11/03/2014: Investors looking for the next catalyst as markets continue to drift

Market Overview

Wall Street endured a fairly quiet session characterised by a slight drift lower, however a positive Asian trading session has left European investors feeling on the positive side after a weak previous session. The Bank of Japan held steady in its monetary policy statement which has resulted in little deviation in the yen from its path of recent weakness. This has subsequently enabled Japanese equities to push further higher..

There is not a huge amount of data releases today to impact the market aside from UK Manufacturing Production at 09:30GMT. The capacity utilization rate are a measure of the Bank of England’s output gap which could create some movement on Cable and Euro/Sterling. Other than that, the meeting of the EU finance ministers could have a bearing on the Euro today. The EcoFin meeting will discuss banking union and positive noises could help to support the single currency. In the UK, Mark Carney is set to be questioned before the Treasury Select Committee, which is sure to be watched closely by Sterling traders.

Chart of the Day – Silver

Whilst gold has been consolidating sideways, silver has been undergoing a drift back towards the key neckline support at $20.50. The daily technical indicators have still just got a corrective look to them, with the MACD lines above neutral and the RSI having unwound to 50. On the negative side is that the 170 day moving average (currently $21.00) which has been such a good gauge for the major moves was recently breached to the downside, and was yesterday being used as resistance. A series of lower highs is in place now in this corrective phase with the latest at $21.61. With the corrective outlook continuing, we could see further pressure on the neckline support at $20.50.

Silver   11032014

EUR/USD

Yesterday we saw Euro/Dollar trade in a very tight 37 pip range as the consolidation that I had expected began to take hold. The move through $1.3892 last week was a significant breakout but daily momentum is a touch stretched and with the absence of any market moving data announcements yesterday the Euro has stalled. The drift lower has continued overnight and the initial support at $1.3852 has been broken in early European trading. Intraday hourly technical studies still look positive but corrective and with very little data due to be announced again today I do not expect there to be much more action again and we could be set for another day of tight trading as the drift backwards continues.

EURUSD   11032014

GBP/USD

The Cable bulls had a disappointing day yesterday as the small sequence of higher lows that had been forming was breached amid a bout of dollar strength. Suddenly the daily chart has taken on more of a corrective outlook to it, with the RSI and Stochastics at a one month low and the MACD lines crossing. This now puts increased significance on $1.6603 once more, with the key reaction low at $1.6581 protecting the formation of a possible top pattern. The bulls will watch for a breach of yesterday’s low of $1.6620 as an early warning signal. A move back above $1.6683 would improve the picture but with hourly moving averages all turning lower the downside pressure on Cable is mounting now.

GBPUSD   11032014

USD/JPY

The breakout above 102.83 continues to consolidate and firm up the old resistance as new support. For a second session the dollar has tested the support and it has held, with a low forming yesterday at 102.78. Daily momentum indicators are still improving and the rate is now trading above the 55 day moving average. The intraday chart shows all moving averages rising in bullish sequence with the 55 hour moving average now acting as the basis of support (currently around 103.17). The hourly momentum indicators are in bullish configuration and once this mini period of consolidation comes to an end there is little reason to think that the intraday high from last Friday at 103.75 will not be tested.

USDJPY   11032014

Gold

There was no major change yesterday to the daily chart as the period of sideways consolidation continued on the gold price. Technical indicators have maintained their bearish divergences as we await the next move. The intraday chart shows the price is once more mid-range in the band between $1328.86 and $1354.80. The bulls have gained the early upper hand with a push above yesterday’s high at $1344.80, but with intraday technical indicators flattening off the range period looks set to continue. I still believe that it will be resolved to the downside, but for now gold appears intent on maintaining its sideways trading phase.

Gold   11032014

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