- 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)
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