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12/06/2014: Trading outlook ahead of the US session


Escalating tensions in Iraq, a central bank rate hike and technical factors are resulting in some big moves higher in commodities, the Kiwi dollar and Cable today. However as the US session approaches, the Dollar Index remains stable due to the continued weakness in the Euro.

Traders will be looking towards the data at 13:30BST when US Retail Sales and weekly jobless claims are announced. The forecast is for an improvement in retail sales from last month’s disappointing +0.1% to +0.6%. A month ago, the weekly jobless claims fell below 300,000 for the first time since May 2007, and although the forecast is for only a slight improvement in the rate from 312,000 to 309,000 the bullish traders will be hoping for a number closer to that 300,000 again. Retail Sales will be the dominant announcement, but an improvement in either data will help to support the dollar.

The oil price is finally starting to push higher on the back of the increasing control that the militant groups are having in northern Iraq which as the potential to impact on oil supplies. The US West Texas Intermediate has jumped around 1.5% and broken out above key resistance around $105 and is now trading at the highest level since September 2013. Brent Crude oil (see chart below) has climbed 1.8% and is now within striking distance of its December high at $112.80. This news is also helping to provide support for precious metals, with both silver and gold trading higher today. Gold is now only a few bucks off a test of its key resistance at $1268.24.

Brent   12062014

In forex, the biggest move has been seen in the Kiwi dollar. Although the rate hike by the Reserve Bank of New Zealand was forecast, comments from the RBNZ deputy governor suggesting that further rate hikes were to come, the Kiwi dollar has jumped almost 1.5% and 125 pips today. Further upside looks likely therefore in due course.

EUR/USD is struggling once again as the rate starts to breach the intraday support at $1.3520. A retest of the $1.3502 low (hit during Draghi’s ECB press conference) is imminent, but the real test will be the key February low at $1.3475.

GBP/USD has jumped through the resistance at $1.6800 and is now seriously testing the near term peak at $1.6844. Slightly overbought on the hourly chart may induce a bit of consolidation. The move is now changing the negative outlook, having broken the corrective downtrend on the daily chart. If Cable can now form support above the band $1.6780/$1.6800 then the bulls will start to feel back in control.

USD/JPY is consolidating around the pivot point at 102.00. The near term outlook is deteriorating with the series of lower highs and lower lows, with resistance in the band 102.20/102.40 now. However I still see this pivot around 102 to be the line in the sand and right now the outlook is neutral and difficult to call.

European Indices have been trading very mixed all morning and have fluctuated around the flat line. After yesterday’s decline on Wall Street, which was he first really negative session since 20th May, the S&P 500 index futures are calling for a 1 point gain at the open. Equity investors are sitting on their hands for now.


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