13/08/2014: Trading outlook ahead of the US session

If you set aside the movement in UK related assets (ie. the volatility in Cable and gains in the FTSE 100), this morning’s trading has been rather sedate again. Forex pairs have remained broadly stable, whilst equities have been steady and gold trading around flat again.

Volumes were light in yesterday’s trade and it will be interesting to see if this can improve with US traders now looking forward the the US retail sales this afternoon at 13:30BST. Expectation is for +0.2% on the month of July, so there is no real anticipation of any major move today.

The morning has been dominated by the economic announcements from the UK which have created much volatility in GBP/USD. A disappointing decline in wage growth and the lack of a hawkish tone in the Bank of England’s Quarterly Inflation Report has caused the market to pull back on expectations of a rate hike in 2014. The impact on Cable has been for a 100 pip decline and now to test the key support band around $1.6700. Technical indicators had been improving but this renews the selling pressure and the bears are back in control.

Elsewhere in forex, EUR/USD has been fairly steady this morning after earlier weakness. The low at $1.3331 remains intact as the bulls continue to come in to support under $1.3350. Also the pressure continues, the longer the support holds, the chances of a technical rally improves. USD/JPY continues to show dollar strength as the pull above resistance at 102.30 is looking to break above the intraday reaction high at 102.46. The outlook for a push higher back towards the 103.00 resistance area is increasing.

Following the initial move higher on the DAX a morning of consolidation set in, but in the past few minutes as the US traders begin to think about taking control the DAX is looking to continue the move higher. The first key test of intent comes at 9200. A breach would open the upside towards the key pivot band between 9400 and 9600. The FTSE 100 has reacted positively to the Bank of England remaining relatively dovish on its outlook for the UK economy and the run higher through the session has continued since Mark Carney finished speaking. The way is open for a move towards a test of 6700 which is the first real resistance in a very messy chart. Perhaps it is wise to keep in mind though that the course of a recovery never runs smoothly for the FTSE.

Gold and silver continue to search for direction and show little sign of breaking their recent sideways outlook. Both metals have tended to slide as geopolitical tensions have moved to the backburner. That and the continued dollar strength suggests another possible test of support levels. $1301.75 is near term key for gold. Silver need to hold above $19.69.

Leave a Reply

Your email address will not be published. Required fields are marked *