Weekly Trading Notes: Watching US economic data continues to be crucial


  • Markets remain data dependent as witnessed by the selling pressure on the dollar in the wake of weaker than expected Retail Sales. Once more the reaction needs to be assessed in the context of the losses over the last week. Is this just another correction on the dollar that will be bought into. Once the market has fully digested the retail sales data there are plenty more announcements to drive the agenda.
  • However as ever the US economic data will be crucial as to how the market views the Fed’s move towards tightening. This week there is data on Industrial Production, housing market indicators, inflation and also consumer sentiment. These announcements could be crucial as to the direction and volatility of the dollar.
  • Comments from FOMC members are beginning to look a touch more hawkish again, especially in light of the news of some driving for a June rate hike in the FOMC meeting minutes. This is helping to drive a stronger dollar once more. FOMC members speaking this week include Bullard, Fischer, Lockhart, Rosengren and Mester, with a variety of hawks and doves and the market looking for any hawkish lean.
  • The Dollar Index has just pulled back away from the 100 level once more but is still only around 1% away from multi-year highs again (dating back to 2003). Euro/Dollar has picked up by 100 pips since the Retail Sales but technically still looks to be a sell into strength and is just over 200 pips from its crucial March low again, whilst a strong clutch of data could easily test it and then re-open parity again. Cable is also interesting as the market concern is that the UK general election will return a weak government and this will impact upon sterling.
  • Earnings season in the US is just getting going but the big banks could set the tone. Fears that earnings could fall between 4%/5% across the S&P 500  have seen Wall Street underperform the European indices. Expectation is for adjusted earnings growth across the sector of around 1%.
  • Gold may have breached $1191 support but is still broadly ranging above $1178. Oil is holding up well though in the face of renewed dollar strength. WTI is supported above $50 and is now moving within range of a test of the $54.24 key resistance.
  • One slight concern for the dollar bulls will be that Treasury yields still remain fairly stubbornly anchored. The 10 year yield is still unable to break back above the 2.00% barrier. A bond market looking towards a rate hike would be broadly in line with higher yields.
  • In other events, the ECB monetary policy meeting will invariably cause volatility for both the euro and also dollar. Also, markets wait to see if Greece can come to an agreement over its proposals for economic reform to meet the conditions of its bailout extension. The talks are on-going and are apparently not without stumbling blocks, but the parties still remain hopeful.
  • Watch for: ECB monetary policy, US CPI



EUR/USD – Rallies still seen as a chance to sell 

  • Despite the dollar correction since the retail sales, there is still an overriding dollar strength impacting the euro once more after the FOMC meeting minutes. US economic data will provide volatility throughout the week and any net sign of strength or beating expectations could send the euro to multi-year lows again.
  • The technical rally is approaching the initial resistance at $1.0712 which was the neckline of a breakdown. If the rally starts to setle down this from retesting the March multi-year low again at $1.0456. Momentum indicators across the board are in negative configuration and suggest that any rallies are a chance to sell. Key resistance near term now at $1.0712.
  • Watch for: ECB monetary policy, US CPI

GBP/USD – Looking to use this technical rally as a chance to sell

  • Polls continue to suggest an election result in the UK too close to call. This is likely to result in a very messy UK General Election result and uncertainty surrounding a weak government. This is ripe conditions for a sterling  sell-off. US Retail sales have induced a sharp rally, perhaps a bit of short covering on Cable, but with a raft of economic data this is only the start of a volatile week.
  • The sharp rally has dragged Cable back into the resistance band $1.4735/$1.4800, however the likelihood is that any rally running out of steam under the $1.5000 resistance band once more will be seen as a chance to sell. Technical outlook for the medium term continues to suggest rallies will be sold into for further pressure on the lows. I expect a retest of $1.4563 in due course.
  • Watch for: US Industrial Production, UK Unemployment, US CPI

USD/JPY – Trading within the range 118.30/120.85 with a pivot around 119.40

  • The reports that an advisor close the Shinzo Abe has suggested that 105 is fair value and that the QE programme is working has resulted in a correction in the pair. The focus will quickly turn to US data though with the weaker Retail Sales adding to the near term selling pressure. Dollar/Yen though remains a range play near to medium term.
  • The pivot around 119.40 is still key as it protects the 118.30 support. This pivot is under pressure in the wake of the retail sales data, but technically the outlook still remains very much rangebound between 118.30/120.85.
  • Watch for: US Industrial Production, US CPI and Michigan Sentiment

Gold – Rangebound between $1178/1224

  • The trade is moving still in negative correlation to the dollar. Compared against the forex majors, gold has also performed well in recent sessions (aside from today). After initial weakness today the outlook has turned sharply better in the wake of the weak US Retail Sales. This suggests continued signals will be taken from US economic data.
  • The support a $1178 remains intact and the momentum indicators are increasingly neutral. Expect the trading to continue to move within the range up towards the resistance at $1224.
  • Watch for: A negative correlation to US dollar performance, and FOMC speakers

Indices – Fear of earnings season holding back Wall Street

Indices beginning to shape for positive moves again. Wall Street has been hampered by the expectation of a concerning earnings season, even though the estimates will have been guided down.

  • S&P 500 – Moving towards a test of the range highs between 2040/2120, but it could need strong corporate news to help drive the move. The big banks this week could set the turn.
  • DAX Xetra – The DAX moves strongly on a weaker euro and this continues to be a driver of the gains. QE continues to underpin the gains and a positive outlook. Key support band now 11,880/12,220.
  • FTSE 100 – FTSE 100 looking to hold the gains into new high ground. However be mindful that the UK General Election is likely to end up with a hung parliament. This could drive some profit taking. Support near term is between 6900/6975. Key medium term support is now at 6694/6765.



Wednesday 15th April

  • China – GDP
  • China – Industrial Production
  • Eurozone – ECB monetary policy + press conference
  • US – Industrial Production & Capacity Utilization
  • Canada – BoC monetary policy
  • US – Crude Oil Inventories
  • US – NAHB Housing market index

Thursday 16th April

  • Australia – Unemployment
  • US – Building Permits & Housing Starts
  • US – Weekly Jobless Claims
  • G20 meeting

Friday 17th April

  • IMF meeting
  • UK – Unemployment
  • Eurozone – CPI (Final)
  • US – CPI
  • US – University of Michigan Consumer Sentiment (Prelim)



Tuesday 21st April

  • Eurozone – German ZEW Economic Sentiment

Wednesday 22nd April

  • Australia – CPI
  • G7 meeting
  • UK – Bank of England meeting minutes
  • US – Existing Home Sales
  • US – Crude Oil Inventories

Thursday 23rd April

  • Japan – Flash Manufacturing PMI
  • China – Flash Manufacturing PMI
  • Eurozone – France Flash Manufacturing PMI
  • Eurozone – Germany Flash Manufacturing PMI
  • Eurozone – Flash Manufacturing PMI
  • US – Flash Manufacturing PMI
  • UK – New Home Sales
  • US – Weekly Jobless Claims

Friday 24th April

  • Eurozone – German Ifo Business Climate
  • Eurozone – Eurogroup meetings
  • US – Durable Goods Orders


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