City AM reports this morning on an Analysis forum in Milan yesterday where Andrea Enya, the ECB’s chief supervisor, said commercial banks might be caught unprepared when the unwinding of ultra-loose monetary policy starts. ‘’Market conditions are now very favourable [but] banks are not paying sufficient attention to this. To see banks are not yet issuing [paper] massively worries me a little.’’ Reminding how the Italian government last year saw credit dry up suddenly after the general election he added, ‘’that should teach banks that market windows must be rapidly seized.’’ Other commentators are warning that negative interest rates are hurting banks’ bottom line.
Ahead of today’s Fed FOMC rate-setting decision, where President Trump has leaned heavily on Fed chairman Jerome Powell to cut the Fed Funds target, yesterday overnight funding unexpectedly hit the top of its current band at 2.25 per cent. In parallel, the repo market, where banks can swap Treasury paper for cash on agreed terms to buy it back the following day, saw overnight rates on ‘general collateral’ spike up to 9.00 per cent. For the first time since 2008 the Federal Reserve Bank of New York was forced to wade in, lending $53 billion, and promising another $75 billion today, to ease the strains created by this lack of liquidity.
DAX 30
A hanging man candle yesterday after Monday’s dragonfly doji yesterday, coupled with a fading bullish MACD after 8 consecutive higher candles suggest the latest rally is stalling again at the 12500 area.
SHORT TERM TRADER: Square.
POSITION TAKER: Square.
FTSE 100
Bullish momentum’s gone as this index struggles at the 50 per cent retracement resistance area. Interesting to note that in an age of ultra-low interest rates and QE ad infinitum, sometimes cash is really king and only those with adequate access can weather the storm.
SHORT TERM TRADER: Square.
POSITION TAKER: Square.
S&P 500
Holding surprisingly well close to the record high.
SHORT TERM TRADER: Square.
POSITION TAKER: Square.
BRITISH POUND/US DOLLAR
Pushing back up to close above Fibonacci 61 per cent retracement resistance again as Lady Hale and the Supremes at Parliament Square are placed in an unenviable position.
SHORT TERM TRADER: Small long at 1.2345; stop below 1.2325. Target 1.2550.
POSITION TAKER: Long at 1.2500; stop below 1.2300. Target 1.2750.
EURO/US DOLLAR
Bouncing back despite Italian ex-PM Matteo Salvini announcing that he was to split with the Democratic Party as ‘’I have decided to leave and build a new house with others to do politics differently’’ has posted on Facebook.
SHORT TERM TRADER: Long at 1.1105; stop below 1.0900. Target 1.1350.
POSITION TAKER: Square.
GOLD
The MACD marginally less bearish as we hold above trend line support.
SHORT TERM TRADER: Short at 1520; stop above 1535. Target 1440.
POSITION TAKER: Short at 1507; stop above 1560. Target 1440.
