Euro (June)
Session close: Settled at 1.2224, down 61 ticks
Fundamentals: Tomorrow’s ECB meeting is the headline event of the week. They are expected to leave policy unchanged and the statement is due at 6:45 am CT. ECB President Mario Draghi begins his press conference at 7:30 am CT and his comments will be the most crucial. The Euro capped off an abysmal stretch ahead of this meeting by closing below our major three-star support and at the lowest level since January 12th. Ironically, we mention this January 12th area because the day prior, the Minutes from the December ECB Meeting pointed to a change in message around the corner. Many, including us, believed this was the first step towards hiking by the end of 2018. At their March meeting, the ECB removed their pledge to increase stimulus if necessary. While the Euro has lost significant ground over the last week, we look to the market now pricing in a dovish rhetoric tomorrow. While recent business sentiment data and Manufacturing has been downright poor, inflation has had traction and we believe this has gotten lost in much of the noise; the liquidation of the massive net-long position in the Euro and short-covering in the Dollar. The U.S 10-year crossing the 3% threshold has strengthened the Dollar, a surprisingly hawkish or simply not dovish ECB could get the Bund and regional yields cooking. As we have said early in the week, the door is now open for a strong recovery in the Euro tomorrow. German Consumer Climate is due at 1:00 am CT. From the U.S weekly Jobless Claims, Durable Goods and Trada Balance data are all due at 7:30 am CT.
Technicals: Price action is undeniably weak after closing below major three-star support at 1.2254-1.22765. However, this does not change our long-term outlook for the Euro as we remain unequivocally long-term bullish. In fact, we believe that this move is a forced rebalancing as traders were heavily net-long the Euro and net-short the Dollar. This opens the door for a sharp technical reversal tomorrow and we are looking to play this with options. It can be done as cost-effective as $100 per position with the May Week ONE 1.24 Calls; we like this because not only is the ECB tomorrow but U.S Q1 GDP is Friday, the FOMC is next Wednesday and Nonfarm Payroll is next Friday on expiration.
Bias: Bullish/Neutral
Resistance: 1.22765-1.2293**, 1.2377-1.2380**, 1.2468***, 1.2547-1.25535**, 1.2659***, 1.2725****
Support: 1.2040-1.2079***
Yen (June)
Session close: Settled at .9176, down 57.5 ticks
Fundamentals: The U.S Dollar continues to strengthen as the U.S 10-year has cleared the 3% barrier. This presents the biggest blow to the Yen because of the carry trade. Additionally, equity markets bounced back strongly today and have seen further strength after-hours on great tech earnings. While the Yen is trading at tremendous support, traders must be cautious on both sides of the trade for the aforementioned reasons and as we gear up for Dollar-related volatility due to the ECB meeting and tomorrow night’s Bank of Japan meeting.
Technicals: The Yen held major three-star support though today’s session and close, but it is hanging by a thread; this level aligns multiple key technical indicators along with the 200-day moving average. The 14-day RSI is now below 30 and for these two reasons we are keeping a slight Bullish Bias. Longs must be extremely cautious and manage risk properly.
Bias: Neutral/Bullish
Resistance: .9315-.9352***, .9402-.9429***, .9514**, .96145***, .9729***
Pivot: .9200
Support: .9161-.9167***, .9073**
Aussie (June)
Session close: Settled at .7565, down 34 ticks
Fundamentals: The Aussie got smoked today and it has been the only currency in which we have a Bearish Bias. Yesterday, we pointed to weak CPI data and this coupled with a soft metals complex has paved the way for a path of least resistance lower. Import/Export Price Index data is due tonight at 8:30 pm CT. Traders must watch the U.S Dollar’s reaction to tomorrow’s ECB meeting, do not be mistaken, this will affect the Aussie.
Technicals: As mentioned above, the path of least resistance is lower, and we are targeting .7501. We expect volatility through the end of the week and a move out above .7644 will completely Neutralize our Bias.
Bias: Bearish/Neutral
Resistance: 7644***, .7695-.7709**, .7799-.7813***, .7921.7944***
Support: 7501***
Canadian (June)
Session close: Settled at .7792, down 8.5 ticks
Fundamentals: The Canadian held ground the best against the strengthening or we should say short-covering in the U.S Dollar. The energy complex posted a good session and Crude Oil recovered to settle back above the $68 mark. Bank of Canada Governor spoke this afternoon and noted that they will remain cautious while inflation is gaining traction. There is now data out of Canada tomorrow, but the currency will be susceptible to Euro related swings in the U.S Dollar. However, traders do need to keep in mind that the steel and aluminum tariffs are set to go into effect next week and this will put pressure on sides to achieve a NAFTA deal; a failure to do so would hurt the Canadian.
Technicals: We remain Neutral due to the U.S Dollar strength, the undeniable weakness and NAFA headwinds. Still, major three-star support at .7771-.7790, which aligns with the late March bull flag breakout, is working very well to keep price action in check. We remain long-term bullish the Canadian as we are long-term bearish the U.S Dollar and believe the Technicals and fundamentals set up extremely favorable for the Canadian through the end of 2018.
Bias: Neutral
Resistance: .7904-.7924***, .7968*, .8045-.8047**, .8100**, .8175***, .8544****
Support: .7771.7790***, .7718-.7735**, .7633***
Last Trades:
LEM8: .70 at 105.75, trading in a range of 1.175
LEQ8: .475 at 105.40, trading in a range of 1.05
GFK8: 1.375 at 141.525, trading in a range of 1.975
GFQ8: 1.20 at 147.675, trading in a range of 2.35
Cattle Commentary: Despite it being a “quiet” day, cattle futures managed to finish the session on higher ground. Today’s Fed Cattle Exchange yielded no sales out of the 3194 offered; 121.00 and 120.25 were passed on. With a wide basis, we continue to feel optimistic that futures will hold their ground here. We are not suggesting that they will run to cash when April goes off of the board, we are suggesting that futures and cash will likely work together to narrow the gap. This is the widest April/June spread we have seen since the 1980’s. Cash trade has been non-existent outside of some cash trade for 3 weeks out reported from 119-121. Boxed beef worked higher again today.
PM Boxed Beef / Choice / Select
Current Cutout Values: / 218.53 / 203.15
Change from prior day: / .88 / 1.04
Choice/Select spread: / 15.38
Tech Talk
Live Cattle (June)
June live cattle continue to loiter near the pivotal 106 level. The bulls MUST get something going before the weekend to set the tone for next week’s trade. A failure to achieve a breakout of our resistance pocket from 106.05-106.925 over the next two sessions would likely lead to some additional long liquidation from the funds. There is still a gap on the charts from last Friday’s close to Monday’s open, that comes in at 104 which represents first technical support. A close below the gap could extend the pressure back down towards 101.20-101.85.
Resistance: 106.05-106.925***, 109.00-109.55****
Support: 103.95-104.00**, 101.20-101.85****, 96.35-97.075****
Feeder Cattle (May)
Feeder cattle futures managed to hold technical support which we had defined as 139.70 (happened to be today’s low). This was the gap from Friday’s close to Monday’s open. The ability to maintain ground after filling the gap was a green light for buyers to step back in. The market managed to close near the highs of the day which is a good sign for tomorrows trade. First resistance comes in from 142.65-142.90. This resistance pocket represents the 50-day moving average and previously important price points. A break and close above could extend the rally to 143.35-144.65. This is a wider resistance pocket than we would typically want, but there is a lot of significance in it. This pocket contains the 100 and 200 day moving average, along with the 50% retracement from November highs to the April lows. We would consider flattening longs and looking short on the first test.
Resistance: 142.65-142.90**, 143.35-144.65****
Support: 139.70**, 135.75-136.325***, 128.875****
Lean Hog Commentary and Technicals (June)
Lean hog futures went and tested first support which we outlined as 73.95-74.00 in yesterday’s report (today’s low was 73.95). Buyers stepped in at this level which pressed prices higher into the close. June hogs finished the session up .475 at 75.30, this after trading in a range of 1.65. If the bulls can get some momentum into tomorrow’s session we could see a retest back to 76.00-76.25. This pocket represents a key retracement level which we had listed previously as support.
Resistance: 76.00-76.25**, 77.325-77.50**, 79.75-79.90****
Support: 73.95-74.00**, 70.25-70.90***
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