The disappointment was palpable in the interviews of the respective Eurozone’s leading politicians after Greece turned up to yesterday’s crunch meeting armed with little more than notes scrawled on a piece of scrap paper. The frustration and exasperation is growing over the lack of urgency that the Greek leaders are engaging in these negotiations, it is almost as though they want the system to fail. Apparently they have until Friday to come up with a solid proposal which will then be discussed before hopefully come sort of agreement over the weekend. Otherwise the Greek banks which remain closed will have run out of money and there will be little more than they can do other than to exit from the Eurozone.
Markets are now becoming increasingly tetchy too. There was a real sense of investors positioning for trouble yesterday. Eurozone equities fell sharply, core/peripheral yield spreads widened as the German Bund was bought and in currency markets everything fell sharply against the dollar, with the exception of the Japanese yen. The only anomaly was the decline on gold, although the continued problems on the Chinese stock market are a factor there, with commodities under pressure. However, a late rally on Wall Street pushed markets up into the close leaving the S&P 500 up 0.6% on the day. The European markets have opened reasonably solidly again today (they did so yesterday before the bears gathered strength).
In forex trading, there is still selling pressure on many pairs, with the dollar still seen broadly as the currency to hold. This is with the exception of the Japanese yen which is now beginning to really come to the fore.
Today is Budget Day in the UK where the Chancellor Osborne lays out his plans for the next year. This could create some volatility for sterling and certain sectors of the FTSE 100. The US oil inventories are at 1530BST and are expected to fall back by 1.5m barrels having increased by 3.4m last week. The main focus though US side is on the FOMC meeting minutes which are released at 1900BST. Although the meeting was held prior to the recently poor Non-farm Payrolls, the market will be looking for any hawkish hints at moves for a potential rate hike in 2015.
Chart of the Day – DAX Xetra
After holding on to support around 10,800 for several weeks, the DAX Xetra has finally broken the key support. This has taken the index to its lowest level since early February and is a significant technical breakdown. The daily momentum indicators are all in bearish configuration but also suggest that there is further downside potential in the current move, with the RSI still not yet oversold and Stochastics also recently showing a “bear kiss”. The decisive breach of the support around 10,800 has also cleared the 38.2% Fibonacci retracement of the 8355/12,389 rally and has opened the next key 50% retracement level at 10,372. The DAX is increasingly being seen as a sell into any intraday rallies, and with the early trading today showing a bounce, there is little to suggest this will not happen again. Initial resistance is in the range 10,800/10,860 and key near term resistance around 11,000. The coming days without a resolution of the Greek crisis will suggest there is little for the bulls to shout above, so this may well translate to selling pressure. The technicals agree.
It was a remarkable day for the euro, with what seemed to be an acceptance of selling pressure in the European session, followed by an almost complete turnaround later on in the US. The result has been nothing really changed in the end. It was a bearish candle that although the bears lost control later on, the pivot level I have been looking at as a medium term gauge, at $1.1050 has been used, now as resistance. The continued downward drift on the euro remains the preferred outlook with the momentum indicators (RSI and Stochastics) in shallow decline, but still there seems to be a lack of conviction in the selling. The downtrend I have been looking at on the intraday hourly chart has come under pressure by the late rebound, but remains intact. Also the hourly momentum indicators have unwound. There is now resistance at $1.1050 to base on and a retest of yesterday’s low at $1.0915 is likely. Selling into rallies is still a viable strategy.
After initial signs of a possible recovery on sterling were quickly extinguished, Cable has continued lower on the correction. The move is now back to the support around $1.5450 and although this level survives on a closing basis, the force of the correction suggests that the bears are not necessarily done yet. The intraday rebounds are being sold into and the trading the trend lower seems to be the correct strategy for now. I am still looking at the RSI and MACD lines which suggest this still looks to be part of a bull correction, whilst the Stochastics are also showing early signs of bottoming. However the correction still needs to form meaningful support and although the intraday hourly chart shows a consolidation at $1.5412 has been broken again as the European session has got going today and as yet there is little sign of a recovery. Initial resistance comes in between $1.5485/$1.5515.
I have spoken often about the numerous intraday tests of the 122.00 old breakout support and how the level continued to encourage buyers back in. The last few days though have seen the pressure increasing as the safe haven yen has become an attractive prospect. The corrective outlook on momentum indicators such as RSI and Stochastics have been continuing to reflect the pressure without ever really turning sharply negative. The intraday hourly chart shows that where once the price was trading comfortably between the Fibonacci levels, these levels are now becoming less relevant as a series of lower highs has come through. There is still yet to be a close below 122.00 but with the pressure mounting, it may just now be a matter of time. In the past couple of days, the hourly momentum indicators have really taken on more of a negative near term configuration. Rallies are now increasingly being sold into. There is now a near term resistance between the 50% Fibonacci retracement of 118.86/125.85 at 122.25 and 122.90. A move below the 61.8% Fib at 121.54 would open the next key low at 120.60.
For the first time yesterday there was a real sense of selling pressure coming through that took gold decisively clear of the bottom of the trading range. The lack of safe haven flow on a day where risk was being shunned must have been somewhat of a concern for the bulls. The closing level around $1155 was also on a day where the candle showed a decisive bear move. Gold has been a sell into strength for a while but now the test of the key March low at $1142.85 could easily come today without any real rebound. There is resistance now in the $1156/$1170 area, but with the momentum indicators looking so negative, the pressure is certainly on the key lows.
After a period of rather settled range trading over the past few weeks, significant volatility has returned to WTI. The technicals have taken a sharp deterioration on the daily chart and now we see the RSI and Stochastics in strongly bearish configuration. However, they are also into oversold levels, the question now is whether this move is going to continue. Yesterday’s trading was entirely outside the Bollinger Bands so that would suggest these are extreme trading and that should limit immediate downside potential in this move. An intraday rebound yesterday has left a low at $50.58. The problem is that there would need to be a move above $53.40 which was yesterday’s high in order to suggest a rebound had any real prospect of lasting. For now the downside pressure remains on and with the trend your friend, a retest of the low at $50.58 remains likely, whilst the breakdown of the move below $56.50 still implies $49.50.