13/11/2014: Inflation data to drive sentiment on the euro today whilst equities look for support

Market Overview

With a lack of tier 1 economic announcements from the US, investor sentiment has been rather neutral for the first half of this week. This is reflected in the price action of Wall Street which has gone all but nowhere in the last two sessions, with the S&P 500 falling 0.1% yesterday. However this could begin to change with some key Eurozone data on inflation and growth due today and tomorrow. Despite slightly weaker than expected Chinese Industrial Production numbers, Asian markets were once again mixed to slightly positive. The Nikkei 225 was again making gains as the yen weakened once more and rumours of a delay to the sales tax hike in Japan continue to circulate. European markets are regaining some lost ground in early trading. In forex trading, once more there is a feeling as though the US dollar is ready to push on again, with the greenback trading flat to slightly positively against the major currencies. The gold price is also slightly lower, as are both Brent and WTI oil prices. Following the early release of the German, Italian and French inflation data, there is the ECB monthly report at 09:00GMT. There is a plethora of key central bank members speaking from both the Fed and the ECB today who could all drive markets and therefore it could be a fairly volatile today. Fed members Plosser, Dudley and Kocherlakota are all due to speak, whilst Fed chairman Janet Yellen is giving the opening remarks at a joint Fed/ECB conference. There is also the Weekly Jobless Claims for the US today at 13:30GMT which are expected to remain fairly stable at 280,000 (last 278,000).

Chart of the Day – DAX Xetra

Yesterday’s correction on the DAX has broken the recovery uptrend that has been in place since the low at 8355. For now, the price action during November can just be considered to be a near term consolidation, however looking at the intraday hourly chart, this is now threatening to turn into a top pattern. The concern is that the hourly MACD lines are now negative for the first time since 20th October, the RSI is increasingly negative and the Stochastics are also looking bearish. I have spoken previously about the key near/medium term support at 9149 and if this support fails it would open a bigger correction. The Immediate downside target from a move below 9149 would be 8830 (which coincidentally would see the DAX return to the neckline of the mid-October base pattern once more). The lower high at 9401 is now resistance. The early gains are clearly a positive, but the DAX needs to continue to hold above 9149 to prevent a correction setting in. DAX   13112014

EUR/USD

The euro is consolidating. The daily chart shows this with the past three completed sessions with a rather indecisive series of candles. However with the consolidation taking place under the $1.2500 old support (which turned into new resistance on a breakdown), the outlook continues to suggest the euro remains under pressure. The is no suggestion on the daily momentum indicators that there is any imminent rally, with RSI and MACD still negatively configured. The Stochastics momentum may slightly turned up but this looks to be more that they are bumping along the bottom rather than turning up with earnest. The hourly intraday chart shows the consolidation with hourly moving averages and momentum indicators increasingly neutral, however I expect the resistances at $1.2509, $1.2533 and $1.2577 to be enough to encourage the sellers to return once more. I see $1.2393 being tested before the low at $1.2357. EURUSD   13112014

GBP/USD

Once more the selling pressure has resumed on Cable with a move to another new low dating back to September 2013. The outlook remains weak and the concern is now that momentum indicators are deteriorating once more. There is a minor level of support around $1.5750, however there is in fact very little real price support until $1.5426 from August 2013. The intraday hourly chart suggests that perhaps the immediate selling pressure from yesterday has settled slightly and this could induce a near term technical rally today. However, I would be looking for any near term rebound that might drag Cable into the $1.5830/$1.5870 resistance band as a chance to sell. The bears remain in control on sterling and further weakness looks likely now. GBPUSD   13112014

USD/JPY

I continue to like the way that Dollar/Yen is using the support of previous breakout levels as the basis of support. Yesterday’s price action was an example of that. There is a level of support around 115.00 which seems to have been used as the latest floor in the price. With the intraday technical studies nicely unwound this drift back towards 115 has been used as a chance to renew upside potential. The gains since the reaction low at 114.88 have been rather slow but steady. This may mean that upside is beginning to become harder for the bulls to achieve, and perhaps we need to watch this in the coming sessions.The recent resistance at 116.09 will be the initial target, however if this is cleared then there is little real resistance until 117.95 which was a reaction high from October 2007. The key support remains at 113.84 which is the latest key reaction low. USDJPY   13112014

Gold

The gold price is now settling down after a messy couple of days at the start of the week. It would appear as though the market is now accepting of the price below the old crucial floor at $1180.70 (now the key resistance) which would suggest the likelihood of further weakness is high. Daily momentum is not pointing to a recovery, with RSI and MACD lines all still negative and the Stochastics already having lost the upside impetus. Intraday hourly indicators are also reflecting this consolidation with hourly moving averages flat and momentum neutral. Perhaps the immediate direction will be newsflow driven, however with the medium/longer term techncials on gold all negative now and the prospect of further US dollar strength (which is a negative driver of gold), expect a retest of the recent lows at $1145.92 and $1131.85 in due course. Gold   13112014

WTI Oil

The price of WTI has settled down in recent days and this suggests that the market is accepting the position of the price below the key $80 level. Whilst I continue to believe that WTI will be ultimately moving towards a test of the key floor at $75, the price has now started to form a trading band between the lows around $76 up towards $79.50. As this consolidation continues the intraday hourly moving averages are gradually becoming more neutral as are the hourly momentum indicators. However there is very little to suggest any rebound will be seen. All the daily technical studies suggest further downside will be seen, whilst today the downtrend resistance from the 3 week descending triangle comes in at $80.00. Expect this near term respite to resolve to the downside, whilst even if there is a technical rally, whilst trading below the reaction high at $82.88 any rallies should be seen as a chance to sell. WTI   13112014

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