10/02/2014: Investors increasingly positive in front of Janet Yellen’s first testimony

Market Overview

With Wall Street closing Friday firmly in positive territory despite the disappointing Non-farm Payrolls report, today’s Asian session guided markets steadily higher to leave European traders facing a decent open for risk appetite. The Japanese yen lost ground against both the dollar and the euro which also helped the Nikkei 225 well over a per cent higher. Friday’s payrolls report in the States suggested there was little reason to believe that the Federal Reserve would be wavering from its path of asset purchase reduction, with unemployment falling and the participation rate showing a positive uptick. On a quiet day for economic announcements today, investors will be looking forward to their first view of the new chairman of the Fed tomorrow when Janet Yellen begins her testimony before Congress. Yellen will set her stall out for the first time, where it is expected that she will maintain the Fed’s line of ultra-loose monetary policy for an extended period of time. In today’s session, the Eurozone Investor Confidence survey at 09:30GMT could be a driving force for the euro.

Chart of the Day – S&P 500

Into Friday’s close we have seen a significant turnaround in sentiment with a shift back to the bulls after two days of solid gains. This puts the S&P now right into a test of the key reaction high at 1799. If this can be overcome then there will be talk once more of the highs with the recent sell-off a distant memory. Momentum indicators are quickly turning round, with RSI and Stochastics improving. A move back above the 55 day moving average at 1808 would also be another reason to turn bullish once more. On the downside, the support around 1768 is now pivotal.

S&P   10022014

EUR/USD

The sharp turnaround in sentiment seen in the last couple of sessions is now at a tipping point once more. The rate has been in a corrective downtrend channel since the beginning of January, but now this move is being seriously tested. Intraday technical indicators have now settled into bullish configurations which would suggest that upside pressure is improving once more. Despite quiet trading in Asian hours, a retest of Friday’s late high at $1.3640 is increasingly possible. A push above $1.3640 would re-open a succession of highs starting at $1.3688 and culminating with the key mid-January reaction high at $1.3739. A breach of support at $1.3607 would quickly see the support band above $1.3580 tested.

EURUSD   10022014

GBP/USD

The jump on Cable seen over the past couple of days needs to continue for the outlook to turn positive once more. On the daily chart, the rate continues to trade under the old uptrend and is bumping up against the barrier of the now falling 21 day moving average. However, on the positive side, daily momentum indicators are once again looking more bullish. The intraday perspective remains one of recovery following from the completed base pattern above $1.6350 which implies a recovery to $1.6450. The rate has been trading in a very tight range during the Asian hours and with the hourly technical  indicators just drifting away, there could be a slight correction. If there were to be a correction, there is support at the neckline of the completed base pattern at $1.6350.

GBPUSD   10022014

USD/JPY

Dollar/Yen had used the Asian trading hours to continue the recovery seen towards the end of last week. However, The yen has begun to strengthen once more which is pulling the rate back towards the initial support band around 102. The intraday base pattern that was completed on Thursday continues to suggest that there is pressure towards a retest of the reaction high within the previous sell-off at 102.94. If this pullback can find support above the 101.77 neckline of the base then it should prove to be a good opportunity to buy once more.

USDJPY   10022014

Gold

Towards the end of last week, gold continued to spike higher only to be retraced again in a period where the price very little overall gains. However we could be seeing a shift in sentiment towards the bulls in Asian trading hours this morning as a significant move to the upside is being held. A break above last week’s high at $1273.26 has now re-opened the key high within the six week recovery at $1278.01.

Gold   10022014

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