Market Commentary

Markets have been trading with subdued momentum since the start of the session ahead of the ECB rate decision and the subsequent press conference.

HSBC China Services PMI came in at 50.7 in May - down from 51.4 in April - the weakest rate of services activity growth since the HSBC survey commenced. The weaker print was off-set to a degree by the Composite PMI which came in at 50.2 vs. prev. 49.5. HSBC justified the higher composite reading by the slower pace of contraction in the manufacturing activity and the relatively buoyant services activity offsetting the de-cline in manufacturing. Despite positive short-term dynamics in the services sector, the broader trends in mfg. and services have been fairly somber so far in 2014.

European equity markets endured a strong and broad push to the upside in the last 20 minutes, with no particular reason driving the rally. US equity index futures are also being dragged higher on correlation.

BoE left the benchmark rate unchanged at 50bp. ECB cut the main refinancing rate and deposit rate by 10bp. In addition, the marginal lending facility rate has been cut to 40bp.


Intraday Strategy: E-mini S&P

E-mini S&P set yet another all-time high in yesterday’s session and is extending higher as I type, driven by the rally in EU equities fol-lowing the ECB rate decision.

The main caveat to buying pullbacks in equities today will be the outcome of ECB’s press conference which commences at 1:30 PM.

E-mini S&P


Intraday Strategy: DAX

The DAX rallied to test the high of the year set earlier in the week just ahead of the ECB rate decision. Expectations of further policy measures being announced at the press conference are currently providing a bid tone to the EU equity space.

Dax


Intraday Strategy: EUR/USD

The EUR/USD continued to trade within this week’s range in yes-terday’s session, with subdued momentum ahead of ECB’s rate decision. The currency pair spiked 0.4% following the rate decision itself but has by now pared the earlier gains following a comment highlighting that further policy measures will be unveiled later - this is nor a common theme for ECB to pre-commit at all. This makes the press conference ever more important.

We decided not to commit to an intraday strategy for the EUR/USD for this session, taking into account the upcoming ECB press con-ference, heightened volatility and limited predictability of short-term direction in price action.

EURUSD


Technical Analysis: Nasdaq and DJIA

Nasdaq

DJIA


Technical Analysis: Bund and US 10-year T-note Futures

Bund

US 10-year T-note


Technical Analysis: GBP/USD and USD/JPY

GBPUSD

USDJPY

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