10/03/2015: Weekly Trading Notes


  • The strength of the US dollar is driving financial markets now. This is a function of two factors. Firstly, the Non-farm Payrolls report has given traders a shove towards an earlier rate hike than had been previously thought. The comments of the Dallas Fed President Richard Fisher (non-voting hawk) back up this assertion (albeit unsurprisingly). Also the ECB has now started its QE purchases and the euro is being hit. Subsequently the US dollar is strong across the board. This is having a knock on impact across forex majors and commodity prices.
  • There is little dollar driving data out this week and the market appears to have taken a view in front of the FOMC (meeting 18th March). I can see the dollar remaining strong until the meeting. My feeling remains that in the absence of any real earnings growth in the Non-farm Payrolls report , the FOMC could have the excuse to sit on its hands for another month and not change the statement.
  • It is also interesting that we are seeing Eurozone sovereign bond yields falling to record levels, with yield curves flattening. Even the German 2 year has fallen sharply below the -0.2% level today (ie below the limit at which the ECB will purchase as part of the programme).
  • Safe haven assets are being hit. The Japanese yen, gold and US Treasuries are all being sold in preference for the US dollar.
  • The impact is being felt across the major forex pairs with dollar breakouts against the yen, Aussie, further downside on the euro. Breaking multi-year levels suggests that if the moves are confirmed then the outlook will remain weak.
  • The precious metals have been a significant casualty in this, with Gold also moving below significant support, silver eying a test of key support. The oil price remains remarkably supported despite the recent dollar strength. This is reflective of the range play outlook that has continued over the last few months. The Baker Hughes oil rig count continues to fall and suggests that there could be a decline in oil supplies being stored up. Issues over a supply line in Iraq could also be supportive.
  • Equity markets are coming under increasing pressure. The initial reaction from Friday to the strong payrolls looked to be settling down but there is further downside pressure today. Markets are now forming top patterns and breached support levels.
  • Watch for: US Retail Sales



EUR/USD – Continued downside looks likely but increasingly oversold 

  • Strong US data and a central bank divergence with the ECB now actively engaged in QE while the FOMC is seemingly on the path towards tightening rates. This will drive the price of Euro/Dollar lower.. Any political wrangling between the Eurogroup and Greece over its bailout programme will also continue to weigh on the euro.
  • Technically, multi-year lows on the euro are becoming a daily occurrence. Momentum is sharply negative although there will come a time (maybe soon) that the RSI becomes overstretched and a potential bounce could set in. There is little real support in place with trade last hear in 2003. Fibonacci projections suggest $1.0617 and then $1.0052
  • Watch for: US Retail Sales

GBP/USD – Pressure on $1.4950/$1.5000 support band

  • Cable should not be under as much pressure as it has been because the economic data from the UK has been improving recently. I think this will begin to feed through as better sterling performance against the major currencies. Also, if the FOMC disappoints next week there could be a Cable rally setting in. In the meantime though the dollar strength should continue, with the Retail Sales a possible blip on Thursday. Perhaps the uncertainty of the UK General Election will begin to weigh on sterling too.
  • Technicals have deteriorated strongly in the past few days and pressure on the key January/February support band $1.4950/$1.5000 is likely to be seen in the next week. Quite how the market will react if this support holds will be interesting
  • Watch for: US Retail Sales

USD/JPY – A confirmed break of 121.84 opens 124.16

  • Dollar strength suggests a shunning of save haven assets such as the yen are under serious pressure. With both the BoJ and the Fed set to announce monetary policy next week the pair could begin to consolidate though. In the meantime, US Retail Sales are the main announcement.
  • The confirmed breakout above 121.84 opens levels not seen since 2007, with 123.66 and ultimately the key 207 high at 124.16 then being targeted. The outlook is positive and when the Dollar/Yen goes on a bull run, it tend to be one worth backing.
  • Watch for: Retail Sales

Gold – Selling into strength with gold under increasing pressure

  • The strength of the dollar has smashed gold in recent days as the traditional negative correlation remains strong. It was noticeable again that the Non-farm Payrolls trade off of strong dollar/weak gold has again been very successful.
  • The medium term bears look destined to test $1131/$1142 support with the lower limit being a critical multi-year low. Momentum remains extremely weak and selling into strength looks to be a good strategy.
  • Watch for: US Retail Sales

Indices – Looking increasingly susceptible to a correction near term

Are we taking the escalator up and the lift back down again? Also, another cliché, could it be better to travel than to arrive…? Equity markets are coming under increasing near term pressure since the Non-farm Payrolls data got traders thinking it would be an earlier than expected rate hike. With US earnings season now all but over this is a market moving story and could have some legs in it for the near term.

  • S&P 500 – completed a near term top that implies a test of the support band 2040/2050. There is good support around the rising 144 day moving average with 40 points of support 1980/2020.
  • DAX Xetra – continues to outperform major indices. There is (as yet) no real sign of any significant reversal pattern and the outlook remains strong. Ultimately dips should be seen as a chance to buy.
  • FTSE 100 – never really got confirmation of the break to new all-time highs and the excruciating bull run is now seeing a sharp correction. Key support is now at 6733 protects from a deeper correction.



Tuesday 10th March

  • US – JOLTS Job Openings

Wednesday 11th March

  • UK – Industrial Production
  • US – Crude Oil Inventories
  • New Zealand – RBNZ monetary policy

Thursday 12th March

  • Australia – Unemployment
  • UK – Trade Balance
  • Eurozone – Industrial Production
  • US – Retail Sales
  • US – Weekly Jobless Claims

Friday 13th March

  • Canada – Unemployment
  • US – University of Michigan Consumer Sentiment
  • US – Baker Hughes – rig count



Monday 16th March

  • US – Industrial Production
  • US – HAHB Housing Market Index

Tuesday 17th March

  • Japan – BoJ Monetary Policy + press conference
  • Eurozone – German ZEW Economic Sentiment
  • US – Building Permits and Housing Starts

Wednesday 18th March

  • UK – Unemployment
  • UK – BoE meeting minutes
  • US – FOMC Monetary Policy + Yellen press conference
  • New Zealand – GDP

Thursday 19th March

  • Switzerland – SNB Monetary Policy
  • Eurozone – Targeted LTRO
  • US – Weekly Jobless Claims

Friday 20th March

  • UK – Public Sector Net Borrowing
  • Canada – CPI

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