China and Oil in focus to drive volatility


  • There are a number of risk factors in the coming days which the markets are gearing up for with China and oil in focus to drive volatility. The economic data out of China will be crucial for risk appetite on Wednesday (Trade Balance) and Friday (GDP, Industrial Production, Retail Sales) will all have knock-on impacts on decision making over riskier assets such as commodities, forex pairs such as the Aussie and Kiwi, and equities. The other factor that will increasingly enter into the minds of traders will be the key OPEC/Non-OPEC meeting in Doha. Speculation and participants’ claims in front of the meeting will drive volatility but the real action will be seen on Monday and beyond next week. The VIX Index starting to pick up again suggests that markets are increasingly concerned about impending volatility.


  • The US dollar is coming under further pressure as markets continue to account for the dovish outlook from the Federal Reserve. Some key levels are being tested across forex majors with the Euro bumping up against major long term resistance and the Dollar/Yen having fallen sharply. There are several FOMC members speaking this week (Kaplan, Harker, Williams, Lacker, Lockhart and Powell) many of which sit towards the more hawkish side of the fence and this could help to support the dollar.
  • The officials from the Bank of Japan have been jawboning in recent days, talking up the potential for intervention. Coming in the wake of Prime Minister Shinzo Abe’s opposition to “arbitrary intervention” in currencies, it would be a surprise if there were to be any action. Subsequently it is likely to just be attempts to talk the yen down from its lofty position. Furthermore, Japan would also need permission from its G7 partners before formally intervening. The BoJ is not the only bank looking to talk down its currency in the wake of the recent dollar weakness. The ECB’s Peter Praet has also mentioned the potential that the ECB has not yet reached the floor on the deposit rate. Again whether the market believes this is debatable as Mario Draghi suggested in his press conference for the last ECB policy decision that the Governing Council was comfortable with current policy and would be concentrating instead on the transmission mechanism/credit side of the equation.
  • The markets will be keeping a close eye on the Chinese economic data to drive risk appetite in the coming days. The trade data will be poured over for the impact of exports and imports on the world’s second largest economy. Also on what the data tells of global growth prospects. Then on Friday there is the triple hit of GDP, Industrial Production and Retail Sales, each of which is important once more for how the economic rebalancing is performing. GDP tends to be taken with a pinch of salt, so the focus is on industrial production and the retail sales, the latter of which is becoming ever more important as the country moves to more of a consumption based economic model.

China growth

  • One of the key risk events approaching is the OPEC/Non-OPEC meeting in Doha to discuss the prospect of a production freeze/cuts. With the 13 OPEC members in addition to Russia, Oman and Bahrain there will be representation at the meeting for around three quarters of global production. However reaching an agreement will be incredibly tough with Saudi Arabia only willing to participate if Iran also does. However Iran has already said that it does not want to limit production as it is still recovering from the reduced production following year of sanctions. Any comments from meeting participants have the ability to drive oil volatility, but the real volatility will be with the fallout from the meeting next week. Given the uncertainties of the meeting, the risk seems to be to the downside. Also could prove to be an issue, with oil trading around $40, the more marginal shale producers in the US can still produce, but this changes down around $30. This would suggest that no matter what the meeting does, the US can still take up some slack and this could be an issue for meeting participants too.


  • Equity markets are struggling to gain traction as consolidation is setting in after such a strong run higher. The FTSE 100 is constantly bumping its head up against resistance between 6200/6237. The significance of a breakout is growing by the day, should it happen, but can it make the breakout?
  • There are also some key US data points due this week, but expectations would suggest that the data is hardly going to be set to drive a stronger dollar. The US Retail Sales are expected to confirm last month’s rolling over of the ex-autos year on year data, whilst the core CPI is expected to remain at +2.3%. This is the sort of mixed data that will not help to encourage the Fed into hiking rates (if indeed they are interested in US data anymore…). However, any upside surprises and we could see some support for the dollar.
  • Aside from the US data there are a couple of central banks with monetary policy decisions, with the Bank of Canada on Wednesday and the Bank of England on Thursday. The BoC is not expected to cut rates, with some now not expecting any moves this year. The BoE has the threat of a Brexit on the horizon and this is a handbrake on the prospect of rate hikes. In the BoE minutes, look for chat about growth being impacted by the uncertainties of the EU referendum.
  • Watch for: China trade, growth and industry data, US Inflation



EUR/USD – The long term resistance band around $1.1465 remains a key barrier

  • Dollar weakness has driven the pair higher in recent weeks, but a consolidation has set in. Dovish comments from the ECB’s Praet have failed the induce a correction, so the clutch of FOMC speakers could make a difference this week. Various risk-on/risk-off has been unable to break the consolidation as the euro seems to waiting for something still.
  • A near term trading range above $1.1325 up towards the long term range resistance at $1.1465 continues to form as the euro is struggling to breakout. Momentum indicators remain primed for a correction if this does turn out to be another failure around the range highs.
  • Watch for: US Retail Sales, US Inflation

GBP/USD – Rallies are still a chance to sell

  • An upside surprise in UK inflation has helped to dive a rebound on Cable, but the threat of the Brexit vote will continue to weigh on Cable in the coming months.
  • The support at $1.4050 remains key for the medium term outlook, but for now the rebound off it alleviates the pressure. However rallies continue to fail at lower levels over the recent months and this bounce will still be eyes as a chance to sell. Unless a rally decisively above $1.4460 is seen the medium to longer term bears remain in control . A near term pivot around $1.4320 is being tested.
  • Watch for: US Retail Sales, BoE monetary policy, US Inflation,

USD/JPY – The support around 111 is likely to come under further pressure.   

  • Verbal intervention from the BoJ in the past couple of days seems to have slowed the yen strength but as yet no real reversal. The safe haven yen continues to be favoured with traders still worried about the Fed’s fixation with “global economic conditions” as a reason not to hike. FOMC speakers could induce a near term pop to the upside on Dollar/Yen but would this be a chance to sell?
  • Medium and longer term technical targets of around 107.00 remain unfulfilled and the chart remains bearishly configured for rallies to be seen as a chance to sell. Resistance in the 108.50/109.10 region near term, but 110/111 would seem to be a medium term sell-zone now.
  • Watch for: China trade, growth and industry data, US Inflation

Gold – Near term outlook is increasingly uncertain

  • A dovish Fed and negative real interest rates are supportive for gold and for this reason I think we are now in with a floor $1190/$1208, but whether gold can drive the upside momentum needed to breakout above the resistance $1280/$1300 remains to be seen.
  • Technically the daily chart shows positive momentum.
  • Watch for: China trade, growth and industry data, US Inflation

Oil – Bulls trend and Doha meeting continue to pull the recovery higher

  • The OPEC/Non-POEC meeting on Sunday 17th April could be crucial for oil direction. A production freeze could drive further gains near term, but questions will be asked on what it actually achieves. No agreement could drive a sharp correction possibly back towards the $30 area.
  • Technically the outlook remains strong with WTI supported between $34.80/$36 and Brent Crude supported between $36/$38.30.
  • Watch for: EIA oil inventories, Doha meeting

Indices – Equity markets continue to struggle   

  • S&P 500 – Into an earnings season that is expected to be particularly bad the S&P 500 has started to drift lower. The support at 2022 is now key for the formation of a potential corrective pattern.
  • DAX Xetra – The DAX is an index geared towards global growth prospects and it is struggling having completed a small breakdown below 9753 which opens a possible correction to test 950 and possibly 9400.
  • FTSE 100 – The loss of momentum around resistance in the 6200/6235 range continues with the market unable to make the upside break. If this continues it could drive a correction, with key support still at 6036.



Wednesday 13th April

  • China – Trade Balance (Imports/Exports)
  • US – Retail Sales
  • US – PPI
  • Canada – BoC monetary policy
  • US – EIA Crude Oil inventories

Thursday 14th April

  • Australia – Unemployment
  • Eurozone – CPI (final)
  • UK – BoE monetary policy
  • US – CPI  
  • US – Weekly Jobless Claims

Friday 15th April

  • China – GDP
  • China – Industrial Production
  • China – Retail Sales
  • US – Empire State Manufacturing
  • US – Industrial Production/Capacity Utilization
  • US – University of Michigan Consumer Sentiment

Sunday 17th April

  • OPEC/Non-OPEC meeting in Doha, Qatar



Monday 18th April

  • US – NAHB Housing Market Index

Tuesday 19th April

  • Eurozone – German ZEW Economic Sentiment
  • US – Building Permits
  • US – Housing Starts

Wednesday 20th April

  • UK – Unemployment / Average weekly earnings
  • US – Existing Home Sales
  • US – EIA Crude Oil inventories

Thursday 21st April

  • UK – Retail Sales
  • Eurozone – ECB monetary policy + press conference
  • US – Weekly Jobless Claims
  • US – Philly Fed Manufacturing Index

Friday 22nd April

  • Japan – Flash Manufacturing PMI
  • Eurozone – Flash Manufacturing PMI
  • Eurozone – Flash Services PMI
  • US – Flash Manufacturing PMI
  • US – Michigan Sentiment (final)


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