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08/07/2014: Weekly Trading Notes


KEY DRIVERS

  • Dollar recovery has been driven by strong employment data (especially Non-farm Payrolls).
  • Equity markets have corrected early this week after weak German and UK industrial and trade data
  • Switch back into safe haven sovereign debt (rally in US Treasuries, Gilts and Bunds), with yields falling in an apparent retrenchment in risk appetite
  • Gold is struggling to gain traction despite a slight shift to safe havens, because the US dollar has rallied
  • Eyes on the Fed meeting minutes on Wednesday, but also the Chinese trade data which could drive an improvement in risk on Thursday
  • Earnings season begins for the US this week with Alcoa (on Tuesday after hours) and the first of the banks Wells Fargo (on Friday).
  • Geopolitical risk (ie. Ukraine, Iraq) has receded for the time being, but always has the ability to flare up again

 

EUR/USD – sell into strength, or on a break of $1.3574

  • After NFPs, the pressure has been cranked up on the euro once more.
  • Testing the near term support band $1.3574/$1.3585.
  • A breach opens weakness towards $1.3500 and $1.3475 near to medium term.
  • Resistance $1.3640/$1.3670

GBP/USD – look to buy into weakness towards $1.7060

  • Despite a brief breach of support at $1.7100 which implies a near term target of $1.7030 it would be a brave trader that goes short.
  • It would be safer to buy into the support band at $1.7060 for further gains in due course into multi-year highs.

USD/JPY – can only realistically play the range

  • Up a few days, down a few days, trading Dollar/Yen is very frustrating
  • The last 3 months have seen a trading band form between support around 101.30 and resistance up around 102.80.
  • Momentum is on the bearish side of neutral.
  • There is little reason to believe that the range will now continue for now.

Indices – Prefer S&P 500

Equity markets back in near term correction mode again. Expect S&P 500 to continue to outperform, European indices hit by weak data

  • S&P 500 bearish key one day reversal is being threatened as the bulls appear to be resilient
  • DAX retreating back towards support around 9810 the old breakout high. Key support near term at 9750. Testing a 4 month uptrend around 9850.
  • FTSE falling sharply  back towards the primary uptrend support at 6725 (which held the June correction almost to the point).

Gold – Stand aside for now

  • Gold has formed a near term band of consolidation between $1306/$1332.
  • Dollar strength and calming geopolitical tensions have curbed the rally.
  • The primary downtrend dating back to October 2012 remains under serious pressure
  • But technical indicators beginning to deteriorate again.
  • Key near term support is now at $1306

 

WATCH OUT FOR

Wednesday 9th July

  • China – CPI
  • US – FOMC meeting minutes

Thursday 10th July

  • China – Trade Balance
  • UK – Bank of England monetary policy

 

NEXT WEEK

Tuesday 15th July

  • Australia – RBA meeting minutes
  • Japan – BoJ monetary policy and press conference
  • UK – CPI
  • Eurozone – German ZEW Economic Sentiment
  • US – Retail Sales
  • New Zealand – CPI

Wednesday 16th July

  • China – GDP
  • UK – Unemployment
  • Canada – BoC monetary policy

Thursday 17th July

  • Eurozone – CPI (final June)
  • US – Building Permits

Friday 18th July

  • Canada – CPI
  • US – University of Michigan consumer sentiment

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