10/06/2014: Trading outlook ahead of the US session

This morning’s European session has been characterised by two features. Firstly, another bout of selling pressure that has taken over the Euro. As this move has been made, the Dollar Index (.DXY) has now seen a clean break to a four month high.  The next real resistance does not come in until the January high at 81.3 (see below). The second feature of trading today has been the significant underperformance of the FTSE 100 versus its European counterparts. Questions over whether the FTSE 100 is going to be able to break out are mounting.

EURUSD   10062014

After some jitters in the Asian session, the dollar is subsequently finding some strong gains (especially against the euro) as the morning has progressed and this is despite earlier struggles against the yen. This morning’s positive UK Manufacturing Production data showed a three year high and this has helped to support sterling. Even then though, the dollar is pushing higher.

The last couple of days has shown the bears solidly back in control now on the EUR/USD. This has strengthened up the key resistance at $1.3670 and the way is now clear towards a retest of the $1.3502 level that was hit during Mario Draghi’s ECB Press Conference. Selling into strength looks to be the strategy now.

Having attempted to hold on to the key near term support at $1.6780 Cable has now broken down. This immediately opens $1.6720 but also suggests that selling into strength should be the strategy. The intraday hourly RSI is towards 30 now and this could limit immediate downside potential. Look for a shorting opportunity between $1.6780/$1.6800.

The support has come in around 102.20 on USD/JPY and if this can now hold then the recovery outlook on Dollar/Yen remains intact. The key near term supports are 102.10 and 102.00.

Gold  continues to consolidate sideways, but with the Dollar Index continuing to push higher the selling pressure will begin to mount. I still see any rallies as a chance to sell.

Once more, the DAX has broken to new all time highs this morning to 10,033 and will be looking for a second close above the psychological level. However the FTSE 100 is around half a percent lower and is lagging quite significantly again. The reluctance of the index to break through the key high at 6895 is becoming a concern whilst other indices are posting new all time highs. S&P 500 futures are suggesting a 4 point decline at the open.

Traders will have little US data to focus on this afternoon.

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