15/07/2014: Weekly Trading Notes

KEY DRIVERS

  • Portuguese banking shock shows firstly how nervous investors still are but secondly how desperate investors are to buy dips.
  • Earnings season in the US underway – US big banks are beating expectations and with decent outlook statements/improvements in market conditions (Citi, Goldman Sachs, JP Morgan) now for Bank of America (Wed) and Morgan Stanley (Thu)
  • Peripheral Eurozone yields calming down after Portugal banking scare, but German and French yields continue to fall – fear of deflation?
  • Gold is moving around on market appetite to risk after Portugal
  • Eyes on Yellen’s testimony today and Wednesday, but also the Chinese GDP which could drive an improvement in risk on Wednesday
  • Oil prices continue to fall as geopolitical risks in Iraq and Ukraine quieten and Libyan supply increases – Brent testing Key April low $103.95, WTI sub $100

 

EUR/USD – Sell into strength, or on a break of $1.3574

  • The rate has done little in the past week, forming a trading band between $1.3574/$1.3650.
  • Longer term technical indicators suggest selling into strength

GBP/USD – Bullish, look to buy into weakness towards $1.7100

  • Strong UK economic data continues to underpin the rise in Cable.
  • UK CPI much higher than expected.
  • A dovish Yellen should continue to drive the rate higher.
  • Positive technical indicators shows a support band $1.7000/$1.7060.

USD/JPY – Look to sell within the range for a retest of 101.30

  • The technical indicators are now becoming on the bearish side of neutral.
  • Although the support band at 101.30 remains intact the downside pressure is growing.

Indices – Continue to much prefer S&P 500

With earnings season underway, expect S&P 500 to continue to outperform, European indices hit by weak data

  • S&P 500 set to burst to new all-time high ground above 1986 and push towards 2000
  • DAX held the primary uptrend and support of the 144 day ma. A move back above 9810 resistance would re-open the highs
  • FTSE is the big laggard still and broke its primary uptrend (which has longer term weak implications), into resistance band 6750/6800

Gold – Support at $1306 is key for the bull recovery

  • The longer term outlook is now less bearish having broken the downtrend dating back to October 2012.
  • A spike lower on improved risk sentiment has threatened the one month recovery.
  • A move below $1306 would quickly re-open the next real support which is not until $1280

 

WATCH OUT FOR

Tuesday 15th July

  • Janet Yellen testimony to Congress
  • New Zealand – CPI

Wednesday 16th July

  • China – GDP
  • UK – Unemployment
  • Canada – BoC monetary policy

Thursday 17th July

  • Eurozone – CPI (final June)
  • US – Building Permits

Friday 18th July

  • Canada – CPI
  • US – University of Michigan consumer sentiment

 

NEXT WEEK

Tuesday 22nd July

  • US – CPI
  • US – Existing Home Sales
  • G20 meeting

Wednesday 23rd July

  • Australia – CPI
  • UK – Bank of England meeting minutes
  • New Zealand – RBNZ monetary policy

Thursday 24th July

  • China – Manufacturing PMI (flash))
  • Eurozone – Manufacturing PMI (flash))
  • UK – Retail Sales
  • US – Weekly Jobless Claims
  • US – New Home Sales

Friday 25th July

  • Eurozone – German Ifo Business Climate
  • UK – GDP (Q2 preliminary)
  • US – Core Durable Goods

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