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05/08/2014: Weekly Trading Notes


KEY DRIVERS

  • Geopolitical concerns just calming down now slightly – ceasefire in Gaza, no escalation of tensions in Ukraine
  • US Earnings Season has been strong with around two thirds of companies that have reported beating estimates on revenue and around the same number beating on earnings.
  • Fears of Fed tightening have subsided for now following the flat average hourly earnings growth in the Non-Farm Payrolls report.
  • Calming down of equities selling pressure helping to reduce volatility – VIX back from 17 to 15.
  • Dollar strength remains a feature of forex trading, driven forward by market fear that the Fed may raise rates in the first half of 2015.
  • Gold/Silver remain under pressure due to dollar strength

 

EUR/USD – Extremely bearish. Sell into any strength

  • An attempted technical rally is running out of steam and any strength remains a chance to sell.
  • Next key support comes around $1.3300 (November low) and $1.3100 (September low).
  • The neckline resistance around $1.3475/$1.3500 should cap any attempted recovery.
  • Longer term downside target is $1.3000 from the head and shoulders top pattern.
  • Watch for: ECB rates decision and Mario Draghi’s press conference

GBP/USD – Near term correction towards 89 day ma. Now looking for a buy signal around $1.6900

  • The outlook has changes in the past week with the sharp selling pressure.
  • Breaching the support of the 89 day moving average and the last long term uptrend has changed the outlook.
  • Now an area of overhead supply $1.6920/$1.7000 and the rate could struggle to move above here now.
  • Watch for: UK Manufacturing, BoE rates decision

USD/JPY – A close above 102.80 would begin to change the outlook positive

  • The range 101.00/102.80 has been in place (on a closing basis) for 4 months.
  • Improving momentum is positive but there is yet to be a confirmed breakout (close above 102.80) needed to suggest a test of 104.10
  • Watch for: Performance of the Dollar Index (.DXY) to drive Dollar/Yen

 

Gold – Continues to struggle, looks to retest $1280

  • The safe haven trade is not benefiting gold as it has done previously, due to the dollar strength
  • Support at $1280 has remained intact but the pressure is mounting through a series of lower highs now.
  • Trading now consistently below the 144 day ma and momentum is deteriorating.
  • Sub $1280 opens $1259 and $1240.

 

Indices – Continue to much prefer S&P 500

Indices have come under big selling pressure which could lead to a technical rally near term.

However only Wall Street really maintains a positive outlook of the major indices.

DAX continues to underperform (exposure to Russia being cited by key companies now)

  • S&P 500 has formed support at 1916 and is way above the key rising 144 day ma (c. 1886)
  • DAX is oversold and could induce a technical rally – but key primary uptrend is broken and moving averages breached. There is a key overhead supply now between 9400/9600
  • FTSE remains very messy on technical basis, but longer term uptrend has been breached and rallies are now falling over at lower levels.

 

 

WATCH OUT FOR

Tuesday 5th August

  • US – ISM Non-manufacturing PMI

Wednesday 6th August

  • UK – Manufacturing Production
  • US – Trade Balance

Thursday 7th August

  • Australia – Unemployment
  • UK – Bank of England rates decision
  • Eurozone – ECB rates decision plus press conference
  • US – Weekly Jobless Claims

Friday 8th August

  • China – Trade Balance
  • Japan – BoJ rates decision
  • Canada – Unemployment

Saturday 9th August

  • China – CPI

 

NEXT WEEK

Tuesday 12th August

  • Eurozone – German ZEW Economic Sentiment
  • G20 meeting (Day 1)

Wednesday 13th August

  • China – Industrial Production
  • Japan – GDP (Prelim)
  • UK – Unemployment and Average Earnings
  • UK – Bank of England Inflation Report
  • US – Retail Sales
  • G20 meeting (day 2)

Thursday 14th August

  • Eurozone – French GDP (Prelim)
  • Eurozone – German GDP (Prelim)
  • Eurozone – CPI (final)
  • US – Weekly Jobless Claims

Friday 15th August

  • UK – GDP (1st revision)
  • US – University of Michigan Consumer Sentiment (Prelim)

 


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