Mar 15, 2017 - Market Update

Short recap

Asia saw some profit taking ahead of FOMC

EU stocks opening higher

EU may officially authorize the start of Brexit talks on June 20 meeting

China keeps building in disputed South China Sea

Interesting to see extremely low level of volatility across many asset classes despite Trump and his policies

May be something is already boiling and FOMC tonight will be the trigger

Oil volatility giving the lead to equity markets

Lower oil may be a new catalyst for stocks

S&P 500 levels 2350/2400

Would need a strong impulse from FOMC to break 2400

US tech and healthcare overstretched and most sensitive to any correction

Volkswagen still recovering from diesel emission scandal and seems to be motivated to search for a tighter cooperation with other big names in the industry, like Fiat-Chrysler for example

Safran still interested in Zodiac Aerospace

Credit Suisse Fear Barometer (S&P500 puts to calls) strongly up as investors pay more for downside protection

EURUSD – crucial for bulls to stay above 1.0505/15 level

Still within the wider range 1.0500/1.0850

Tomorrow’s trading (after FOMC) to show further direction

But wouldn’t be surprised if we stayed range bound again

Base setup – a contrarian view:

ECB can not be dovish going to G20 and on German higher rates hopes

Should Germany want higher rates and higher currency, the Germanexit needs to take place

USD not reacting to strong data doesn’t mean bearish view

Monthly chart setup showing strong demand around 1.0500 level

FOMC can give the confirmation to break the level and head to parity

Than to 0.9500 in medium term

Likely this move will be accompanied by spike toward 1.0750/0850 as market will look for liquidity

Yields expected to spike up but correct in the coming days (as history shows)

10-yr Trys yield likely to test 2.64% level that contained the recent selloff

If Fed not convincing about higher pace of rate hikes due to Trump policy uncertainty

USD selloff to follow what will hurt more then stronger currency

Looks like being bullish USD is an edge and market is positioning for weaker USD

On the other hand ECB and FOMC will need to take into account lower oil prices

And their impact on inflation at some point

Data

US: Consumer Price Index – expecting to touch 2.7%

US: Retail Sales – to easy slightly but keep rising

FOMC – 25 bps hike expected

But the wording on the pace of future hikes the most important

Dutch elections (polling stations close at 2000 GMT, first exit polls to start right after)

US debt ceiling deadline

This week is busy:

Mar 16 – BoJ meeting (right after Fed hiking…)

Mar 16 – SNB meeting (to be watched as EURCHF is not behaving in a normal way)

Mar 16 – BoE meeting

Mar 17 – Merkel meeting Trump

Mar 17-18 – G20 FinMin meeting

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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