June is now the front month for currencies, volume should switch by today .
Session close: Settled at 1.2467, down 22 ticks
Fundamentals: The Euro shed about half a penny at 3:00 am CT on comments from ECB President Mario Draghi that they would not raise rates until “well past” the end of its bond purchasing program. His comments are to intentionally battle a rising Euro which is believed to be slowing growth and stopping inflation in its tracks. In contrast to the Federal Reserve’s use of “gradual”, he cited a “measured” pace. His comments were supported by the ECB’s Coeure and the Euro saw additional pressure due to poor Industrial Production data. The Euro battled back a little today on another bad U.S Retail Sales read which was accompanied by an unenthusiastic PPI. Ultimately, yesterday’s strength turned into a bit of a consolidation, however, we maintain that the non-existent wage growth and doubts around inflation should keep the Fed from being any more hawkish than expected next week. Tomorrow morning, French CPI data is at 2:45 am CT and traders should keep an eye on the Swiss National Bank’s monetary policy meeting at 3:30 am CT. Out of the U.S, weekly Jobless Claims, Import/Export Price Index, NY Empire State Manufacturing and Philly Fed Manufacturing are all due at 7:30 am CT. The ECB’s Lautenschlaeger speaks at 10:45 am CT.
Technicals: Price action on today’s session failed to get out above strong resistance at 1.2504. This level is now major three-star resistance, it aligns multiple strong technical indicators as well as a trend line from the high; a close out above here is very bullish and signals a high probability that the Euro makes new swing highs. There is no true support until down to 1.2409 and a close below here will open the door for the bears. However, until then, 1.2449 is an important pivot and the bulls will remain in the driver’s seat as long as price action stays above here.
Resistance: 1.2504***, 1.2547**, 1.2659***, 1.2725****
Support: 1.2409**, 1.23645-1.2379**, 1.2349*, 1.2254***
Session close: Settled at .9475, up 31 ticks
Fundamentals: The Yen reversed sharply on Tuesday’s session and held the gains well overnight coming into today despite strong data out of China and a higher equity market. Last night’s Machine Orders data beat expectations. Bank of Japan Kuroda said today that he is confident that they will be able to exit smoothly the ultra-loose monetary policy when that time comes, they are targeting April 2019. Gains in the Yen were advanced as the session developed as both equity markets and the Dollar weakened from overnight levels. This has laid solid ground work for higher price action in the coming days.
Technicals: We have had a rare major four-star resistance level in the March contract that has brought tremendous overhead resistance for the Yen. This is a multi-year level and the roll from March to June pins recent price action out above here. Without reducing the significance of this level, we have combined it with the closing high of .95415; the Yen must close out above .9491-.95415 in order to confirm a bullish breakout. The pivot level of .9459 is key to hold on a closing basis for the bulls to remain in the driver’s seat.
Support: .9382-.9391**, .9310***
Session close: Settled at .7887, up 16 ticks
Fundamentals: Strong Industrial Production and Fixed Asset Investment data out of China last night got the ball rolling higher for the Aussie. Price action peaked at .7921 in the June contract right at 7:30 am CT when U.S PPI and Retail Sales were released. This data was not good and did not support the U.S Dollar, however, a wall of resistance brought sellers to the table in the Aussie as well as the ensuing risk-off trade in equity markets. Still, it was a green session for the Aussie and this leads the way into MI Inflation and the RBA Bulletin at 7:00 pm CT. These will be followed by New Motor Vehicle Sales at 7:30.
Technicals: Price action has been favorable and much more constructive than meets the eye. The recent drop, though sharp has battled against strong support below. The rally since the beginning of March has more than neutralized any weakness. It will now be key for the Aussie to hold .7843-.7844 in order to keep its newfound uptrend. First key resistance at .7924 brought the sellers in quickly today but a second test should be able to make a run at major three-star resistance.
Resistance: .7924**, .7972-.7986***, .8035**
Support: .7843-.7844***, .7819**, .7757-.7794***
Session close: Settled at .77415, down 1.5 ticks
Fundamentals: The overall risk-off trade today did not do the Canadian any favors. However, the U.S Dollar remains weak and Crude Oil is beginning to show tremendous potential. In today’s Midday Market Minute, we talked about a potential rip to $63 before the end of the week. The economic calendar was bare for the Canada today, but we look to the private ADP jobs read tomorrow at 7:30 pm CT. Prime Minister Trudeau said today that he was very optimistic NAFTA would be a win for all three involved. If traders begin to get the same feeling, the Canadian is building strong support, if Crude turns higher and the U.S Dollar continues to weaken this would be very positive for the Canadian.
Technicals: The Canadian faces support at the .7700 area that has become stronger and stronger, this is now a major three-star level. It has been in a consolidation range and bouncing between its recent low and what has now become major three-star resistance at .7818-.78265, we must see a close out above there to get the bears out of the driver’s seat.
Resistance: .7818-.78265***, .7886-.7902***
Support: .77075***, .7550***
Cattle Commentary: The market worked higher today on the back of a firm cash trade yesterday. The bulk of cash came in at 127 with 128 making an appearance. Today’s cash trade echoed just that, 127 on the Fed Cattle Exchange (113/113 head) and 128 noted in Nebraska after the close; dressed was noted from 205-207. The boards inability to hang on to early gains should be a bit of a caution flag for the bull camp as it signals supply concerns growing looking into the future (hence the name futures market); the silver lining in the near term is the firm demand early in the week from packers. Some are suggesting that we could see cash continue higher into next week. Outside markets struggled to gain ground in the afternoon session which may have also been a bit of a headwind for the market. Boxed beef inched higher on the day.
PM Boxed Beef / Choice / Select
Current Cutout Values: / 224.11/ 217.01
Change from prior day: / .38/ .26
Choice/Select spread: / 7.10
Live Cattle (April)
April live cattle gaped higher on the open after reports of the firm cash trade yesterday afternoon. The market ran out above technical resistance from 123.55-123.80 which represented recent highs along with the 50 and 100 day moving average. The markets momentum fizzled out and drifted back below those points, closing the session right near where we capped opened. The reversal off the highs is not at all what the bulls wanted or needed to see. Price action suggests to us that the market wants to close the gap from yesterday. First technical support tomorrow we have coming in from 122.20-122.55. A close below this pocket opens the door for a test of 120.15-120.25. On the resistance side of things, the bulls will want to chew through those moving averages and close above them to extend the rally towards 125.45.
Resistance: 123.55-123.80***, 125.45-125.675****
Support: 122.20-122.55***, 120.15-120.25****, 117.90-118.05***
Feeder Cattle (April)
Feeder cattle were technically sound today as futures rallied up to our resistance pocket from 144.75-145.00, as mentioned in previous reports, this pocket represents the 200-day moving average along with the 50% retracement from the August lows to the November highs, both of which were previously significant support indicators. The reversal off of this level again sets the table for the bear camp in the near term as it keeps the trend of lower highs and lower lows intact. A break and close back below 141.025-141.75 is a green light for the market to break down to 137.70. The RSI (relative strength index) is currently at 35.91, this is towards the lower end of the last years chart.
Resistance: 143.85-143.95**, 144.75-145.00**, 146.45-146.85***
Support: 141.025-141.75***, 137.70****, 131.25****
Lean Hog Commentary and Technicals (April)
Lean hog futures traded lower in today’s session following yesterday’s bearish reversal, finishing the session in the middle of our support pocket that we outlined as 66.425-66.875 in yesterday’s report. April lean hogs finished the session down .875 at 66.85 trading in a range of 1.10. The bears remain in control, but the market is nearing a point where the risks may start out weighing the reward (this does not mean buy). We are looking to see if the market can’t make a run towards the August lows of 65.05, at this point we would start to CONSIDER looking at the long side. The RSI (relative strength index) is currently at 37.13, if the market did test those august lows we would not only be at technical support, but also be in a grossly oversold condition.
Resistance: 69.50-69.80***, 71.15-71.35**, 72.60-73.15****
Support: 66.425-66.875**, 64.85-65.05***, 63.50-63.75**