Market report 19th of July

See the full pdf version here

Follow our live trades for free at: http://twitter.com/AFtrading
Make sure to check out our blog as well: http://avantagefinancial.blogspot.com/
I outlined that 1293.75 level as key in yesterday’s report and in fact we had a successful test of that level yesterday, which put a bid into the market towards the close and overnight. The S&P 500 Emini futures (ES) gapped higher at the open today by 8.25 points and traded to a high of 1316.25 so far. The high from Friday is at 1315.50 in the ES and acting as major resistance at the moment and it is natural to see sellers coming in at that level. However a daily close above 1316 today in the ES could open for a stronger rally. News wise it is more of the same really, the European debt crisis and US debt ceiling talks are the major focal points. The EU summit on Thursday is probably the next big event on the calendar. Also watch out for any developments in US debt ceiling talks. It seems like everybody expects an agreement to be reached on the US debt ceiling, but time is running out quick and Obama said it had to be done this week.
The Euro is higher so far today, but I still reckon it is a sell on rallies below 1.4300 for the moment. RBA minutes out overnight were less hawkish than expected as the RBA dropped their view that policy would need to be tightened at some point. However I think it is the risk on/off mode that is the major driver for AUD, meaning the equity markets will dictate the direction. At least until we see interest rates going up in the US or RBA start cutting rates of course.
I see a trader friend of mine in London looking for upside in the NZD as we have the RBNZ rate announcement next week. The market is looking for 50bps hike by January, but some are looking for a move already next week. More likely is a signal that rates will be raised on the next meeting, which is in September. There are only 4 more RBNZ meetings until January (including next week’s meeting), so if the market is correct we should see some rate hike signals soon. I was also reminded by my friend that RBNZ was more hawkish than expected at the last meeting (June).
Canadian dollar is stronger across the board following the Bank of Canada left rates unchanged today, but signaled that borrowing costs will rise as the economy recovers.
http://www.bloomberg.com/news/2011-07-19/bank-of-canada-says-policy-interest-rate-will-rise-dropping-eventually-.html
Just one thought on the Gold rally. We have seen a major move higher from the 1478 low (August futures) on the 1st of July, to the high of 1607 today. The move higher has been on the scare that we might see a US default and basically a run for safe heaven. So, if we see an agreement on the US debt ceiling, gold should trade lower and the risk is for sell stops to go off if it drops below 1580 or so I reckon.
Looking at a few interesting points in the markets trading wise:
- Successful test of the key 1293.75 level in the S&P 500 futures yesterday and the close well off the lows signals buying interest. We have key resistance at 1315.50 now, the Friday high.
- Looking for a move back lower in Corn to fill the gap at 669. Chart can be seen here: http://chart.ly/5y9bfyv
- Crude has key support at 94.50 and key resistance at 97.74, watch those levels for the next directional move.
- Looks attractive to sell US 10 year Treasury futures above 125, will update on Twitter if I open any positions.


Technical’s and comments

Euro: Euro looks weak below the 100 day moving average at 1.4293. I prefer selling rallies for a move down to the 200 day moving average at 1.3913 near term.
Cable: EURGBP lower, helping GBP higher and we have key resistance at 1.6194 (14/7 high) that should be though to run through unless the Euro really blasts higher, which I think is unlikely going into the EU summit Thursday.
USDJPY: More up and down in the Yen, with lack of direction and focus this pair seems to be on the sideline for now. I remain longer term bearish on the JPY as the fundamental factors in Japan looks ugly, with huge public debt and unfavorable demographics going forward. I am looking for a break out to the upside of the 2 months range, which is 78.44 to 81.78.
Swissy: I am not looking to chase this pair lower at this stage. To me it looks actually more interesting to look at buying some calls. Will update on twitter if I do anything.
AUDUSD: Amazing the 1.0550 support level once again holds. Strong resistance up at 1.0750.
USDCAD: I prefer selling rallies below 0.98 for a move back to 0.9500. My 0.9500 target hit following the BOC statement. I would not chase the price lower at this level, but rather wait for an retracement to get short again.
S&P Future (ES): Key level at 1293.75 held and buyers stepped in. Looks like higher is the most likely near term direction. Key resistance at 1315.50 that needs to be taken out to open for a move to test last week’s high at 1327.75. We also have a gaps up at 1329.50 and 1344.25. Support at 1291.25 (yesterday’s low) and we also have 61.80% Fibonacci retracement of the 1252 – 1352 move coming at 1290.
Gold: 1606 high so far, the sky is the limit. The most important I reckon is the US 10 year rate, so keep an eye on that.
Crude oil: Looks like plenty of selling towards 99.50 last week and I expect a move down to test the key support at 94.50 near term. Minor resistance at 97.74 and a close above this level would make me more uncertain about a down move to be honest.



________________________________________
Risk Warning: Any information in this report is based on data considered to be reliable, but no representations or guarantees are made by Avantage Financial GmbH with regard to the accuracy of the data. This information is provided on condition that we accept no responsibility, legal or other for its contents. We, including our directors, officers, employees or publishers, disclaim all liabilities. Any statement constitutes only current opinions, which are subject to change. Neither the information nor any opinion expressed shall be construed to be, or constitute an offer to sell or a solicitation of an offer to buy any investments mentioned herein. Regardless of the account type you choose, there are risks inherent in trading, including the risk of loss greater than the original investment. The opportunity for profit creates a corresponding risk of loss. Anyone wishing to invest in any of the products mentioned should seek their own financial or professional advice. Prices can go down as well as up. Past performance is no guarantee of future results.