Submitted by Nic Lenoir of ICAP
Very little economic data whether it's in Europe or the US today. Recently that has been synonymous with more carry trade: short USD long anything that has high beta. Today seems to be no exception so far, though the USD is not getting beat up all that much by recent standards. Expect dismal volume and an attempt to run the market up.
A few things are interesting. First we are quite significantly up on the day in European equities already. Second EURUSD appears to be drawing a bull flag, but just tested the upside resistance so we should expect consolidation for the next few hours of trading. Another sign is the recent break in correlation between USDCAD and crude oil. Graphically this looks like a dead cat bounce for the USDCAD more than anything, but it tells us the market is a bit tired and recent trends need a short break before pushing further.
In S&P futures we seem to be in a new channel with a slightly lesser slope (the market is tired...). The support is around 1,078, but there is an intermediate support level around 1,080.70 that I don't expect we would violate during today's session. On the upside observe 1,090.70 as the intermediate resistance, before the topside of the channel at 1,100.20.
A look at the Dax seems to indicate we now have an intermediate support around 5,738 in the future, while the topside resistance is at 5,925. Technically the graph is much clearer than for the S&P futures, so I would suggest using the Dax as a guideline playing equities in the next few days. Given the price action one could expect to retest 5,738 before pushing up to 5,925. Only a break of 5,738 would confirm a bearish tone and a more significant retracement towards 5,525. Without this break, we would play the range bewtween the 5,738 and 5,925. A retest of the support to begin with seems the most likely outcome.
We conclude with bonds, where the market stared the week weaker following a Barron's article. The piece seemed a bit naive, and we would not make too much of it. It seems to have been shrugged off for now by US fixed Income futures. Technically we continue to think the 117-20+/117-28 zone is where traders could establish tactical longs to play a retracement towards 119 in 10Y futures in the near term.
Good luck trading,