24/02/2015: Weekly Trading Notes


  • Greece has agreed with the Eurogroup over the extension to the bailout but they are yet to agree on the economic reform proposal. Aspects of pension reform, tackling corruption and tax evasion all need to be approved, however, given that the agreement has been made I see this as a mere formality. Leaving aside the fact that this is just another example of a Eurozone fudge that kicks the can down the road for another 4 months, the issue is at least kicked into the long grass for a while. There has been hardly any impact on the euro, if anything the euro is lower. The DAX has been boosted and I expect that the removal of this would be a positive for German equities as QE is just around the corner
  • The oil price has been lower for the past week but is still yet to break the key support band at $47.35/$48.00. The technical indicators are beginning to show signs of strain but for now with the supports intact the consolidation band $54.25/$47.35 is intact. The fact that some OPEC countries are talking about an emergency meeting of OPEC could be supportive too. The oil price will have a negative impact on markets such as FTSE 100 (18% weighting in oil majors) is it starts to fall away again.
  • Eyes on Janet Yellen for the next two days with her chance to testify and also to give the most current views of the FOMC since the strong Non-farm Payroll numbers. It will be interesting if Yellen alludes to wage growth and strong labor market conditions. Also the appearance of “patience” would also be notable given that this word is meant to denote no rate hike for the next two meetings.
  • In forex, the Dollar Index has started to appreciate once more and this could continue if Yellen makes any hawkish lean.
  • Watch for: Janet Yellen’s comments, US CPI and GDP being the tier 1 economic data



EUR/USD – Consolidation threatening a downside break 

  • The market has been consolidating with uncertainty of Greece/Eurogroup but this has now been replaced with focus on Janet Yellen. Hawkish leans from Yellen will be a driver of further euro downside.
  • Technically, the outlook continues to consolidate between $1.1260/$1.1530 and until we get a decisive closing breakout it is difficult to call direction either way. The pressure is growing on the downside but there has been no decisive move yet.
  • Watch for: Yellen’s testimony, US CPI and GDP

GBP/USD – Can Cable continue to hold the support band $1.5300/$1.5400?

  • With Mark Carney not giving away much that we did not already know from the Quarterly Inflation Report attention turns to Yellen. The UK economic data has improved in recent weeks and this is helping to support Cable. Yellen could have an opportunity to reverse some of this recovery if she moves along a hawkish path.
  • There is still an appetite to support sterling at higher levels, but the support at $1.5300 is key to maintain the bull control. A dip back below would turn the outlook more negative again.
  • Watch for: Yellen testimony, UK GDP, US CPI and GDP

USD/JPY – Bulls looking to hold on to the near term breach of 119.40

  • Risk appetite is improving and safer haven plays such as the yen are beginning to suffer again. This is helping to pull Dollar/Yen higher. The Japanese CPI on Thursday could show a slide in inflation and this could encourage dovish rhetoric that could drive Dollar/Yen even higher. Any hawkish Yellen lean could also help to drive a stronger dollar.
  • A move above 119.40 which is a range breakout that implies a target of 120.50, which is key resistance. Momentum indicators are just showing a bullish bias, but only a slight one.
  • Watch for: Yellen’s testimony, US CPI and Japanese CPI

Gold – Lower highs and lower lows imply a move back towards the $1168.50 key support

  • The negative correlation between the dollar and gold has returned and therefore we must be watching out for dollar moves as a driver of gold again.
  • The medium term bears are now fully in control with the sequence of lower highs and downtrends intact. A retreat back to the old key downtrend (which could not become supportive in the low $1180s. A full retracement of the January bull run back to $1168.25 looks likely though. Key near term resistance is now at $1223.10 which is the latest key reaction high on the intraday chart.
  • Watch for: Yellen’s testimony, US CPI

Indices – Finally breaking higher

Indices are breaking out after a uncertainty of the Ukrainian ceasefire and now Greece seems to be abating. Almost entirely through S&P 500 earnings season means that markets will be moving on big macro stories. Clearing the decks for QE should be a positive for equities.

  • S&P 500 is trading around an all-time high at 2110, with support now 2080/2100.
  • DAX is now looking to breakout above 11,000 and clear of a 100% Fib projection which means that on a medium term basis if this is to be the case then the way is open towards the next projection target of 12,020 which is 161.8%.
  • FTSE 100 is so close to the all-time high at 6950, but the dip in the oil price has cost it valuable points to make the move. The technical indicators look ready this time to make the break and the outlook for equities remains positive.



Tuesday 24th February

  • US – Janet Yellen testifying to Senate Banking Committee
  • US – Consumer Confidence

Wednesday 25th February

  • China – Flash Manufacturing PMI
  • US – Janet Yellen testifying to House Financial Services Committee
  • US – New Home Sales
  • US – Crude Oil inventories

Thursday 26th February

  • Eurozone – Targeted TLTRO
  • Canada – CPI
  • US – CPI
  • US  – Durable Goods
  • Japan – CPI

Friday 27th February

  • Eurozone – German CPI (Prelim)
  • UK – GDP (Q4 2014 – second reading)
  • US – GDP (Q4 2014 – Preliminary)
  • US – University of Michigan Consumer Sentiment (revised)



Monday 2nd March

  • China – HSBC Manufacturing PMI (final)
  • Eurozone – Manufacturing PMI
  • UK – Manufacturing PMI
  • Eurozone – CPI (flash)
  • US  – ISM Manufacturing PMI

Tuesday 3rd March

  • Australia – RBA monetary policy
  • UK – Construction PMI
  • Canada – GDP

Wednesday 4th March

  • Australia – GDP
  • UK – Services PMI
  • US – ADP Employment report
  • US – ISM Non-manufacturing PMI
  • Canada – BoC monetary policy
  • US – Crude Oil inventories

Thursday 5th March

  • UK – BoE monetary policy
  • Eurozone – ECB Monetary policy & press conference

Friday 6th March

  • US – Non-farm Payrolls
  • US – Average hourly earnings


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