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12/03/2014: Trading outlook for today

I am mindful of the impact that today’s movement away from risk is beginning to have on currency pairs. This should ultimiately play out as Yen strength and a correction in forex majors. Gold is also a beneficiary of this. Stock indices are the main focus of the downside pressure today.

EUR/USD had been drifting lower and is now settling sideways, but the reaction high at $1.3876 from yesterday’s high remains intact. I still anticipate the Euro to weaken back towards the support band that starts at $1.3824 but it is proving to be stubborn today. This is despite the trading outlook today which has started out being a reduction in risk appetite. I am running a short position and would view a rally as a chance to sell.

GBP/USD has breached the key reaction low $1.6581 and now opens the very real prospect of a completed top pattern which implies a move back towards $1.6480. Having formed a low at $1.6566 today a pullback rally is underway. Although I would expect this to be sold into today and there looks like further weakness on the way for Cable.

EUR/GBP has broken out today! A move above resistance at £0.8350 has completed a base pattern which in the least implies upside towards the December high at £0.8466. Momentum indicators are a touch stretched near term but the strength of the breakout is impressive. This marks a significant turning point in the relative relationship between the Euro and Sterling over the medium term.

USD/JPY is similar to the top pattern on Euro/Yen and the confirmed move below 102.83 (today’s low is at 102.63) suggests that 102.25 will be seen. I would be looking to use a rally back towards the neckline support turned resistance is a chance to sell.

Gold has had a strong move higher, but I am loathed to buy it. Aside from the bearish divergences on daily momentum, the hourly RSI is also towards 70 and looks stretched. I am concerned still that this chart has the potential for a sharp correction at some stage.

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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.