NOB Spread comes back to Earth, EURO comes under pressure

The first Monday of the New Year saw a late Christmas gift for dollar bulls as the EUR/USD came under pressure early and often. EUR/AUD (highlighted as a short trade in our 2009 Preview) took a 600 pip haircut. This coincided with a nice sell off in the long end of the curve as 30 year bond futures and 10 year note futures caught some heat as well. The equities had a pretty docile session as one of the things we chart at www.netblackcapital.com is 3-month realized volatility compared with 10 day realized volatility. As of today’s close, 3 month realized volatility sits at about 65% and 10 day now sits at around 20%. This stark difference should regress over the course of this week as I anticipate seeing the range in the equity markets open up shortly.

Key Crosses and Pivot Points for Tuesday –

EURAUD – After losing 560 pips today, the short term techincals have flipped bearish and any strength below 19330 needs to be sold aggressively. These early week trades can define the trends going forward. A nice upward trend line on the daily chart from July should keep shorts honest and may lead to a consolidation pattern before heading lower.

EURUSD – 13390 is the line in the sand for this cross following the rally in the wake of the Fed’s decision to cut rates by .75 bps. If the EURUSD undercuts this level, the balance of power shifts squarely back into the bears camp. A move back above 13861 indicates Euro bulls have regained control.

USDJPY – 9408 sets up a natural fade spot on a weekly chart and a great Fib 1 x 1 to fade the current move in this cross and get short. For day traders, action above 9227 should be bid into. This is a classic case of understanding the time frame you trade and working positions around it.

Crude Oil (CL G9) – 49.23 is a key spot on the weekly charts of Crude and something we are watching closely as a move from here back to 45 can take place if the markets come under pressure and CL works off its recent overbought condition. The 15 MA on the daily chart has started to flatten out and work off the steep nature that accompanied this sell down...

 Good luck in the markets all...