13/05/2014: Trading outlook ahead of the US session

The Euro is back under pressure once more this morning. Yesterday’s damp squib of a recovery has been well and truly forgotten as the selling pressure has resumed. The trigger today has been a series dovish influences. The German ZEW economic sentiment survey fell sharply to 33.1, well below the 41.0 expected by the market, while the survey said that German would not be able to maintain the fast pace of growth. Furthermore, reports have come out of the Bundesbank that it is open to a cut in the main refinancing rate, a cut in the deposit rate or even open to ECB purchases of asset backed securities.

Italian CPI dipped to +0.5% for the month which was below expectations. Bond yields on German, French, Italian and Spanish sovereign debt are all lower today. The market is subseuqently putting pressure on the Euro which is around 40 pips lower on the day. This is also dragging on Sterling and the Swiss Franc which are both also suffering against the dollar.

After initial moves to the upside, European equity markets have failed to maintain the momentum needed to ensure a break to new highs. However, there is still time and the profit-takers have not moved in too badly yet. S&P futures are around 3 points higher at the open.  Gold has traded throughout the morning just above $1290.

The US Retail Sales will be keenly watched by traders at 13:30BST as April was the first month of clean retail sales following from the winter weather impacted data.

EUR/USD is back to the key support round $1.3700. The 144 day moving average lies at $1.3699 and has been the basis of support for the major corrections in recent months. The key low is at $1.3671 which is the April low and this could come under threat, if not today, then in the coming days. Certainly be looking to sell into strength.

GBP/USD is now back into the support band $1.6800/$1.6840. The issue now is that there is now a large 2 week head and shoulders top pattern on the hourly chart that requires a move below $1.6820 to complete. A breach of $1.6800 would confirm the breakdown and completion of the top and open for further weakness.

USD/JPY continues to trade around 102.30 and has been around there for much of the morning. I am now looking at corrections into 102.00/102.20 support band as the chance to buy.

Gold has been solid around $1290 all morning. The price has not fallen as the dollar has strengthened, reflecting the huge uncertainty surrounding gold trading at the moment. There is a range in play now, with a band of support $1275 to $1280 moving up to resistance between $1300/$1305.

Both the FTSE 100 and the DAX have moved higher in early trading, but failed to make it through he resistance. The FTSE 100 had a sniff above the 6876 old May 2013 resistance. This is only an initial rejection at this stage and nothing major should be read into it, but we wait to see the next move. Profit-taking has come in around these levels almost exactly on three occasions in the past 12 months. The DAX also came within 10 points of its all time high too. Both are on the cusp of a critical move but are the nerves going to get tot the bulls in the meantime?

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