12/08/2014: Weekly Trading Notes

KEY DRIVERS

  • Wavering geopolitical concerns creating volatility in markets
  • But volatility beginning to calm down? VIX lower (below 15) and smaller ranges on forex pairs (such as Dollar/Yen) gold settling down.
  • US Earnings Season: 85% companies have now reported – just 16 corporate announcements this week and all the big guns having announced already.
  • Earnings have been positive with over two thirds beating estimates on revenue and around two thirds beating on revenue
  • Few US economic releases this week as Eurozone and UK take centre stage.
  • Dollar remains strong as it resists the signs of a correction for now.
  • Equity markets very much impacted by geopolitics and summer lull in volumes

 

EUR/USD – Showing signs of a technical recovery threatening. Possible rebound to $1.3475/$1.3500

  • Draghi tried to jawbone the euro lower in his press conference last week with talk of central bank divergence.
  • There is still a drift lower in price but the technical studies are suggesting limited downside potential.
  • Bullish divergences point to a potential technical rally.
  • The pullback towards the neckline of the huge top pattern $1.3475/$1.3500 is yet to be seen.
  • Watch for: German/French/Italian GDP and Eurozone HICP

GBP/USD – Weakness towards $1.6700 support band looks likely

  • Unlike with the euro, there has been very little sign of any recovery.
  • A 4 week downtrend continues and is on course to test the key support at $1.6700
  • The longer term outlook is increasingly becoming neutral.
  • The outlook would improve on a move above $1.6890
  • Watch for: UK Unemployment, BoE Quarterly Inflation Report

USD/JPY – Continue to play the range 101/103

  • Once more the calmer geopolitical tensions leading to lower volatility in the pair.
  • Tends to create a slight dollar positive bias.
  • Currently mid-range though
  • Watch for: Japanese GDP, Newsflow on geopolitics with increased tensions yen positive

 

Gold – Fluctuating on geopolitical tensions, looking to build now above $1300

  • Difficult to read as technical indicators are becoming very choppy.
  • There is still a slight upside bias (trading above moving averages, support at $1280 holding).
  • Holding above $1300 will begin to improve the outlook.
  • Sub $1280 opens $1259 and $1240.
  • Watch for: Newsflow on geopolitics increased tensions is gold positive

 

Indices – Continue to much prefer S&P 500

Seems to be a dichotomy between Wall Street and European markets.

S&P 500 outlook remains positive, whilst DAX, FTSE and CAC are still under big threat.

Proximity to Russian sanctions are a big element to this.

  • S&P 500 has formed support above 1900 and is way above the key rising 144 day ma (c. 1889)
  • DAX looked to recover but once again is under pressure. The March key low at 8913 is broadly intact though. There is a key overhead supply between 9400/9600
  • FTSE remains very messy on technical basis, there is now a resistance band 6640/6700.

 

WATCH OUT FOR

Wednesday 13th August

  • China – Industrial Production
  • Japan – GDP (Prelim)
  • UK – Unemployment and Average Earnings
  • UK – Bank of England Inflation Report
  • US – Retail Sales

Thursday 14th August

  • Eurozone – French GDP (Prelim)
  • Eurozone – German GDP (Prelim)
  • Eurozone – CPI (final)
  • US – Weekly Jobless Claims

Friday 15th August

  • UK – GDP (1st revision)
  • US – University of Michigan Consumer Sentiment (Prelim)

 

NEXT WEEK

Tuesday 19th August

  • UK – Consumer Price Index
  • US – Building Permits
  • US – Consumer Price Index

Wednesday 20th August

  • UK – Bank of England MPC meeting minutes
  • US – FOMC meeting minutes

Thursday 21st August

  • China – Manufacturing PMI (Flash)
  • Eurozone – French Manufacturing PMI (Flash)
  • Eurozone – German Manufacturing PMI (Flash)
  • UK – Retail Sales
  • US – Weekly Jobless Claims
  • US – Existing Home Sales

Friday 22nd August

  • Canada – Consumer Price Index

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