1 Mar
#eMini Trading Levels, Leaders & Medium Term Update
Posted in Intraday Analysis by Bob English at 10:36:39 2 Comments10:37 am EDT: ISM came in with a Goldilocks reading of down slightly from January, but within consensus, which is bullish for equities because too-strong would have rallied the Dollar and too-weak would have hurt confidence. The Dollar and T-Bonds are down, but curiously, so is the EuroYen, perhaps out of Eurozone weakness. Accordingly, while further gains in the ES to weekly R1 at 1116 are in the cards today, a trend day up is unlikely. To facilitate further gains today, we would want to see VWAP hold around 1109. Otherwise, a test of the lower end of the projected range is likely, from 1102.00 to 1103.50. We’ll have to issue the standard caveat regarding surprise political news (which has occurred frequent recently), but otherwise, we don’t see an impediment to an equities rally over the next few days as there is no major news until Friday’s Employment Situation.
fullcompass
on March 1 2010 at 14:56:43
Would you provide background on why you use the EUR/JPY as a leading indicator?
Bob English
on March 1 2010 at 15:39:23
The EuroYen is a measure of risk appetite or aversion. Watching its general trend and how it behaves around different technical levels can give leading information. As to why these currencies in particular, the Yen is important because it is used in the carry trade. Because the USD is also used in the carry trade, it is not a good candidate for the other currency in the pair. The Euro is the most actively traded non-commodity-based currency, so it wins by default. When the EuroYen is going up, it is saying that global investors are willing to borrow in Yen at ultracheap rates to purchase risk instruments denominated in Euros. When it is going down, investors are covering the trade because they are risk averse.