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Lean hogs rally suggests pigs really can fly

Five markets in focus today: Lean hogs, EUR/JPY, EUR/USD, GBP/USD and Australia 200 cash.

Lean hogs

I focused on this commodity earlier in the week as price action has been extremely strong. There are clear concerns about supply, with viruses in the US expected to hit pork production fairly substantially. I also mentioned that stops on longs should be tightened and this is even more prevalent now with the nine-day RSI at 97. Volumes are still very high, however they have fallen for a couple of days now and this could be warning sign. Caution is warranted, as when the profit takers move in this could fall fairly hard.

EUR/JPY

In the forex space it was all about JPY strength and EUR weakness overnight, with EUR/USD testing the former downtrend drawn from the 2008 high of 1.3820. Mario Draghi joined a number of peripheral Europe dominated ECB members in flagging that the EUR is creating a headwind for the European economy. Throughout January and February we saw solid resistance around the 141 level (on EUR/JPY) and after breaking through this level after the recent ECB meeting, we are now seeing EUR/JPY push back through. We will see how the close fares, but as things stand the pair is trading through the 38.2% retracement of the February to March rally at 140.92. A close below here could target the March 3 low of 139.15.

EUR/USD

Traders will be keen to look at tonight’s price action on EUR/USD, with the pair not too far from the 2008 downtrend at 1.3820. A weekly close tonight below this level would be taken as a bearish signal and suggest a potential correction is due.

GBP/USD

The pair is trading sideways at present; however a close below 1.6605 would be a bearish development and suggest a bigger correction is due. There has been plenty of narrative from BoE members of late about the strength of the pound, and with positioning in sterling being fairly elevated, a close below the bottom of the recent range (at 1.6605) could see hedge funds take long GBP/USD positions off the table.

Australia 200 cash

After making a double top on the index I’ll be watching for a close below the neckline at 5340. A close below here could suggest a deeper correction to the 5200 level. Price action in China is tough to predict, however it’s going to be an ugly day in Japan and Hong Kong.

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