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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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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.