Market Overview: Ugly US ADP Employment Change made stocks retrace

Yesterdays bad US ADP Employment Change made stocks in the US drop significantly and this will spill over into the European session today as equity markets are pricing in bad Non-farm Payroll Friday.

Market Updates

• Yesterday’s ADP Employment Change of -693K finally had equities reacting on negative news. Today’s Jobless Claims might confirm the job losses.
• S&P500 dropped 3% and could test trendline support at 891 today.
• Obama says that the coming stimulus plan might costs as much as $1.3T and promises regulatory change no later than by April. Thus, financial shares should continue to underperform the broader market.
• The BoE may cut interest rates by 50 bps or more today, but there is a lot of uncertainty around this decision, so GBP volatility is virtually guaranteed.

Forex Recommendations:

• EURUSD: 1.3545-55 held in Asia, risks rebound past 1.3670 to re-test o/n highs
• EURJPY: Risk-aversion making downside vulnerable. Test of recent 125.0 low likely. Res 126.50
• USDJPY: USD negative environment makes test of 92.0, 91.50 likely. Res 92.90-00
• GBPUSD: 1.5000 needs to hold for next leg up to 1.5250. Seen consolidating ahead of BOE mtg.
• AUDUSD: 0.7000-30 key suppt. Rally limited to 0.7125 for now amid weak commodities.

FX Options

• EURUSD: Front end reversals once again dealt at around par but this time skewed towards EUR calls. Vols backed off slightly but should stay at these levels going forward.
• EURCHF: Significant trade observed in the market where interest bought 9m 25delta risk reversals in 350mio/leg sign of lower spot in the long term.
• AUDUSD: Monday 6900 and March 8100 strikes being paid today as spot comes under pressure since the NY session. Spot likely to head under 7000.

Equities

• DAX: Sell at the break of 4906 targeting 4843 initially, 4780 finally. S/L at 5035.
• FTSE: Sell at the break of 4502 targeting 4456 initially, 4414 finally. S/L at 4540.

Futures

• Gold (XAUUSD): Pressured by commodities slide. 835.0 suppt seen holding. 855.0 res
• Silver (XAGUSD): Seen ranging around 11.0 pivot. 10.80-11.20 should be the parameters
• Oil (CLG9): Inventories keeping crude capped for now. Risks slide to 40.40 support.