12th August 2011
Currency overview
Focus on the Cable (GBP/USD)

Cable has broken lower over the past few sessions as the Dollar has seen a safe haven bid during the turmoil that currently engulfs the markets, breaking back below the Head and Shoulders neckline that has dominated the picture over the past few months.

Thoughts from the trading floor

Monday saw a retest of the recent highs in Cable with the contract opening around 1.6475 and then selling off hard throughout the day. Since then the market continued lower, falling through the 1.6220 area which has acted as good support over the past two weeks, and is now where the neckline comes in. We broke back below this neckline on Wednesday but have since bounced back and are trading around it this morning. This area looks like becoming an important pivot point for the market once again.

Thursday’s low at 1.6107 is now important short term support for the market, having bounced quite impressively from here. A break and close below this point would be a bearish signal and should result in further selling of Cable. For now though this looks to have put a low print in the market and a move back into the trading range of the past two weeks is the most likely scenario.

The medium term outlook is again going to be dominated by the trade in the Dollar. During the chaos that has encapsulated the markets in August the Dollar has generally seen a slight bid against some of the riskier currencies, such as the British Pound and the Euro. These trades have generally been in line with the moves in equity markets. If the equities have made a low for the time being then expect some buying to come back into Cable, with another test of the 1.6475 being the first major target.

Bull View

Although Cable has sold off while the equities have seen big moves lower, Thursday saw an impressive bounce from 1.6110. A move back into the recent range and the bulls will try and target the recent highs soon after.

Bear View

After an impressive sell off the bears have let the market bounce back up above the neckline. A close below 1.6260 would allow the bears to try and retest Thursday’s low.

Futex View

If the market can close above 1.6260 today then we expect a move back into the recent range. Though we will be keeping a close eye on the equities. Any selling there will see Cable dip as well.

29th July 2011
Currency overview
Focus on the Cable (GBP/USD)

Cable has traded in a range between 1.6260 and 1.6440 this week as traders turn their attention to the ongoing US debt ceiling issue with the August 2nd deadline just days away now.

Thoughts from the trading floor

Cable has remained relatively bullish this week, with the market making new highs for July again on Tuesday and Wednesday. The market reached the 1.6440-70 area we mentioned last week but failed to break into and above it, creating a high tick on Wednesday of 1.6440. This area will act as short term resistance for now. If we break through here there are small levels at 1.6550 and 1.6600 which we would expect to hold on the first test.

To the downside 1.6260 has proved to be good support with lows made there on three consecutive days since Friday. This also coincides with the June 22nd high. If this breaks in the coming sessions the focus will turn back to the 1.6160-80 level. This is the key pivot point for the market and a break back below here should result in a lot of longs rushing for cover. The head and shoulders neckline has been nullified somewhat after breaking back above it but after providing such good support and resistance over an extended period, might be worth keeping an eye on if we do move lower. Today the line comes in at 1.6200 so just above good support.

The big news this week has been the ongoing dispute between the two main political parties in the US about the debt ceiling. This is likely to dominate over the weekend and probably into early next week as well. There is still some doubt that an agreement will be made but in all likelihood both parties will have to make some concessions and some sort of compromise will be reached. Whatever the outcome however, it is likely to have a big effect on the markets and we could see some large, volatile moves as traders react to the news. If an agreement cannot be met and a default follows, the fast money move will likely be a weakening of the dollar. Perversely though, if equities take a real pounding the dollar is likely to still be seen as the safe haven option as risky assets are sold off. Be mindful of the news and expect to see some larger than normal moves, with technicals playing a second fiddle to the fundamentals.

Bull View

1.6260 is an important support level that will need to hold but if this is achieved expect another test of the 1.6440-70 area over next week. Beyond here 1.6550 and 1.6600 are in sight.

Bear View

The bears defended the 1.6440-70 area on the first test and have sold the market back down to near the lows of the past few sessions. A break below 1.6260 is needed before the important 1.6160-80 is tested (and keep and eye on the neckline at 1.6200).

Futex View

We still favour buying any dips down to 1.6160-80 but are mindful of the possible larger than normal moves that could occur after the any news on the debt ceiling. A break above 1.6470 and we expect to see 1.6600 soon after.

25th July 2011
Equity Overview

All in all, a pretty strong week for equity markets as traders sought comfort from the deal made by EU leaders on Thursday to help Greece, Ireland and Portugal in their attempts to recover from and repay the previously received bailout funds.

Thoughts from the trading floor

Last week saw a deal reached by EU leaders that allowed for a reduction in the interest payments made by Greece, Ireland and Portugal as well as more time to pay the debts off. Agreements were also made that allowed the EFSF to buy bonds on the secondary market, and extend credit lines to other countries that have so far avoided the need for a bailout, should they struggle to raise funds in the open market. This deal created a large bullish sentiment for the week as the S&P 500 futures closed the daily gaps previously left at 1329.25 and 1344.25, wiping out areas expected to provide strong resistance with relative ease.

The market squeezed through resistance seen at 1346.50 but only reached a high of 1347.75 before coming off slightly. The market gapped down over the weekend and during the Asian session as the impasse continued in the US between the two major parties negotiating a deal on the US debt ceiling. It seems strange that the markets have failed to pay more attention to this situation so far as we are now just over a week until the supposed 2nd August deadline to reach an agreement. European markets have again recovered this morning after opening much lower and it will be interesting to see if they manage to hold on up here or whether this is simply washing a few weak shorts out before they really make a decent move lower.

Resistance in the S&P500 futures lies first at 1335.00 before 1346.50 which is just below the recent high of 1347.75. A move back above here and we would really expect the yearly highs to be tested in the next few weeks. 1315.00-18.00 should act as good support if we do continue lower. 1306.00 may provide a small bounce but the major support in the market remains the 1290.00-93.50 level that we failed to break last week.

Important events this week.

● Monday: Texas Instrument earnings
● Tuesday: UK GDP, US Consumer Confidence, New Home Sales. Ford, 3M, Amazon
● Wednesday: US Durable Goods. Boeing
● Thursday: US Initial Claims, Penidng Home Sales. Motorola, Exxon Mobil
● Friday: US GDP, Chicago PMI. Aon, Chevron

Bull View
Having closed the daily pit session gaps previously left at the beginning of the month the market has removed the extremely bearish chart patterns. Though we have opened lower this week, a move back to the 1346.50 level and close above should lead to further buying with a test of the yearly highs eyed in the medium term.

Bear View
The bears have lost all momentum in the market, with even a lower open this morning failing to provide any follow through. Perhaps the biggest bearish play will come on the back of continued problems with talks over the US debt ceiling. A break of 1325.00 in the short term should lead to 1315.00-18.00 being tested soon after.

Futex View

We traded down to our important level last week at 1290.00-93.50 and since then we have seen an impressive bounce. Our bearish stance has been removed with the closing of the daily gaps, though we still see potential for moves lower as we approach the deadline for the US debt ceiling agreement. Another break above 1346.50 however, and we would expect a strong leg higher.

22nd July 2011
Currency overview
Focus on the Cable (GBP/USD)

Cable surged higher yesterday as risk assets across the board saw strong gains on the back of the deal announced by EU leaders for Greece, taking the market back above the head and shoulders neckline that has recently capped the gains..

Thoughts from the trading floor

The big news yesterday was the announcement by EU leaders of further aid to Greece and the already bailed out nations of Portugal and Ireland, including the ability to offer credit lines to other nations should they encounter problems in the future. This resulted in a huge appetite for risk assets, as equities rallied hard along with commodities along with the dollar selling off. As a result, Cable surged higher and finally broke back above the head and shoulders neckline that has dominated the long term picture over the past couple of months.

The neckline had previously capped gains at the end of last week and during sessions this week and the break and close above changes the medium term picture for the market. The neckline, along with the series of highs made in the past few sessions should now act as support for the market and be a key pivot point. Should this move higher fail to hold, and the market sell off back below the 1.6160-80 level quickly then it may prove to be a false break higher that flushes out the weak shorts. A move back down to 1.6000 would then be expected.

The move and close yesterday though should result in further gains over the coming sessions. The market touched the first resistance to the upside at 1.6345 this morning though has since sold off from here. In the short term, 1.6260-80 has to hold to keep the bullish stance and if this can be achieved a break through 1.6345 should see a move up to the 1.6440-70 area of resistance. Next week sees the first release of the GDP estimate for the second quarter and price action may be tempered by this going into Tuesday morning. Cable of course may swallowed up by the bigger picture again depending on how the markets see the Greece deal going forward, and how the rating’s agencies react to it. We could have increased volatility in risk assets should a ‘selective default’ be announced for example. The moves in the dollar would then take precedence over the technical outlook.

Bull View

Having broken and closed back above the head and shoulders neckline the market has a medium term bullish stance. Having already touched 1.6345 the bulls will look to retest here and break up to 1.6440-70.

Bear View

The bears failed to hold the neckline yesterday and may now need to rely on fundamental news to get the market back below here. 1.6260-80 is an important area for the bears to get the market back below if they are to test the important 1.6160-80 area.

Futex View

We saw the neckline act as resistance a couple of times this week with some good opportunities to sell and cover for a point or so but the close above now leaves a bullish medium term outlook. We would favour buying any retests around the important 1.6160-80 area. 1.6260-80 may also provide good initial support.

20th July 2011
Commodity Overview
Focus on Oil

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.

18th July 2011
Equity Overview

A pretty volatile week for the equity markets as they sold off hard on Monday and Tuesday before recovering going into Tuesday afternoon. Since the S&P 500 futures have traded in a large 30 tick range, currently trading near the lows of this range this morning.

Thoughts from the trading floor

A continuation of Friday’s sell off saw the market break down on Monday and Tuesday quite dramatically as fears over Spain and Italy increased among investors. Already in sell mode following Friday’s shocking NFP reading, the S&P 500 future sold off a further 40 handles by late Tuesday morning, making a low at 1295.25 as panic set into the markets with Spanish and Italian bond yields in particular blowing out.

The market stage a good recovery going into Tuesday pit session though and since then we have been relatively range bound between 1302.00-04.00 and 1323.00-27.00, though the markets have been particularly volatile in this range. These areas remain key support and resistance this week and a break in either direction should so see a continuation in the move. Due to the daily gaps made in the pit session on Monday and Tuesday the medium term outlook is still bearish. A break below the 1302.00-04.00 area will likely lead to a retest of the recent lows at 1295.25. On the upside, a close above 1329.25 is required if the market is to regain some bullish momentum, where 1337.50 is the next resistance.

The main focus this week again is likely to be the peripherals in Europe. The European stress results released on Friday fell mainly in line with analyst expectations but the sovereign debt crises is still hanging over the markets with Spain and Italy now in particular focus. The bond yields this morning are again creeping out, some to the widest levels seen for 15 years and this is likely to cause more panic among traders. Moves in these yields may dictate the direction of the market over the coming sessions though with European data out and earnings season in full flow we may see some volatile moves on the back of releases to the market.

Important events this week.

● Monday: Halliburton, IBM earnings
● Tuesday: DE ZEW, US Housing Starts. Bank of America, Goldman Sachs, Wells Fargo, Johnson & Johnson, Yahoo!, Apple
● Wednesday: UK BoE Minutes, US Existing Home Sales. Ebay, Intel
● Thursday: UK Retail Sales, US Initial Claims, Philly Fed. Morgan Stanley, Microsoft
● Friday: DE IFO, EU Industrial Orders. GE, Ford, Catepillar

Bull View
The market bounced and hung on well after initial big losses seen on Monday and Tuesday morning so any retests lower will have to be defended again. The first upside target will be the top of last week’s range, around 1323.00-27.00.

Bear View
The market is back down at the low of the recent range and the bears will look to break support at 13002.00-04.00 with a view to testing the 1295.25 low of last week. This will be a key test for the market.

Futex View

With the island reversal and daily gaps on the pit session holding last week we remain bearish in the long term and after some further poor US numbers and doubts over the Eurozone still lingering, we further another move lower. We would look for 1315.00 to hold to the upside and see how the market reacts if we get back down to 1295.25 again. 1290.00-93.50 is still an important area so we may see some buyers come in again here.

8th July 2011
Currency overview
Focus on the Cable (GBP/USD)

Cable has sold off over the past few sessions after retesting the head and shoulders neckline on Monday and failing to move back above it. The low this morning is just above the 1.5936 level.

Thoughts from the trading floor

On Monday the head and shoulders neckline came in at 1.6144 and the high was made at 1.6141 with the market failing to make a move above back above it. This now leaves a bearish outlook in the medium turn with the 1.5936 level and recent daily double bottom at 1.5912 providing short term support. If these lows break then expect a move down towards 1.5750 over the following sessions. A move to here would confirm the bearish outlook on the market.

The longer term target on the head and shoulders is around 1.5350 which ties in nicely with the lows made in December. This is a much longer term play and we wouldn’t expect the market to reach this point for another few weeks at least. If this move does play out, support to will come in at 1.5640-70 and then 1.5450 before the December low levels. In the shorter term then the market remains weak and the recent lows should act as an important pivot for the market. If these hold then a bounce up to 1.6060 is expected at the least. This may also show signs of the market remaining range bound for a few sessions before finally going one way or the other. The top of this range should be the highs made this week around 1.6140 and up to the head and shoulders neckline, which is obviously edging higher each day.

The all-important NFP release is due out of the US today which could have a major bearing on all dollar paired currencies. In recent weeks we have seen some of the stronger US data result in a strong dollar - a trend that has been missing for some time so we will look to see if this continues in the wake of NFP. Expect some volatility after the release and the close will be important relative to the strength or weakness of the numbers.

Bull View

The bulls will look to defend the 1.5936 level again with a view to eventually retesting the head and shoulders neckline again. First though 1.6040-60 is an important hurdle to overcome.

Bear View

The bears sold the market back off after touching the neckline earlier in the week and the market is now back near the recent lows. A break and close below here should see a move down to 1.5750 initially.

Futex View

The head and shoulders neckline remains and important resistance to the upside, and the recent lows at 1.5936 and 1.5912 are a key pivot point. We still favour selling the bounces until we see a close above the neckline, and will look to go with momentum should we get a close below the recent lows.

7th July 2011
Currency Overview
Focus on ECB policy decision and the Euro/USD

Today sees the release of the ECB policy decision and the usual press conference. The ECB is expected to hike interest rates by 25bp. to 1.50%. This is built into the expectations.

Thoughts from the trading floor

The ECB hiked interest rates in April to 1.25% from 1.00%. Since the start of the year ECB have ramped up their hawkish stance on policy by dropping the appropriate word to describe rates. In January, they introduced the statement that the see short-term upward pressure on overall inflation, and at the same time “very close monitoring is warranted.” In March, the ECB signalled a April rate hike by announcing that “strong vigilance” was warranted on upside inflation pressures. Last month, the ECB signalled that they viewed inflation risks with “strong vigilance”. The policy stance was described as “accommodative”. If the ECB hike rates as planned today, it should confirm that the ECB are in a rate hike cycle. This is almost a given for the markets. After this, the markets need to work out how aggressive the cycle will be. The market is currently pricing in one further rate hike this year after the expected hike today

Going back to the start of the year, the ECB announced that they would “monitor very closely” upside inflation risks in January and February before signalling “strong vigilance” in March whilst dropping the word “appropriate” to describe interest rates. The monitor very closely statements of the April and May were then followed by a “strong vigilance” comment last month. Extrapolating forward this would imply a rate hike this month followed by a monitor very closely statement. This is expected by the markets. We have a similar situation to one we had last month where peripheral debt issues was the main driver of the markets heading into the ECB meeting (Bunds rallied firmly the day before the ECB meeting) and the German bonds subsequently shrugged off the strong vigilance commentary.

Key words to look out for:
“Appropriate”- (very dovish) This would suggest that potentially the ECB have decided that the current short-cycle (given they hike rates today) has come to an end and are in a wait and see mode. The one further hike expected late this year should then be unwound.

Announcing “monitor very closely”, with rates remaining “accommodative”- is expected by the markets. This would be quite event risk neutral.

Strong vigilance would indicate a hiking of rates next month. Doing so may need the ECB to use the words “(very) accommodative” to describe interest rates. Should be very hawkish as it would suggest a more aggressive cycle of hikes than currently priced in.

Interest rate corridor width:
Currently stands at 150bp. (marginal rate minus deposit rate). The pre-crises width for this corridor was 200bp. whilst the ECB’s liquidity provisions are being implemented (MROs, etc) widening the corridor to 200bp. should have a limited impact (may initially be taken as a tightening of liquidity). If this is announced alongside the easing out of the liquidity facilities, this would be seen as a further hawkish development. However, would put ECB in difficult position as many peripheral banks need the liquidity facilities to remain solvent. We also need to look out for the tender process of the MROs and LTROs. Currently they are conducted at a fixed rate. If this changes to a variable rate process, it would be a hawkish development. The ECB has continued to conduct fixed rate tenders despite hiking rates already this year as the peripheral banks are reliant on this process for liquidity.

Today’s other focus for the markets may be on the ECB measures to support peripheral banks. There has been talk of a two tier system where banks in the bailed out nations receive further liquidity provisions than the others, currently the ECB using fixed rate MRO and LTRO tenders for this process. Also the ECB will be quizzed about the recent Portuguese debt downgrade to junk by Moody’s. If another ratings agency follows and cuts Portugal to junk, this means that the ECB cannot accept Portuguese debt as collateral unless they make special provisions as they did for Greece.

With regards to the non-standard measures, described as “enhanced credit support” and the Securities Markets Programme, the ECB stated that these are “temporary in nature”.

Bull View

The Euro was under-pressure yesterday on the back of the Eurozone peripheral debt issues, and thus a surprise hawkish surprise may be required by the ECB to reverse the declines. The market may need the ECB to signal a more aggressive tightening phase for monetary policy, either through ramping up inflation rhetoric or the big surprise of another vigilance statement.

Bear View

The bears will cite the continued weakness in Eurozone peripheral debt as a sign that the market is “overvalued” and look to shrug off the expected hike by the ECB today. They may look for some sort of dovish surprise to support their case that the ECB are at least more deeply concerned about the ongoing peripheral issues.

Futex View

We favour bears, unless there is a hawkish surprise form the ECB, we favour the cross to weaken following the ECB press conference.

4th July 2011
Equity Overview

An extremely strong week for equity markets as Greece was once again in focus - this time with a vote on austerity measures. The S&P 500 futures broke important resistance at 1290.00-95.00 and continued to climb going into the end of the month and quarter.

Thoughts from the trading floor

The week started strongly for equity markets with many ‘front-running’ the vote by the Greek government in expectation that they would pass the vote on further drastic austerity measures. As the vote passed on Wednesday equities continued to climb with many market commentators believing there was an element of window dressing going on as we came into the end of the month and quarter. Friday saw further buying however as ISM Manufacturing data showed a strong reading - the first strong piece of US data for quite some time. All in all then the markets were up every day of the week and the S&P 500 futures posted it’s biggest weekly gain of the year. Volumes will be light on Monday as the US takes the day off to celebrate Independence Day and this could lead through most of the week as we are data-light until Non-Farm payrolls is released on Friday.

On a technical outlook the S&P 500 futures look very bullish having easily broken through all levels throughout most of last week. Next resistance to the upside comes in at 1346.00 and then 1356.50. With Friday’s NFP data being the main focal point of the week though, we may see some covering going into the numbers after the recent surge higher. Remember that before Friday’s ISM data was released June saw most manufacturing and jobs numbers missing consensus forecast and the NFP release will provide a key indicator going forward as to whether the ISM data was an anomaly or whether the US recovery is continuing, albeit at a slow pace. The previous key resistance at 1290.00-95.00 area now offers key support on the downside that may act as the markets pivot point. Before here however 1309.00-1313.00 should also attract some buyers should we dip down this week.

Important events this week.

● Monday: US Independence Day - Cash and Futures Pits closed
● Tuesday: EZ Serviced PMI’s, US factory orders
● Wednesday: DE Factory Orders
● Thursday: DE Industrial Production, BOE/ECB Interest rate Announcements, US Initial Claims, ADP Employment data, ISM Non-Manufacturing
● Friday: US NFP Jobs Report

Bull View
After a very strong week the bulls have the momentum again and will be looking for further gains with little data out before Friday’s jobs report. As long as the market remains above 1290.00-95.00 the bulls are in control but attention turns to resistance at 1346.00 - if this can be broken then the yearly highs will not be far off.

Bear View
After failing to break the lows made down at 1256.00 the bears could not stop the market from surging higher last week. They will need to defend the important 1346.00 level if we trade higher. The target for the bears must be to get the market back below 1309.00-1313.00 with a view to testing the 1290.00-95.00 area.

Futex View

Having seen such a strong buy up of equity markets it is hard to remain bearish and when the important 1290.00-95.00 was broken the bulls took control. As this week is data light the markets could continue to drift higher but there we expect to see some form of covering going into Friday’s important NFP release - this is key going forward for the market.

1st July 2011
Currency overview
Focus on the Cable (GBP/USD)

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.