Markets Get Freaky With Bond Carnage June 3, 2015
Stocks Recover While USD Gets Hit On Bond Moves
As I try to make any sense of the moves yesterday the only thing that sticks out are the moves in bonds. It looks as though some bond traders got a little freaky on higher European Inflation not to mention all the tape bombs on Greece and an airline bomb threat. However all is well as long as stocks recovered. Nothing to see here. Below is one take on all the headlines from Zero Hedge.
- 0400ET Early drop on hotter-than-expected EU inflation
- 0500ET Ramp on Greek deal rumors once again
- 0815ET Airline Bomb Threats send stocks lower
- 0830ET BTFDers ignore those headlines – stocks jump
- 0915ET Dijsselbloem dismisses deal – stocks drop
- 0945ET S&P touches 50DMA and bounces
- 1000ET Terrible Factory Orders data – stocks surge
- 1130ET Rip to new highs as algos latched on to Crude’s spike – run stops
- 1200ET VIX monkey-hammered lower surges stocks
- 1400ET Stocks start to rollover on no news
- 1430ET NYMEX Closes, oil-stock link fades and stocks drop into red
- 1445ET RTRS headline bullshit on EU agreement on terms for Greece
- 1500ET Great Auto Sales data bumped stocks briefly but faded
EUR/USD Surges 280+ Pips
With yesterdays moves todays analysis is rather easy. They will either continue the USD carnage or retrace the inefficient move. I will consider the short from yesterdays highs at 1.1183 and consider a long at 1.1115. At this point I do see the probability of the pullback higher since there is some clear topping along with the potential Greek deal still looming. It would be best to see the conviction below 1.1115 before taking a continuation short but I am open for catching it from the highs after they show they cant find buyers to push it up.
GBP/USD Reversal Slowed By GBP Weakness
The GBP/USD made a shorter move to the upside for a 180+ pip reversal but as with the EUI suspect they will retrace some of it before any push to the upside. This pair dont show any topping so probabilities are lessened but if the USD can manage a recovery today this pair will go with. The level I will look to short is up at 1.5363 while considering a long from 1.5315 or the psych level at 1.5300 just below.
EUR/JPY Runs With EU
As with the EU the EUR/JPY move today will depend on whether or not Greece accepts the “take it or leave it” deal the troika is rumored to be setting up today. Since we may not get an answer from the Greeks today I suspect they may hold prices up or more likely retrace at least some of yesterdays inefficient move. As with the EU the highs are best to short from unless they show conviction to the downside while there is still potential for the long from 137.96
Forex News Today
The calendar starts off with Services PMI data from Euro Zone countries. With expectations flat from the most important German and French it will take a big miss to get them moving unless something comes of the Greek offer. Otherwise a disappointment might get them thinking the inflation data yesterday may be a one off deal and start the retracement. The ECB Rate Decision most likely wont do much as usual but the Press conference has more potential as Draghi does a pump on yesterdays inflation before he has to admit the Euro Zone still has big problems ahead. The kicker is the potential Greek tape bomb
The UK has their Services PMI expecting a slight drop. I do see a disappointment as a higher probability but if it does manage to improve the push up on the GBP/USD has a better chance even if its taken up mostly in the EUR/GBP.
The US has ADP Non Farm that will likely be ignored baring a big miss since Draghi starts speaking fifteen minutes later. The same goes for the ISM Non Manufacturing PMI later as they will likely still be dissecting what Draghi talks about as long as nothing comes from the Greeks.
Asian session traders have Aussie Retail Sales to watch for tomorrow.
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