02/04/2014: Trading outlook ahead of the US session

Although risk appetite remains good, there has been a lack of conviction in this morning’s European trading. Indices are showing marginal gains, while major currency pairs are trading around flat. Even gold, which has seen seven straight lower daily lows has stabilised this morning.

This is the one day of this week where traders can be forgiven for taking a rest. The only real data of any note is the ADP employment report (released at 13:15BST). Because of this it would appear that traders are lacking the guidance  and direction that a weak heavy with data has been so far giving them. Perhaps things will change this afternoon after the ADP number which is expected to come in between 195,000 and 200,000.

EUR/USD has had a disappointing morning as the rate has fallen below $1.3800 which has broken a three day recovery uptrend. The recovery has subsequently entered into a period of consolidation above the support around $1.3780. Traders to to be waiting for the ADP number which could drag the Euro below $1.3780 if the number come sin above 200,000. This would suggest a small intraday top pattern and open for a correction back towards the next intraday band of support around $1.3740.

GBP/USD is another pair that has consolidated and the rate threatens a top pattern. Intraday support is fairly strong now around a potential neckline at $1.6620, while the resistance of this morning’s high at $1.6663 is in place. Technical studies are fairly neutral ahead of the ADP number, with traders seemingly waiting for the direction.

USD/JPY, I still like the intraday uptrend but this morning’s condolidaiton is now testing it. It is also now testing the support of the rising 21 hour moving average which has been consistently used throughout the last two days. If this recent move is not going to run out of steam then these two supports need to hold. A move back above 103.85 would probably now be a signal to back the buyers once more.

Gold has so far today not breached the previous day’s trading low, which is encouraging. I am increasingly now looking at the falling 55 hour moving average (currently $1285.09) as a signal. The rallies over the past week have failed around this moving average and if the price can move above it this would be another early sign of possible support coming in.Furthermore the price has not traded above the falling 89 hour moving average since it turned negative on the 17th March.

Indices continue to make gains. The DAX remains on course for its test of 9720, with higher lows finding support around the rising 21 hour moving average (currently 9606). The FTSE 100 continues to build its recovery and although it may be lagging other European indices the outlook from an intraday perspective continues to improve. Again a series of higher lows is in place, with the 6620/6635 support band in place and the intraday moving averages helping the index higher. A test of the reaction low at 6671 is underway but the recovery looks decent now for further upside. The implied target from the intraday base pattern is 6762.

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