07/10/2014: Weekly Trading Notes

KEY DRIVERS

  • Dollar strength questioned for the first time in weeks on Monday, but still remains on track.
  • Dollar/Yen is the main dollar pair to show the cracks in the bull run – watch for support at 108 being breached, could be a trigger for a correction
  • General market sentiment is cautious in front of the FOMC meeting minutes
  • Equity markets still under pressure despite positive Non-farm Payrolls report – US earnings season cannot come soon enough for the bulls…
  • Commodities remain under pressure from the strong dollar – gold hitting critical support zone.
  • Little economic data due this week (other than FOMC minutes) that will disrupt the current trading pattern of the week.
  • WATCH FOR: FOMC meeting minutes, a possible break down in Dollar/Yen 

 

EUR/USD – Any rallies are still being sold into   

  • Technical indicators remain weak and continue to suggest selling into strength.
  • Initial resistance at $1.2700 and then at $1.2900.
  • The bounce off $1.2500 is still likely to be retested though and still there is very little real support now until the key July 2012 low at $1.2040.
  • Market continues to believe that the ECB will continue to ease monetary policy.
  • Weak German economic data will help to drive that view.
  • Watch for: FOMC minutes

GBP/USD – The latest rebound will be another chance to sell

  • The outlook remains weak, but there are very slight signs of sterling support in the past 48 hours.
  • However, momentum indicators remain in bearish configuration and suggest that any rally within the 12 week downtrend will be a chance to sell.
  • UK economic data is not as strong as US and this should help to keep a lid on any sterling rally.
  • Bank of England is expected to stand steady on monetary policy.
  • The old support which is now resistance at $1.6160 is the initial barrier, then $1.6250/80.
  • Continue to expect a retest of the key November 2013 low at $1.5850
  • Watch for: FOMC minutes, BoE monetary policy

USD/JPY – Looking to buy into any weakness for 110.65

  • The consolidation between 108.00/110.08 continues, but a series of corrective technical signals are building.
  • A close below 108.00 could induce a near/medium term correction.
  • A cautious market sentiment is helping to support the yen.
  • No change from Bank of Japan on monetary policy.
  • Watch for: FOMC minutes

 

Gold – Still view the latest rally as a chance to sell

  • The rebound from $1183.46 has kept intact the key 2013 lows $1180.70/$1184.50.
  • Gold has rallied as the dollar has had a wobble.
  • However the sequence of lower highs is intact.
  • There is considerable resistance starting at $1220 up to the key resistance at $1240.
  • The rebound should still be seen as another chance to sell as the bearish arguments are intact.
  • Watch for: Any resumption of dollar strength will hit commodity prices

 

Indices – Continue to prefer Wall Street over European markets.

Indices have struggled outside earnings season, but Alcoa reports on Wednesday to unofficially kick off US earnings season.

Markets have quickly pushed aside the Non-farm Payrolls report and are under pressure again.

  • S&P 500 has formed support at 1926 but the uptrend is being threatened; resistance at 1978.
  • DAX has lost further support around 9200 and is eying a test of 9068, with a breach opening a full retracement at 8903.
  • FTSE continues to outperform the DAX during the selling phases, needs to hold on to support formed at 6446.

 

WATCH OUT FOR

Wednesday 8th October

  • US – FOMC Meeting Minutes

Thursday 9th October

  • Australia – Unemployment
  • UK – BoE Monetary Policy
  • US – Weekly Jobless Claims

Friday 10th October

  • UK – Trade Balance
  • Canada – Unemployment

 

NEXT WEEK

Monday 13th October

  • China – Trade Balance
  • Public Holidays – Japan, US (Columbus Day) and Canada

Tuesday 14th October

  • UK – CPI
  • Eurozone – German ZEW Economic Sentiment

Wednesday 15th October

  • China – CPI
  • UK – Unemployment
  • US – Retail Sales

Thursday 16th October

  • Eurozone – CPI (final)
  • US – Weekly Jobless Claims
  • US – Manufacturing Production

Friday 17th October

  • Canada – CPI
  • US – Building Permits and Housing Starts
  • US – University of Michigan consumer sentiment

 

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