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01/05/2014: Trading outlook ahead of the US session

Trading today in the European session has been quite muted due to the various May Day/Labour Day public holidays hence the reduced volatility amid extremely light volumes. The FTSE 100 is the only open major index and volumes this morning have been about half the levels of previous days. In forex trading, the dollar remains under pressure, although this is not being reflected in the weakness in gold this morning.

The major move has come in Sterling which has strengthened once more on the back of the significant beat on UK Manufacturing PMI which jumped to 57.3 (55.4 exp), with both the PMI for New Order and Output both over 2 points higher than previous months. Cable has subsequently pushed above $1.6900 and the highest since August 2009. Euro/Sterling is again challenging the floor around £0.8190/£0.8200, while Sterling/Yen is eyeing a test of the April high at 173.13.

Wall Street futures are pointing towards slight gains at the open. Attention will now turn towards this US data which starts with Weekly Jobless Claims at 13:30BST which are forecast to come in at 319,000 which would be a slight improvement from last week’s 329,000. The ISM Manufacturing data is due at 15:00BST and is expected to improve slightly to 54.3 from last month’s 53.7. There will be increased emphasis on this forward looking data after the disappointing (backward looking) and weather impacted GDP data showed growth of only 0.1% in Q1. Traders will be hoping for a significant bounce back in Q2 to make up for the disappointment in the first few months of the year.

EUR/USD outlook remains strong although earlier Euro strength this morning has been drifting backwards recently. It seems as though there will be a test of the range high around $1.3905 and a dip could be a chance to buy. However with Non-farm Payrolls due tomorrow and reduced volume, unless there is either a big beat or miss of the ISM data this afternoon, perhaps this consolidation lower will last into tomorrow.

GBP/USD has been the big mover of the day but, like the Euro has just drifted a touch as the US data approaches.  The outlook is positive now and a correction into the support band $1.6860/90 would be a chance to buy.

USD/JPY is now consolidating in a tight 30 pip trading band between 102.00/102.30. The daily chart suggests this is around the bottom of a near term trading band, but the hourly intraday chart continue to suggest the downside pressure is slightly greater and a test of the 102 level will be seen.

Gold has rebounded after the early weakness. However this looks to be just another chance to sell. The outlook is progressively more concenring and a retest of the $1268.24 level could easily be seen. The trend of lower highs and lower lows continues. A pickup into the resistance band $1285/$1290 looks to be a decent chance to sell.

FTSE 100 has settled down after the initial jump higher on the back of the strong corporate data from Lloyds Banking Group and British Sky Broadcasting Group. Into a fourth day of gains now, there is good support on the intraday hourly chart now at 6770, 6740 and a little further below at 6725. The initial resistance is at 6827 and 6634

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.