Market Report Tuesday 6th of July

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Portugal was downgraded to junk (Ba2) by Moodys yesterday and the European debt crisis suddenly back in focus, sending the Euro lower down below the 1.4350 support today. The market remains very news driven. The downgrade of Portugal was based on the view that Portugal will not be able to borrow as sustainable levels in 2013 and might need a second round of bailout. It seems to me that the rating agencies are now doing a better job than before the financial crisis at least, where they got way behind the curve on many fronts.
There seems to be a lot of indecisive comments out of Euro zone of late. I see a headline this morning that Germany wants to have another look at the Greek swap idea, which earlier ECB was opposed to. See link below:
http://www.reuters.com/article/2011/07/06/us-eurozone-germany-greece-idUSTRE7651N120110706
I just repeat my comment from yesterday, which I still stick to: “My thinking is that the European debt crisis will not go away quickly and probably come back to hit us sooner rather than later. We have had a nice rally in the S&P 500 over the last 2 weeks, but from here it will be more difficult to go higher in my opinion. With the QE2 over as well, the support for the equity markets could be thin during the summer months. Technically the 1340 resistance is an important level to get above to continue to the upside. I suspect a lot of traders looking to short up around the 1330 to 1340 and stops above 1361.75, the yearly high. It would be healthy for the rally to get some kind of pullback before going higher, if not I am afraid the selling pressure will get too big on any break higher. Friday’s break out level of 1317 is now support.”
EURCHF have corrected lower and slightly below the 1.2050 support level now at 1.2030. To me this level seems to be attractive level to have a look at the long side again for another drive to 1.22.
I am still looking to add some type of position in Corn following the huge sell off week, but I have not made up my mind what the position will be yet. I will come back on that during the next few sessions.
Today’s calendar (CET):
16.00 US ISM (non manufacturing)
02.30 Aussie employment data
The DOE Crude oil inventory and the US ADP report will be released tomorrow due to the holiday shortened week.


Looking at a few interesting points in the markets trading wise:
- 76,4% Fibonacci retracement of the 1361.75 – 1252.25 move comes in at 1336, which was right around the Friday’s high (1336.50). The high from 31st of May at 1340.25 is the next key target. Break out level of 1317 is now key support.
- Crude punching through the 96.00 resistance yesterday, next key level is 98.00.
- Silver bouncing off the lower end of the last month’s range of 32.75 to 38.76. Can we head back up towards the upper end of the range?
- Gold have broken above 1502 key resistance, next upside target is 1520. Target met and next level is 1530.
- Key resistance in Euro up at 1.4564, which I expect to hold for the next 2 sessions. Spot on yesterday with that view and we are down below 1.4350 today.

Technical’s and comments

Euro: We are back below 1.4350 after the Portugal downgrade yesterday. The resistance levels today are the low from 7th of June at 1.4564 and the high from the same day at 1.4695. We have a series of support levels from 1.4320 down to 1.4237.
Cable: We failed towards 1.6140 again yesterday. Looks likely we will drive down lower again with support at 1.5990 followed by 1.5910. I don’t expect to see a break below 1.59 before the Bank of England rate announcement tomorrow.
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. However the risk off over the last days has taken us below 80 again. Not sure if we see any intervention unless the move picks up in speed and magnitude. Buy on dips for the brave.
Swissy: Have resistance at 0.85 at the moment, which is the pivot level in this pair for now I think. Bearish below this level and bullish above.
AUDUSD: We have strong resistance around the 1.0750 level, so would not chase the price action above that level. The buy in level of 1.0550 or so is the place I would look to try long again.
USDCAD: Rapid move lower and I think it makes sense to wait for a rally back up towards 0.9730 or to get short again.
S&P Future (ES): We have key resistance up at 1340.25 and minor resistance at 1337 (yesterday’s high). Looks overbought and selling rallies below 1340 looks the most attractive today. There is a potential double top on daily chart if we fail towards the 1340 level. If we break 1340, I would reverse to look long. Key support is not Friday’s break out level of 1317.
Gold: Break above 1520 opens for 1530 and higher next. I would look to buy if we see any dip towards 1515.
Crude oil: Took out the 96 key resistance yesterday and this 96 level held on the test lower this morning. That is bullish confirmation for me and looks like we will test next key resistance at 98 next. Key support is now down at 96. If we break below 96, the risk is for stop loss festival will send it lower.



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