Forex Signals: The E-mini S&P 500 finished 0.56% lower yesterday

S&P 500 (Sep 11) INTRADAY

Review The E-mini S&P 500 finished 0.56% lower yesterday as an on-going lack of progress in the US debt ceiling talks continues to concern the markets. The E-mini S&P opened lower and headed down to find support at 1322, which was at that point 1.4% below Friday?s close as talks between Democrats and Republicans broke down over the week-end. However, equities bounced from here as it still appears that the main product that is suffering from debt ceiling risk is the US dollar which continues to weaken particularly against the safe haven currencies JPY and CHF. The S&P rallied from the US cash open and managed to close the gap by trading all the way up to Friday?s closing price at 1340 before again coming under pressure in the latter part of the session.

Strategy The US dollar index slipped another 0.6% overnight and the volatility index the VIX rose 10% yesterday - These are indications that the nervousness ahead of the 2nd August debt ceiling deadline fast approaches. Despite this equities remain remarkably resilient with notably Apple hitting further all time highs yesterday by testing $400. Following some solid earnings from Glaxo and Ford we look towards some important US economic data in the shape of Consumer Confidence and New Home Sales due at 15.00BST. Good news from these releases can continue to support the S&P against a debt ceiling risk sell off. We are neutral today with an entry long at the overnight low of 1327.00.

Alternative Worse than expected economic data may weigh enough on equities to trigger a risk-off move lower. A break of yesterday?s low at 1322 should lead to a test of support at 1315.

EUR/USD INTRADAY

Review The EURUSD was contained in range bound trading yesterday as the stand-off in the US debt negotiations continued while Eurozone peripheral markets were weak on the lack of fresh developments over the finer details of the Greece rescue package agreed last week. Both component currencies traded weaker against the Swiss Franc with the USDCHF making new record lows as the Democrats and Republicans were unable to move forward on a unified plan for deficit reduction. Instead we saw two different proposals being pursued yesterday while Obama and House Speaker Boehner were resigned to defeat for the day in separate speeches.

Strategy Overnight we have broken the double top from Thursday and Friday last week at 1.4438 and rallied above the 1.45 handle for the first time since the 5th July as the US dollar weakened across the board as US politicians remain at loggerheads on a debt ceiling plan. However, some of this strength was eroded due to a weakening Euro following worse than expected bond auctions from Spain and Italy this morning. Importantly EURUSD remains above last week?s high at 1.4438 and this continues to be our entry point long this afternoon. Following some solid earnings from Glaxo and Ford we look towards US Consumer Confidence and New Home Sales data due at 15.00BST. It is important to note that any positive developments on the US debt ceiling negotiations will override other influences and USD will strengthen.

Alternative Scenario Positive news from Washington on the debt ceiling negotiations will lead to broad based USD strength and a break of 1.4407 will lead to a test of key support at 1.4324.

US 10Y T-Note (Sep 11) INTRADAY

Review T-Notes printed a perfect doji on the daily chart yesterday with the market opening and closing at 124.040. The 10yr Government bond continues to show resilience despite the Republicans and Democrats remaining at loggerheads over a consensus agreement on raising the debt ceiling. Yesterday morning T-Notes found resistance at Friday?s high of 124.120 before drifting lower but strength came in at 15.45 to force the market up above our entry short at 124.120. But the rally was short lived and price action quickly saw a retracement back under this level to set up a further drift back towards the opening level into the close.

Strategy Looking ahead we continue to favour the downside in the absence of an agreement on a fiscal adjustment plan and the longer this remains the case the higher the probability of a US ratings downgrade becomes. Again we look for an entry short at Friday?s high at 124.120 as we continue to get solid earnings from the likes of Ford today and in anticipation of good economic data at 15.00BST, when we see Consumer Confidence and New Home Sales figures released. We have tightened up our profit targets for today to reflect the smaller ranges we have seen in recent sessions and have a first target at this morning's low of 123.250 and a second target at last week?s low of 123.220

Alternative Scenario With positive developments in the debt celling negotiations T-Notes will stage a relief rally and a break above yesterday?s high at 124.200 should lead to a breach of resistance at 124.235.

Crude Oil (Sept 11) INTRADAY

Review Crude oil saw a mixed and overall quiet session yesterday with a range of just 135 ticks, which if you disregard Independence day is the tightest daily range since May. Last week Crude broke above the downward trend line that had been in play since May and since then the market seems to have lost direction sitting just under the $100 handle. Crude followed the S&P in pushing higher at the US cash open, rallying off its low at $98.52 and topping out at $99.77. The price action then took the oil price back into the middle of the daily range closing at $99.20 down 0.67% for the session

Strategy We have seen further broad based US dollar weakness over-night as the US Democrats and Republicans remain at loggerheads over the US debt ceiling plan. This has benefited crude prices with a rally during the Asian session and again in the European morning taking prices up to just shy of yesterday?s high. Activity remains relatively subdued however and we look for an entry long this afternoon at the pivot level of $99.20. The main focus will be economic data from the US in the shape of Consumer Confidence and New Home sales due at 15.00BST ahead of the API inventory data after the close.

Alternative Scenario Positive news from Washington on the debt ceiling negotiations will lead to broad based USD strength which may impact negatively on the commodity space. A break of the overnight low at $98.80 will lead to a test of Friday?s low at $98.43.