Market sentiment is once more under pressure into the new week as talks between Greece and its creditors have again failed to come to any resolution. Although the rhetoric from Greek finance minister Varoufakis remains confident, time as per usual is running out for a deal. The next real opportunity for a deal is Thursday with the Eurogroup meeting. Markets are digesting the news and the initial assessment is fairly negative. The European indices are trading lower in a continuation of the weakness of Wall Street into the close on Friday and also declines across Asia overnight.
In forex trading is interesting this morning as at first glance it looks as though the dollar bulls are gaining some sort of control. However the outlook is broadly neutral (with very slight dollar strength) and it is only really the euro that it being hit. The euro is down on the reaction to the latest disappointment over Greece.
There is not much European data to help rebuild sentiment this morning, so traders will be looking towards the US data this afternoon. The Empire State manufacturing data is out at 1330BST with an improvement expected to 5.8 (from 3.1 last month). Then at 1415BST the Industrial Production numbers are announced with a month on month improvement of +0.2% forecast. At 1500BST the NAHB announces its housing market index with again an improvement expected to come in at 56 from 54 last month.
Chart of the Day – Silver
Although the trading on silver has not been especially clean in the past week, the inference is that the outlook remains bearish for a test of the key support band $15.26/$15.50. Looking at the mixture of daily candles, a series of bullish and bearish candles that on their own could inspire some sort of reversal, but largely speaking have candles each other out and so we must continue to follow the trend. With the moving averages all coming together to turn down in bearish sequence the trend does not look especially positive still. Momentum indicators are stuck firmly in negative configuration and last week’s high at $16.22 is now a near term benchmark. There has been a consistent bout of selling pressure in the past few weeks where rallies are seen as a chance to sell. The hourly chart shows the importance of $16.22 as the basis of resistance and already a peak has been left at $16.09 overnight. Any bounce is a selling opportunity.
The rally on the euro which saw the challenge of the resistance at $1.1380 has rolled over in the past couple of sessions as the rate has drifted lower once more. The momentum indicators on the daily chart are becoming corrective again with the Stochastics crossing back below 80 again. However there is no significant selling pressure at the moment and for now the pivot band around $1.1050 is still intact, and whilst this remains the case then there will still be a positive medium term bias within what is increasingly now a sideways trading band. The early signs are that the drift lower is likely to continue again today. The intraday hourly chart shows the euro trading below a batch of rather neutral looking hourly moving averages which would back the slight drift lower. The support comes in at $1.1150 could come under threat again as Friday’s low with $1.1050 the main support area. The resistance is at $1.1296, Friday’s high.
After finding resistance around the 23.6% Fibonacci retracement of $1.4563/$1.5814 around $1.5519, the break back higher was a bullish move and the bulls will be increasingly gaining in confidence now. However this is an odd kind of rally that never really inspires too much confidence. For that to be seen, the RSI will need to be pushing up towards the 70 mark, whilst it has spent much of the past 4 days unable to breach 60. I am also still mindful that the key interim resistance at $1.5700 is also still intact. Once more again, this morning the bulls have been unable to break the shackles, with a drift back once more. The intraday hourly chart shows higher lows and rising hourly moving averages, but the price is again back into the support band $1.5500/$1.5530 which needs to hold. Hourly momentum is positive without inspiring too much confidence. A move back below $1.5465 would break the sequence of lower highs, whilst $1.5420 is the key near term support now.
The technical rally that saw Dollar/Yen bottoming at 122.43 now seems to be stalling as the price continues in its sequence of lower daily highs (no 5 in a row). The resistance band of the old supports between 123.50/124.00 seems to be acting as the barrier now and this means that the momentum indicators remain in corrective mode. It is noticeable that the RSI is now struggling to get back above 60 and that would suggest that the outlook is neutral at best near term. However with the MACD and Stochastics still falling the balance remains negative for further retracement back towards the key breakout at 122.02. The hourly chart shows that a period of sideways consolidation underway and Friday’s low at 123.10 is an important level to keep hold to prevent a drift back towards 122.43. The sequence of lower highs would be breached on a move above 123.80.
The technical rally off $1162.35 has played out but is now struggling to find any more traction as it stalled at $1192 last week. The subsequent trading has been consolidating, but also interestingly has held up around the old closing level support at $1178. I am increasingly watching the resistance of 3 week downtrend (c. $1187) whilst also the negative outlook which is sustained by the fact that gold continues to trade below all its moving averages which are now falling in bearish sequence. The momentum indicators also retain a bearish configuration with the RSI consistently unable to move above 50, whilst the Stochastics have once again rolled over. I anticipate pressure on $1178 to break and a further test of the $1162.35 low. A break back above$1192 would now be disappointing for the bears whilst the key medium term pivot level remains around $1200.
Once more we see the bull rally within the trading range $56.50/$62.60 falling over, with another peak being left within the band, at $61.82. Once again we look towards the Fibonacci retracements of the latest bull run for the basis of the intraday consolidation levels. The 38.2% Fibonacci retracement of the $56.83/$61.82 rally at $59.91 performed a consistent basis of consolidation on Friday, however the hourly momentum indicators suggest a corrective drift is once more being seen. The 50% Fibonacci level comes in at $59.33, whilst the basis of support at $59.23 also adds to the potential for this to be a subsequent near term consolidation. Resistance is now in the band $60.50/61.00.