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Markets Awaiting new Data and Direction

So far the equities markets have managed only a minor dead cat bounce after yesterdays rout.  On the last day of the second quarter we patiently await some excitement. 

We did receive the ADP Employer Service Report which estimated the private employers had added only 13,000 jobs in June.  This is far less than the estimated addition of 60,000 private sector June jobs.  The government's NFP report coming Friday will be much more comprehensive.  Is is estimated that the government reduced temporary census workers by 110,000 in June so unless there is a hearty gain in private sector jobs, the NFP number will be negative.  The expectations level for these reports have been reduced, down to -103K, so we may have the market set up for a number that is 'not too bad.' 

As we have observed the British pound is one currency loaded with large and small spec shorts.  There has been an orderly rally from beneath 1.44 to the 1.51 handle.  During the run up, the open interest in the futures has not receded.  Yesterday in the futures only summary, there remained about 122,000 contracts open.  The modest rally in the pound, so far, has failed to dislodge the bears.  With today the end of 2Q, we need to watch for short spec efforts to low ball the trade.

Tomorrow we do get two UK reports that may have some market influence.  The Halifax HPI m/m report is due out along with the Manufacturing PMI.  Should these reports show the economic recovery in Britain is proceeding in an orderly fashion, while the US unemployment numbers cast doubts of the strength of the US recovery then there may be some merit owning the pound versus the USD.  In a fashion, this is also a way to cast a vote in favor of Britain's attempt to curtail spending, or the present American policy of ever more spending, in the name of stimulation for the economy.

Let's try to buy the pound if it slips back to the 1.49 level, risking 150 points.  Our objective is above 1.5150



Disclosure: Short FXE Lonf FXA