KRUGER INSIGHTS WEDNESDAY, FEBRUARY 26, 2014

By: Joel Kruger

What A Letdown - It really has been quite the anti-climactic week thus far, with currency markets going nowhere and still locked within consolidation. While the S&P did manage a fresh record high, the price action has done little to influence broader macro flows. And so, we just have to sit back and continue to be patient. I had thought Monday's rally in equities would offer an opportunity to establish a compelling short trade that would ultimately trigger a fresh wave of risk liquidation, but no such luck just yet and it's back to the sideways chop. Interestingly enough, we did see a nice little sell-off in stocks into the North American close on Tuesday, and yet, Asia was happy to buy into the dip, which is a little strange in my view. Normally we don't see such commitment from the Asia session unless there is something really compelling to drive the price action. 

Shekel On The Move - Moving on, the two key markets I am watching have also been relatively quiet, but still point to more risk off trade ahead. USD/JPY looks like it wants to carve out a fresh lower top below 103.00 in favor of a fresh downside extension below 100.75, while EUR/CHF is still having a very hard time finding bids and seems to be slowly gravitating back towards critical support at 1.2165. One market that has been offering some encouraging signs for my outlook has been the USD/ILS market, where we are starting to see some movement in favor of the buck. This week's surprise Bank of Israel rate cut has unquestionably been driving the underperformance in the Shekel, and I am looking for more USD/ILS strength over the coming sessions back towards 3.56. I am also projecting a move to 3.80 in the second quarter of 2014. Finally, GOLD remains in good demand, and has been very comfortable establishing back over the 200-Day SMA. At this point, the outlook is looking more constructive, and a move towards the August $1430 area peak should not be ruled out.