The Euro vs. the Swiss Franc has seen volatile trade over the last week. The market posted fresh record lows last week, around the 1.1400 handle, and has since settled around the 1.1600 handle.

Thoughts from the trading floor

The EUR/CHF is trading just around the 1.1600 handle, with the record low being marked around the 1.1400 handle. The recent failure from the 1.2320-57 level marks this as a good short term resistance. Also the 1.2400-27 level is the major resistance and short-term market pivot. If bulls are to avoid further liquidation they must look to take back this area of the market. Below here, it remains liable to big capitulations, as seen over the last week. Technically, the market looks set to continue to trade lower, with the break below 1.2400 marking the potential of this next leg lower to be aggressive and violent in its nature. Bulls will need to see the current lows hold and must look to retake the 1.2357-1.2450 area. A major reversal can only occur once this area gives. Otherwise bears remain firmly in force. The cross should now be entering its most violent stage of the move lower and thus we should observe quick failures of rallies. Yesterday we saw such price action. This continues to highlight short-term weakness. Last week’s rejection of the 1.1900 handle also highlights the quickening in pace of the trend lower. Selling short-term rallies on euphoria remains the most profitable strategy for the moment.

Last week’s announcement to provide further aid for Greece and the attempt to ring fence the rest of the periphery saw the cross trade from record lows to just shy of the 1.1900 handle. However since then, concerns that these measures may not be enough to save the Eurozone from further deteriorations have seen the EUR/CHF move back down to the 1.1600 handle. The relative quick rejection of this euphoria continues to highlight the case that the Eurozone debt crises is picking up pace, which is also reflected by the quickening in pace of the downtrend in the EUR/CHF. Global uncertainty regarding the US debt ceiling has also allowed the Swiss Franc to move to fresh record highs against the USD as participants look to flee to one of the few’ gold standard’ currencies in the world. It is likely that Portugal and Ireland will next come under the radar of nervous investors and we would anticipate a move against those countries soon. The major concerns are the Italian and Spanish debt markets. Those markets have been very quick in giving up gains made last week, and further deterioration there should see the Swiss Franc accelerate even further in its advance. Ultimately the deterioration in Spain and Italy will seal the fate for the Eurozone.

Bull View

The bulls will look for the market to stabilise around the current levels before the market can stage a comeback. A move back through the 1.2350-1.2450 area should stabilise the market.

Bear View

The bears will look to maintain pressure below the 1.2400 handle. The market has consistently made lower highs and lower lows on a weekly/monthly basis since 2010, and below 1.2403-89 the market remains liable to a fresh and violent leg lower over coming weeks.

Futex View

We favour the short, medium and long term bears. We feel that the Eurozone debt crises will approach the endgame scenario heading into the coming weeks.

The German Bund markets have seen very volatile trade over the last week. The market moved sharply higher leading into the new Greece bailout agreement heading into the end of the last week, however has recovered impressively since then to trade around the 128.50 handle this morning.

Thoughts from the Trading Floor

From a technical perspective, German Bunds have potentially staged a key weekly reversal. The market has recovered from firm support at 3.5%, which coincided with the 119.85-95 area. The market is trading around the 2.74% yield mark, having made a high in price around at the 2.50% yield mark earlier this month. The market has seen a deep pullback to the 2.94% mark towards the end of last week and recovered impressively since then. The lows, in price terms, last week just below the 126.50 handle is a key support area and the market found firm buyers around here. Thus the market skew remains short to medium term bullish above here. If sellers are to find their feet again, they must look to take this area out. Otherwise, a move back towards the 129.30 level seems the most likely on the cards. Today may be a key day in terms of which way the market may find firm momentum heading into the rest of the week. A day close above yesterday’s highs at 128.45 may signal further. Bears must look to protect this from occurring.

The recent days’ have seen a stark volatility in the peripheral debt markets. Last week’s announcement of further aid measures for Greece and the establishment of a ‘firewall’ around the rest of the periphery saw a dramatic flight into risk assets across the board. Although it remains to be seen whether these moves can be sustained as they may only be a brief respite before further deterioration occurs in the coming weeks. We have already seen somewhat of a sell-off in Spanish and Italian debt markets over the last 2-3 days, a sign that investors remain sceptical of the measures that were out into place last week. Italian BTPs have since given back much of the strong gains seen last week. This has resulted in peripheral linked equity markets underperforming the German Dax index to a large extent. Over the recent weeks we have started to see a quickening of pace in the peripheral debt turmoil. Markets are now quite keen to give back any euphoric moves quite quickly, as opposed to a few months ago where the moves on the back of bailouts and other new measures would persist for several weeks. This market behaviour should keep the bunds well supported.

Bull View

Bulls will need to protect the 126.39-64 level if they are to maintain upside momentum. A day close today above the 128.45 level will also ensure that bulls remain strong.

Bear View

Bears will need to protect the 128.45-55 level. If this is achieved they need a move back below the 126.39-64 level in coming days in order to capitalise.

Futex View

We remain bullish the bond. We would back the Eurozone crisis to quicken in pace going forward as we fast approach the end game this year.

WTI Oil futures have remained relatively range bound over the past few sessions as a lack of news has prevented the market from moving in any real direction. The volume has rolled to the September contract and so we will now be quoting this contract from here on in.
Thoughts from the trading floor

The past few sessions have been relatively quiet for WTI Oil futures with the lack of a dominant theme in the market taking play. Last week we had Fed chairmen Ben Bernanke first suggest that more QE was on the way before appearing to retract that opinion the very next day. This resulted in a bid into risk assets before mainly selling off again. There are still doubts over the peripherals in Europe but the serious fears seem to have subsided for now which has led to Oil climbing back towards the top of its range during yesterday’s session.
Technically the the $99.25-40 area is providing resistance for the market and marks the top of the recent range - one we have been trading in since the beginning of July. This area will need to break and close above before we see a move higher and the $100.00 will obviously be eyed first. If we begin to trade back above here the longer term sentiment may begin to turn again. Resistance above here lies at $101.25 and $102.00. To the downside the daily double bottom this month at $93.50 marks the low of the trading range and is key support. Just above here there is also support in the $94.20-60 area. It would take something major to get the market back down here over the next few sessions but these areas should provide buying opportunities.
Last night’s API showed a huge draw down of 5179k in Oil stocks. This compares with the DOE estimates of a draw down of 2000k. The Gasoline showed a build of 1957k barrels, compared with the DOE estimates for a draw of 250k barrels. The API numbers were mixed but if we see these readings mirrored in the DOE release we expect to see more upside pressure in the Oil.
Bull View

The market is trading above the $97.75 level and as long as we see a close above here the bulls will target the recent highs made at $99.25 and $99.40.
Bear View

The bears will need to defend the recent highs if we get there as a break could see increased upward pressure. A move back and close below $97.75 should see $96.30 targeted at the least.
Futex View
We still favour trading the July range until it breaks as we have yet to see any real direction in the market. In the medium we are turning slightly bullish and a break above $100.00 should see some weak shorts covering, with a move to $101.25 at least.

The German Bund markets have sold off sharply over the last week, making a low at 125.22 last week as the euphoria from the easing of the Greek crisis allowed risk-on trades to prevail over most asset classes. Greek 10yr yields have moved in back to the 16% mark and easing has also been observed in the other peripherals.

Thoughts from the Trading Floor

From a technical perspective, German Bunds have potentially staged a key weekly reversal. The market has recovered from firm support at 3.5%, which coincided with the 119.85-95 area. However, the market has traded back to the 3.00% mark having traded to as low as 2.82% over a week ago. The move back to the 3% mark signifies a potentially serious technical deterioration of the short-term bullish run higher that the market has had since making the April lows. The last 2 days has seen the market stabilise somewhat from the capitulation sell-off seen at the end of last week. However, below the 125.76-84 area the market remains vulnerable to further selling pressure. This is especially the case as the market has left a potential outside week reversal pattern based on last week’s actions. If bears can take the market through last week’s 125.22 prints, then we would expect further strong selling to enter the market. Bulls will need the market back above the 125.76-84 area with a strong close above here in order to stem the bearish flows for the moment. Thus the next 2-3 days will be crucial.

Thursday sees the usual ECB monetary policy announcement with the accompanying press conference. The ECB is expected to interest hikes rates by 25 b.p. on Thursday to 1.5%. In the long term this should continue to pressure the periphery especially as the major part of the reason they are struggling with their debt levels is because economic growth has really stagnated. However as we wait for this longer term scenario to play out, the major focus for the bund market will be on gauging how aggressive the rate tightening cycle the ECB is on. At the moment it would seem the ECB is on course for tightening every three months. Thus we will see what the press conference brings on Thursday. If the ECB ratchet up their inflation rhetoric at the next meeting, it may signal a more aggressive stance going forward. On the off chance we see another “strong vigilance” statement come from the ECB, it may show a very aggressive stance and catch the markets on the hop.

Bull View

Bulls will need to protect the 125.22 level if they are to prevent another week of sharp deteriorations in the market. If they are to stabilise after the recent sell-off, they will need a day close back above the 125.76-84 area.

Bear View

Bears will need to protect the 127.76-84 level. They have the upper hand, by achieving a move back through the 2.94-96% yield mark and will need to capitalise with a break of the recent low prints at 125.22.

Futex View

Above the 2.94-96% yield mark we are bearish the Bund. A further deterioration may mean that the medium-long term trend lower which started in August 2010 is resuming.

Equities sold off hard on Friday after a fairly volatile week. After the S&P 500 future touched 1316.00 on Tuesday they bounced quite strongly, topping out at 1345.50 before Friday’s sell off on continued European debt fears.

Thoughts from the trading floor

After an impressive bounce from Tuesday’s lows the equity markets sold off strongly during in Friday’s session with the Dax particularly hit hard as fears grew over the European debt situation. This culminated in an outlook downgrade by Standard and Poor’s rating agency on Italy from ‘stable’ to ‘negative’. The S&P 500 futures sold off nearly 20 full handles from Thursday’s high at 1345.50, closing at 1327.50. This sell off continued overnight during the Asian session and into early morning trade in Europe, with the June contract currently trading around 1318.00. This is just two handles above the low made last Tuesday at 1316.00 which may act as short term support this morning.

Below here the next major level is at 1290.00-92.00 but there are plenty of small levels before here (1308.50, 1300.00 and 1298.00). Sometimes this can lead to a slow grind lower as all the levels attract short term buyers but if Friday’s price action is anything to go buy you could see these all wiped out in fairly quick succession should the market fail to bounce this morning. In recent weeks we have seen the markets continually make moves lower only to see aggressive bounces so we would like to see the market continue to sell off today if we are to gain any sort of momentum in one direction. Failing that, we could see another bounce to the 1325.00 level. Above here there is further resistance at 1332.50.

With Friday’s move mainly attributed to growing fears over the European debt situation the S&P downgrade of Italy’s outlook late in Friday’s session will do nothing to quell investor fears. There has also been talk this morning that Greece only has enough money to last until mid-July and will need another tranche of the EU loan this month.With these fears prevalent in the market place we could see some big moves on the back of rumours, as well as quotes and denials from senior EU officials. As commodities have remained relatively strong over the past week, the FTSE 100 has been the stronger of the European equity markets. Keep an eye out for major support at 5816.00-30.00. A break below here could cause another big leg lower. The Dax and Eurostoxx where somewhat weaker during the sell-off, owing mainly to the number of European banks in the indices. If fears continue this week these markets should again see increased downside pressure.

Important events this week.

● Tuesday: German IFO Survey, EU Industrial Orders, US New Home Sales
● Wednesday: UK GDP (2nd est.), US Durable Goods Orders
● Thursday: US Initial Claims, GDP
● Friday: US Michigan Sentiment, Pending Home Sales

Bull View
After Friday’s sell-off and failure to bounce this morning things are looking worrying for the bulls. They will look to defend last week’s low of 1316.00 and below here use support levels down to 1300.00 as buying opportunities. A failure to meaningfully break 1316.00 and we could see a bounce up to 1325.00 and further, 1332.00.

Bear View
Bears will be encouraged by the continuation of Friday’s move and will try to break the 1316.00 level in Monday’s trade. A significant break of this low targets 1298.00 initially, with major support at 1290.00-92.00 the next target.

Futex View

Short term we see markets trading lower on the growing fears in Europe. We would expect any tests to the upside at 1325.00 to hold and look for bigger moves down to the major support at 1290.00-1300.00 this week.

Equities sold off last week ask we saw a huge liquidation in commodities across the board. The market was looking to recover on Friday afternoon after the positive Non-Farm Payroll report from the US, but the move was tempered by rumours that Greece may need to leave the Euro currency due to ongoing debt fears.

Thoughts from the trading floor

Since the high made in the S&P 500 Future in the wake of Osama Bin Laden’s confirmed killing the market has been gradually selling off. This picked up steam last weak as commodities sold off hard from their highs with some of the biggest daily falls seen in months. On Wednesday equities seemed to be in free fall as Oil made new lows but a strong bounce into the close leaves the low made at 1325.25 a key level to the downside. Before here there is minor support at 1332.00. Friday’s post-NFP high remains short term resistance at 1352.00.

Despite the German Dax Future posting four strong down days last week the market did recover on slightly on Friday and remains relatively bullish on the technical outlook, with the market still trading just above February’s highs at 7445. Support to the downside is seen at 7355 and furthermore at 7293-7310. There is a daily gap on the chart at between 7281 and 7291. As long as the market remains above this level the market looks strong.

The major risk scenario to the equity markets lies in familiar territories - European Sovereign Debt. After some strong market moves after Friday’s NFP release rumours began to circulate that Greece may need leave the Euro altogether in order to get it’s public finances back in shape. Though clearly denied over the weekend, these rumours continue to float around the market with debt restructuring by some of the smaller Eurozone nations at the very least seeming like the only real way out of this problem in the long term. While the EU can bat away these fears the market will remain fairly resilient, but sharp pull backs may occur if eventually countries have to restructure.

Important events this week.

● Tuesday: US Wholesale Inventories
● Wednesday: US Trade Balance
● Thursday: US Initial Claims, PPI, Retail Sales
● Friday: US CPI, Michigan Sentiment

Bull View
Despite a sharp sell off last week the market made an impressive bounce off off 1325.25 in the S&P 500 Future and as long as the market remains above here, the bulls will be confident of pushing higher and retesting Friday’s highs.

Bear View
The medium term momentum is with the bears and they will surely look to retest Thursday’s lows. A break through here and 1298.00 is the next big level to the downside.

Futex View

We remain bullish equities in the long term but are cautious of short term pull backs to the downside as commodities remain volatile and fears over the European Debt situation persist. We would like to see 1325.25 hold to create a base from which to buy.

WTI Crude Light Oil futures made a new 2011 high on Monday before having a sharp pull-back in the wake of Osama Bin Laden’s confirmed killing by US special forces. The market has been predominantly range bound over the past week between support at 110.70-90 and April’s high around the 114.00 handle.

Thoughts from the trading floor

After building value around the yearly highs over the past week, the market looked primed for another leg higher, especially after breaking April’s highs of 114.07 initially on Friday and then again in early Monday trade, touching 114.83. Then came the announcement out of the US that Osama Bin Laden had been killed by US special forces which saw Oil, along with other commodities fall dramatically across the board. The market this morning is trading around the 111.00 handle - fluctuating above and below the levels seen at 110.70-90. The market has traded lower over the past couple of days without making a meaningful break. Any move through the 110.00 handle and we could see some weak longs further flushed out of the market. If the June contract can hold above these levels again today we may see another move back towards the top of the trading range of the past few days.
The confirmation of Bin Laden’s killing has initially caused a sell off in Oil and commodities across the board. It will be interesting to see how the market moves long term on this news. It has the potential to be long term bullish for Oil especially, should Al-Qaeda and other terrorist groups plan revenge attacks on the Western nations, or tensions in the Middle East intensify with extremist groups rising against the West. For now, look for a reaction around the current levels. If the market can break the 110.00 handle we could see a move back down towards the 106.00 handle and previous support. If the market bounces again from here and gets through the highs it will provide an extremely bullish outlook.
Last night the American Petroleum Institute reported another large build of 3196k barrels, comparing with DOE estimates of a build of 2000k barrels. The API Gasoline showed a small build of 680k barrels compared with current estimates at the DOE of a drop of 500k barrels. As we have seen recently, the trend is for a surplus in supply in the US, rather than a shortage of Oil. It seems unlikely in the near term that OPEC will increase output to help bring the price down as supply does not seem to be an issue at this point.

Bull View

With the market having broken the highs this week the momentum is firmly with the bulls, despite the pull-back since Bin Laden’s death was announced. The bulls will look to keep the market above the 110.70-90 level in the short term with major support coming at the 106.00 handle. If these are not broken then a move back above the highs looks likely in the medium term.
Bear View

The bears will be heartened by a false break of the high earlier in the week, even if it came about via a large news story. They will now look to leave this as a double top print and pressure a further sell-off. With the market currently trading around short term support, the bears will want to make a significant break lower and test the daily triple bottom around the 106.00 handle in the coming days.
Futex View

We are still long term bullish on Oil and expect a more significant break of the highs in the coming weeks and months. With the sharp pull back from Monday’s break higher however there is potential for the market to fall some more in the short term. We will look to buy above the aforementioned 106.00 level but be cautious of bears gaining some momentum at these levels.

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Bond Overview

Bond markets observed continued volatility last week with violent moves generated by both the nuclear crisis in Japan and the continued conflict in Libya. Bonds took a strong offer as Gaddafi declared a cease-fire, which was promptly broken. Traders fully expect news to drive market moves and generate further volatility over the next week.

Thoughts from the Trading Floor

From a technical perspective, German Bunds slowly closed the gap at 122.63/122.19 as the panic bid seen last week cooled and sellers took control. The market squeezed back down below 122.50 and short-term momentum seems to be returning to the bears. However, it is worth noting that the market has been fickle and panic driven and aggressive drives in both directions are a strong possibility. Sellers will be looking at 121.71 support and a potential test of 121.11 if their momentum picks up. On a lighter note buyers will be looking to regain the 122.50 and 123.00 handle and restore some of the aggressive buying seen early last week.

Many economists and analysts are quick to quote that current global fundamental conditions are being hit by ‘multiple black swan events.’ It is still highly difficult to assess the long-term effects and potential likelihood of a rebound from post-earthquake Japan. It appears that the nuclear threat has stabilised but still remains in a dangerous state. There is no quick fix in sight but rather the potential for a drawn out long-term recovery. It is extremely difficult to assess the probability of a swift recovery; the main concern now lies with the rolling blackouts and electricity shortages. Major industrial supply chains have been disrupted both in Japan and with their trading partners across the globe which means the industrial powerhouse needs to get back on the rails before a recovery can take hold. Many economists are currently viewing the situation as a potential slingshot out of recession. The large public and private sector rebuilding projects that will be needed over the coming years will add a massive multiplier effect to economic growth.

Important events this week

• Tuesday: UK CPI, RPI.
• Wednesday: US New Home Sales.
• Thursday: US Durable Goods
• Friday: US GDP

Bull View

Bulls took a strong bid early last week on the back of severe panic in the market; the price action was extremely volatile as prices surged to just below the 124.00 handle. However, higher ground was not held and the market fell back below 122.50. Buyers will need to recapture their old momentum and pressure higher prices. Global fundamentals are still on edge and this should help in their pursuit.

Bear View

Bears, in the face of such bullish fundamentals, have done remarkably well to reject any moves past the 124.00 handle. Helped largely by the continuing stance from the ECB of not changing their new hawkish language, sellers will look to drive out long positions placed rashly in the panic of the last week.

Futex View

We are still bullish on German Bunds. Global problems in Japan and Libya still exist and we do not see them being fixed any time soon.

21 feb tech sheet