February 14, 2007
The Euro is on fire this morning and is now getting back into the value area that was rejected in that last sell off on Jan 3rd –Jan 5th. The market has gone above the resistance area of $1.3055. The European growth data yesterday was friendly and the boost this morning is from remarks by Austrian Central Bank Gov Liebscher when he said the bank is fearful that inflation is going to accelerate. There is other news out today that much of the euro’s rise this morning is due to demand from, “Russian names running into offers from an Asian account defending a $1.3110 barrier.” Market News.
The dollar rejected the 85.00 again and I thought we could see a fast move to test recent highs above 85.00 then fail, but it cannot even do that. Despite falling oil prices and rising bond yields the dollar cannot rally and this now has a feel of taking a more serious downturn.
The S&P (ESH7) opened strongly and had a range extension early on. Stops on short positions were hit at 1444. Closing above 1446.50 is short term bullish and put my short term model into a buy yesterday with stops below 1437 (1430 on cash index). Medium term model is neutral but expect to see a sell off in the next 1-3 months as the probability of a wave of risk aversion is rising.
Happy Valentine’s Day!