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02/09/2014: Weekly Trading Notes


KEY DRIVERS

  • Geopolitical tensions continue to rumble on in eastern Ukraine, although negotiations between Ukraine and Russia are on-going.
  • Dollar strength is having a significant impact across financial markets (especially on major forex pairs and gold).
  • All eyes on the ECB and what they choose to do (or should that be not do) this week with regards to QE on Thursday.
  • Eurozone sovereign bond yields continue to fall and suggest that the market is pricing in further ECB easing.
  • The slide in gold is being driven by a stronger dollar, interspersed by occasional jumps higher on geopolitical tensions
  • Equity markets continue to improve with Wall Street continuing to push to new all-time highs and European markets trading around key upside resistance levels.
  • Volatility has settled down, with VIX stabilizing around 12.
  • KEY RELEASES: ECB monetary policy, Non-farm Payrolls

 

EUR/USD – Continue to use any intraday rebound as a chance to sell  

  • ECB members continue to look to talk the euro lower, whilst bond markets are pricing in QE.
  • Furthermore the on-going dollar strength is adding a double whammy of downside pressure.
  • A retest of the September 2013 key low around $1.3100 is imminent with the big head and shoulders top pattern targeting $1.3000.
  • Technical indicators are incredibly weak.
  • Watch for: ECB monetary policy and Non-farm Payrolls

GBP/USD – Continue to sell rallies within the 7 week downtrend

  • Price action  in the past 2 weeks suggested perhaps the argument was becoming more balanced but this was hampered by the weak UK manufacturing PMI.
  • Strong US data could drive Cable lower this week, but the Bank of England (may come out more hawkish) is an interesting variable too.
  • A retest of the March low at $1.6460 is now open.
  • Above $1.6645 to improve the outlook.
  • Watch for: Bank of England monetary policy, Non-farm Payrolls

USD/JPY – Breakout targets 105.44 key December high

  • The outlook has turned firmly long term dollar bullish now.
  • Driven by recent dollar strength and sustained by positive US economic data.
  • The bulls are firmly in control with a bullish flag pattern that has formed on a move above 104.43 that suggests the December high at 105.44 will now be tested.
  • Key supports now 104.43 and 103.50.
  • Watch for: Further strong US economic data(ISM data, Non-farm Payrolls) to drive expectations of a Fed rate hike.

 

Gold – Use rallies as a chance to sell, the breach of $1273 has re-opened $1240

  • Dollar strength is a drag on gold and with an absence of the “war premium” perception that investors no longer deem necessary gold is in decline.
  • Expect a channel decline where rallies fall over at lower levels and are seen as a chance to sell.
  • Next support at $1258.85 but little really until $1240 key June low.
  • Watch for: US data driving dollar strength (subsequently gold lower) and geopolitical tensions escalating in Ukraine

 

Indices – Continue to prefer S&P 500

Indices still holding up well, but there could now be a lack of drivers at the end of earnings season.

September is a historically very tough month for investors – could it once more be time to take profits on these recent runs higher?

S&P 500 outlook is strong, whilst DAX remains volatile around the Russian geopolitics, FTSE more sedate in its gains.

  • S&P 500 continues to make gains above 2000, with support around 1990.
  • DAX needs to break through the 9600 pivot level resistance and the 61.8% Fibonacci retracement of the big sell-off at 9612. Support around 9400.
  • FTSE needs to close above the key reaction high at 6834 to continue the rally and open a retest of the 6895 highs.

 

WATCH OUT FOR

Tuesday 2nd September

  • US – ISM Manufacturing PMI

Wednesday 3rd September

  • China – Services PMI
  • Australia – GDP (Q2)
  • UK – Services PMI
  • Canada – BoC monetary policy

Thursday 4th September

  • UK – Bank of England rates decision (plus statement)
  • Eurozone – ECB rates decision (plus press conference)
  • US – ADP Employment Report
  • US – ISM Non-manufacturing PMI

Friday 5th September

  • US – Non-farm Payrolls
  • Canada – Unemployment

 

NEXT WEEK

Monday 8th September

  • China – Trade Balance

Tuesday 9th September

  • Japan – BoJ meeting minutes
  • UK – Manufacturing Production
  • UK – Inflation Report Hearings

Wednesday 10th September

  • New Zealand – RBNZ monetary policy

Thursday 11th September

  • Australia – Unemployment
  • China – Inflation
  • Eurozone – ECB monthly bulletin
  • US – Weekly Jobless Claims

Friday 12th September

  • US – Retail Sales
  • US – University of Michigan consumer sentiment

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Research Risk Warning

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.