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EDIT: This is 16 May 2012 (NY Session) premium exclusive part analysis for Capital3x premium subscribers being released to FXSTREET.

A quick update on headlines and news not that they matter in the slightest but just so that I warm you up before we get to the real stuff.

Major Headlines

• Greece confirms the passover to a caretaker government and a second wave of general elections due on June 17th.

• BoE revise their near-term inflation expectations higher, and their growth forecasts lower; alongside analyst expectations.

• BoE’s King remains somewhat dovish, keeping the option for further QE open in the face of increasing downside risks.

• According to unsourced reports, the BoJ could cut their interest rates on reserves. (Financial Facsimile Service)

• The Vice-Chairman of the Chinese banking watchdog has said regulators do not plan to change the country’s RRR, and policymakers are now studying a regulatory system in which banks would extend loans at a steadier pace. (Sources)

• New lending by China’s four largest state-owned banks was flat for the first two weeks of this month, and total deposits continued the decline from April to fall by approximately CNY 200bln. (Shanghai Securities News)

• The Republican leader of the House of Representatives has set the stage for a new fiscal showdown with the Obama administration; reviving memories of the standoff last summer which saw the US lose its ‘AAA’ rating. (FT-More)

• The Federal Housing Financing Agency has expressed concern on the potential Californian anti-robosigning laws, saying that the new ruling could have a chilling effect on lawful foreclosures. The FHFA added that the ruling could lead to a reduction in credit availability and could create significant risks for the housing markets. (Sources)

• US MBA Mortgage Applications (May 11) W/W 9.2% vs Prev. 1.7% (Sources)

Am sorry am going to disappoint you a bit as I personally dont see much trends out there which makes me wonder we might by stuck on risk trends in this zone for some time. ES could well be in this range 1320 to 1333 for some time before the next big move.

In forex, we will discuss the break out of USDCAD while we also look at USDJPY breakout.

Do take time to read the earlier update: Are we seeing reversal?

Am going to begin with Falcon EUR/JPY Daily (To know more about Falcon and Gladiator, please roll to the end of the post and read about these bond market indicators developed and operated by Captial3x)

Not much to be said here. These indicators are powerful trends and they will not miss trends if one exist in the medium term. The move for EJ from 107.45 to 102 has been a classic trend caught completely by the system. Not only that, it caught the up move from 101 to 110 just before it caught the down move.

On USDCAD the long was triggered at 1.0018 yesterday. It The Falcon EUR/USD Daily has been running on adrenaline after Falcon gave a sell signal at 1.3022. Over 300 pips in the money.

European News

The Bank of England have released their latest projections for the UK economy, revising lower their growth forecasts and higher their near-term inflation expectations, alongside analyst forecasts. The BoE have stuck to their long-term predictions that there will be a slow but steady return to recovery, but reiterated that major downside risks exist from Europe. Governor King’s subsequent press conference has shown him to remain somewhat dovish, commenting that an increase in downside risks would prompt the bank to commit to further actions, leaving the door to a boost in asset purchases open. The forecast revisions prompted a sharp move lower in GBP/USD, falling around 75 pips and Gilt futures moving 55 ticks to the upside after the opening comments.

Back to analyzing ES (spx emini futures), we see a good strong chance of ranges.

ES hourly is at 1325 which is the mid line of the 25 BB range.

On USD/JPY which are charts I sent earlier supporting my trade on USDJPY:

USD/JPY daily charts are setting up for a move. The daily is fighting a battle at 80.35 which is the mid BB and the 100 MA line. The lower boundary now comes in at 79.75.

On the hourly things look calmer as we expect 80.55 as long as it stays above 80.1 but the larger picture is being played in daily.

The ES Hourly has been in the pit. Nothing to do really as it goes up and down in this zone filling up the hole I mentioned. Expect a tight intra day range between 1320 to 1334 (upper BB).

In case of ES Daily, as and when the bounce happens, we are talking of 1371 level which is the mid 25 BB line. But before that lies the 100 DMA AT 1346 which will be tested.

The hourly is now positioned a tad below the mid line. There is a good chance that it can burst up surprising many. That will mean EURUSD flies off to 1.284 and will leave the shorts aiming for 1.2625, high and dry. Watch out.

The BTP daily has been really falling into abyss.

On crude, the hourly is in a no man trading zone. Nothing you can do here. This is perfect equilibrium as vortex is zero and stochs are at 50 and prices are at mid BB line.

The daily has broken multiple lines of support and is just staring in to nothingness. The crude chart is so bearish that it forces me to think ES may be headed to 1280 levels.

Gold has been much discussed. Not much to add. Gold is at a historic level if it closes below 1525 which is the 100 WMA untouched in 24 months and which maintained the sanctity of Gold’s uptrend.

Detailed upto date calls and analysis are sent to all premium subscribers of Capital3x. We also have released our indicators. These are known as Falconfx and Gladiator which are primarily indicators working off bond markets and helping us with trades. The advantage of trading via forex via signals from bond markets that you are often early on trades and trends.

Our updated performance (May second week) is on our site.

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