04/07/2014: Trading outlook ahead of the US (non) session

Well, today’s update is going to be fairly short and sweet. That is largely because we are trading in a market of thin volume and in the doldrums as the US is on Independence Day public holiday. Furthermore with no major economic data due, you can be forgiven for thinking more about Wimbledon and the World Cup quarter finals later on.

Equity markets have been utterly directionless, with a 10 point range on FTSE 100 and a 15 point range on the DAX. With no Wall Street trading today, I would expect this trend to be set for the day now. Volatility is back at record lows following the bullish session yesterday on Wall Street. This suggests that it would be a great time to protect a portfolio using S&P 500 put options with the VIX again back at its lowest since Q1 2007.

VIX   04072014

On the gold market, the cash price has moved in a $5 range. The only way this might conceivably change is if any significant news comes out of Iraq or even Ukraine.

Forex markets have given a bit more action through the morning as the dollar has gained in strength. The key consequence of this has been for the euro to weaken further and EUR/USD to put pressure on support at the key near term support at $1.3585. A failure of this support would open a potentially quick decline back towards $1.3500.

Cable has also drifted back again having recovered from yesterday’s Non-farm Payrolls related weakness. Following from yesterday’s “Hanging Man” candlestick (which is potentially a negative candle if the subsequent day is negative) a second disappointing day would result in pressure back towards the initial support at $1.7100 which has the potential to tun into a near term double top pattern that would imply a correction back into the middle of the support band $1.7000/$1.7060.

Dollar/Yen continues to trade around 102.00 which is almost band in the middle of the 3 month range 101.30/102.80. The outlook subsequently remains neutral around these levels.

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