Non-Farm hangover dominate a quiet data day

Market Review

Friday’s Non-Farm Payrolls release saw the creation of 192k new jobs, and a substantial upward revision of close to 25k on the previous reading, leading the market to believe there is no doubt tapering will happen – which is alongside previous expectations. Initial market reaction saw some short term upward pressure and the market did make a new all time high. However, as traders were loosing faith ahead of the 1900 handle which had been anticipated for weeks, there were some selling pressure and at 1530BST the Amplify conservative entry long was obtained. Even though you may have argued a range or even an uptrend the selling pressure continued, which may be attributed to a combination of technical and fundamental reasons; QE speculation in Europe, driving Bunds (and US10Y sympathy) higher, confirmation for US tapering (all uncertainty is off the table in the immediate term) as well as technically meeting resistance at the 1900 area on the cash market, with the 1897 effectively being the all time high. Risk seeking traders would have started getting filled on larger scaled sell positions near this handle and as it was not breached to stop out any participants at all we did not see a <<pop>> higher and this may lead to a decent sell off as seen about a month ago. Theoretically our US10Y position was obtained on Friday, but we recommend no-one to enter pre or during the release of the NFP release. 

Today's Fundamental View

This morning has seen a continued move lower in the S&P index, while its German counterpart ,the Dax, has started retracing higher after a decent sell off initially at the open which may serve as a lead to how the S&P will develop today, though with very little news we do not see this as likely. For the sake of this strategy; we do not really consider it likely to continue the sell off either. Today we see the Non-Farm hangover dominate a quiet data day, leading to alow volumen on  moving market which nobody should expect too much from.We see the potentially best opportunity beingin US treasuries today which went bid on the payrolls number and have been supported by potential stimulus by the ECB. However with further commentary this morning signalling decreased chances of stimuli from the European Central Bank combined with US tapering, we get the same effect from the worlds two biggest monetary policymakers which should lead to an extended sell off in US Treasuries. The only caveat here is if risk assets continues to sell off investors may look to demand safer assets instead which may create some trouble for the entry. Either way there is definitely risk off in the market and the USD will be remain attractive–though the euro we may get some decent pressure higher. Whilst the Crimean crisis and the Libyan clarification are pulling in the opposite directions for price movement in the oil today’s strategy will be short all assets,with a neutral stance in the FXsector.

Alternative View

Adverse comments from central bankers may adversely affect the markets, as will any developments in Ukraine.