle and now trades around the levels seen yesterday. This would certainly worry bulls as the news overnight can be considered as an intervention on the currency. However the failure of this intervention to have any decisive impact on the market makes it increasingly likely that we will see a break below the 82.80-83.00 area. Importantly, traders may be looking for the BOJ to intervene in the currency market tonight if the cross remains at or below the current levels otherwise they may become unnerved by the sharp intraday rejection seen so far. We saw a similar pattern during the months of Swiss National Bank interventions, where a sharp rejection of interventions resulted in an extended rally in the Swiss Franc whenever the market returned to pre-intervention levels and the SNB did not step in that day or the next day.

Bull View

The bulls will look for the market to stabilise around the current levels before the market can stage a firmer bounce. They will need a firm close above the 86.00 before they can hope to build on any gains should the market get there. Short-term bulls will also be entering the market around current levels looking for the BOJ to intervene again. However they will be nervous that last night’s news could not sustain a move above the 84.00 handle.

Bear View

The bears will look at the interventions by the Japanese authorities as a selling opportunity. If bears can get the market through the 83.00 level, we may see some real panic in the markets and from the Japanese government.

Futex View

We favour the long-term bears. If market cannot return to above the 84.00 handle by tomorrow, and the BOJ do not intervene again very soon, we will look to be sell.

The Crude Oil Market crept higher last week. NYMEX Crude Light futures remained positive on the week but climbed at a moderate pace. The market again tracked equities higher amid a quiet data week.

Thoughts from the trading floor

From a technical perspective, the market broke to the upside, touching $77.17 highs. Bulls will be happy progressing in the right direction but the market does appear to be putting up a dogged resistance to the up-trend. This has led to fierce retracement of many intra-day rallies, showing sellers are not willing to give up ground easily. Bulls will be targeting $78.05. A break off here will snap the defence of many short positions and could very well lead to a firm drive towards  $79.38 and possibly $80.50. Sellers have not given up yet and a key break down of support at $75.60 will tip momentum back into their hands. They will be looking to trial $74.52 and potentially a wider objective of $72.63. In the longer view, the daily chart posture seems to be setting itself up for a possible bearish flag formation, with the potential of a strong downside break - characteristic of previous sell-offs this year.

Last night the American Petroleum Institute reported that US oil inventories posted a large drop of -2415k barrels last week. This compares to the analyst estimate for the DOE number of 970K barrels. The API gasoline rose 3018K, as similar to the estimate for the DOE number of 1590K. With such a convergence between the DOE estimates and the API number, we anticipate that a larger the expected negative number will shock the market given the recent surplus in oil and gasoline levels.

The IEA this week have announced that it has cut its Oil demand for 2011 by 50,000 bpd, as fuel consumption will be a lot lower then 2010 if the global economy slows further. On the supply front, the IEA highlighted the currently high oil stocks in developed countries, with stockpiles being more then enough to match current demand.

Bull View

Bulls will hope their determination to push higher, will press the market to test $78.05. This level marks key resistance and a break above here will open the floodgates to higher ground.

Bear View

Bears have struggled to hold ground this week. They will be hoping to constrain further up moves and be keeping a close eye on the potential formation of a daily bear flag.

Futex View

We are at present still bearish and will be selling rallies. However, being very aware of the changing market conditions and the possible upsurge, we will be cautious of adverse moves against us.