Market report 20th of July

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Risk appetite rising over the last two sessions and S&P 500 futures are up 4 points in Globex at 1325.25, following strong earnings from Apple last night. Nasdaq 100 Emini futures are outperforming and up 0.70% at 2405.75 on the back of the Apple earnings. If trading intraday in equity indices, it makes sense to buy Nasdaq 100 futures on dips rather than Dow Jones or S&P 500 as I expect the Nasdaq 100 futures to outperform following the Apple earnings.
More on the Apple earnings can be found in the link below:
http://www.bloomberg.com/news/2011-07-20/apple-shares-jump-after-record-iphone-ipad-sales-fuel-profit.html
The Euro is more or less flat at the moment, trading 1.4182 in the spot market. I am not sure what to expect out of the EU summit tomorrow. However, it seems like the market is pricing in that a solution will be reached. I am not so convinced it will be that easy, therefore I still prefer to sell rallies below 1.4300 at the moment. However as we have seen the last few weeks, these event risks can play out both ways and I see it pretty high risk to play Euro going into the EU summit as we can see quite a bit of noise. Maybe a better idea is to wait and see the outcome of the summit or at least play with small positions.
The deficit reduction plan from the “Gang of Six/Seven” seems to be on the right direction, although the details of the plan remain unclear. The main point to take from this is that it looks like Republicans and Democrats can agree if it really matters and it looks like a agreement will be made within the 2nd of August deadline. Although “the more realistic deadline” set by Obama is only two days away now. The key issue is how the rating agencies will view this plan.
Minutes from the last Bank of England meeting on 6-7 July, showed BoE voted 7-2 to keep UK rates on hold and looks like rates will remain low for some time. I have seen some comments over the last days that the phone-hacking scandal in the UK could force the coalition government to fall, leading to general election. This could again have impact on the austerity plans, which would be negative for the GBP. This sounds a bit extreme to me, but who knows…
http://www.bloomberg.com/news/2011-07-20/boe-voted-to-keep-rate-steady-as-dale-weale-sought-quarter-point-increase.html
I repeat a comment from yesterday’s report, as NZD continues to strengthen, high of 0.8566 so far today:
“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 yesterday, 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
I also repeat my comment from yesterday on Gold: “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:
- S&P 500 Emini futures broke above the 1315.50 level (the Friday’s high) and the next key level last week’ s high at 1327.75. We then have gaps at 1329.50 and 1344.25.
- Looking for a move back lower in Corn to fill the gap at 669. Chart can be seen here: http://chart.ly/5y9bfyv
- Crude broke above 97.74 minor resistance, looking for a test of the 99.50 key resistance next, where we saw solid selling last week.
- Selling the US 10 year Treasury above 125 should work well as I expect the yield to rise again when the US debt plan goes through. Should at least see a move back below 124 near term.
- Surprised to see Yen performing this well given the recent rise in risk appetite, looks interesting to try and go long below 79 in USDJPY for a move back to 80.50

Today’s calendar (Central European Time):
16.00 US Existing home sales
16.30 Bank of Canada monetary policy report
16.30 DOE Crude oil inventories

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. I favor going long below the 79 level for a move back to 80.50 or higher.
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. The yearly low is at 0.9446. Minor resistance at 0.9540 today that can be used as a level to sell at.
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 yesterday, the sky is the limit. The most important I reckon is the US 10 year rate, so keep an eye on that. Watch out if we break below 1580 support, could see sell stops go off.
Crude oil: Broke above the 97.74 minor resistance yesterday and now looks like we will test the 99.50 key resistance, where we saw lots of selling last week. A break above 99.50 will likely see buys stops triggered and we could easily pop 1 point or more higher. So make sure to use stops if short.



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