No data this afternoon, slow session expected

Market Review

 Friday there was no strategy report due to the US bank holiday, which saw the market unsurprisingly range for the  full session across all markets. Thursday’s payrolls number turned out to be very well correlated with the ADP  number on Wednesday and posted one of the highest numbers we have seen the last couple of years, giving more  credibility to how the cold winter weather argument earlier this year affected the economy negatively. Not only the  headline number beat consensus estimate, the unemployment rate was a full 0.2% lower than expected at 6.1%, and  is currently at the lowest since Lehman Brothers collapsed. We assumed widespread risk on, but as the day went on  the market only just made a new all time high. At this stage we will need to see increased dividends in the upcoming  earnings season which is just starting for the S&P to sustain its levels, as well as a slight uptick in inflation.    

Today's Fundamental View

As with Friday, today’s session is expected to be slow. There is no data this afternoon, and this should be reflected in the price movement. With a long weekend behind us as the US celebrated Independence Day on Friday it is highly likely that today will continue on low volume. As mentioned in the section above the Q2 earnings need to show stellar performance for the market to maintain current levels, and is one of the biggest threats to the 2,000 handle being obtained. The current dividend yield stands at 1.88%, which is still a long way away from the lowest ever recorded at 1.11% in August 2000. It is also worth noting that the number is also a significant distance from the mean at 4.42%. The current yield could contradict the normal definition and could be viewed as risk aversion by investors. With the monetary policy the last years being very expansionary in the US and investors and traders partly anticipating the same from Europe, it could also be viewed as an aversion to inflation. Risks are to the downside should companies earnings miss expectations, and we will monitor the dividends spending in regards to this. On a technology note, travellers to the US will now be asked to turn their phones on before boarding flights due to the increased risk which various intelligence cells have warned about. A Russian ruling has also surprised stating internet companies are required to store personal data of their citizens on servers inside the country. Today’s strategy will be looking for tiny profits and we may be guilty in lacking risk:reward on some assets. This will further illustrate the volume we expect. With the good NFP number we will continue to hold some focus on this and trade from a risk on perspective, looking for USD weakness and crude oil partly down. The increased tension in Ukraine has seemingly had no tangible effect the supply of crude and the risk premium should not be affected to a large extent. As with Friday, today’s session is expected to be slow. There is no data this afternoon, and this should be reflected in the price movement. With a long weekend behind us as the US celebrated Independence Day on Friday it is highly likely that today will continue on low volume. As mentioned in the section above the Q2 earnings need to show stellar performance for the market to maintain current levels, and is one of the biggest threats to the 2,000 handle being obtained. The current dividend yield stands at 1.88%, which is still a long way away from the lowest ever recorded at 1.11% in August 2000. It is also worth noting that the number is also a significant distance from the mean at 4.42%. The current yield could contradict the normal definition and could be viewed as risk aversion by investors. With the monetary policy the last years being very expansionary in the US and investors and traders partly anticipating the same from Europe, it could also be viewed as an aversion to inflation. Risks are to the downside should companies earnings miss expectations, and we will monitor the dividends spending in regards to this. On a technology note, travellers to the US will now be asked to turn their phones on before boarding flights due to the increased risk which various intelligence cells have warned about. A Russian ruling has also surprised stating internet companies are required to store personal data of their citizens on servers inside the country. Today’s strategy will be looking for tiny profits and we may be guilty in lacking risk:reward on some assets. This will further illustrate the volume we expect. With the good NFP number we will continue to hold some focus on this and trade from a risk on perspective, looking for USD weakness and crude oil partly down. the supply of crude and the risk premium should not be affected to a large extent. The increased tension in Ukraine has seemingly had no tangible effect the supply of crude and the risk premium should not be affected to a large extent.
 

Alternative View

Bad NFP numbers and/or a hawkish Draghi will lead to significant upside for the EURUSD with the S&P selling off