16/02/2015: Trading could be slow with the US public holiday and markets awaiting the Eurogroup

Market Overview

It is round two of the bout between Greece and its major creditor, the EU, today as the Eurogroup meeting again convenes to try to thrash out some sort of deal that would be agreeable to all sides on how to prevent a “Grexit”. The signs are reasonably positive as the meeting approaches amid reports that Greece is willing to be more open to the negotiations this time around. Market sentiment is a touch cautious once again (as it was in the run up to Wednesday’s first meeting) and this could mean a rather quiet day as traders await any news. In other geopolitical news, the “ceasefire” in eastern Ukraine looks somewhat fragile and we await to see what the market’s reaction to any reports of continued fighting will be as there was a significant jump in equities on original news of the agreement, so this could unwind to an extent.

Wall Street closed at record levels on Friday with the S&P 500 closing 0.4% higher.  Asian markets were mixed to slightly higher overnight amid Japanese GDP which showed the country leaving recession but growth coming in +0.6% (+0.9% had been expected). The Japanese Nikkei 225 was  0.5% higher as the index pushed to multi-year highs. European indices have opened the new week in a muted fashion and trading flat to slightly lower.

In forex trading, once again the dollar is coming under a small amount of pressure across the board as the major currencies fight back. Both euro and sterling are showing decent gains, whilst the Kiwi continues its strong recent run and is around half a percent higher.

The fact that it is Presidents Day in the US is not going to help market activity today as traders await the outcome of the Eurogroup meeting which is in effect the only real event on the economic calendar.

Chart of the Day – USD/CAD

We could be in the process of seeing a turnaround on the Canadian Loonie. With daily momentum firmly in correction mode now the reaction low support at 1.2350 could come under pressure. The RSI is at a 9 week low, with Stochastics also falling strongly now and MACD lines also in retreat. The 21 day moving average has provided a basis of support since early December and is today being broken at 1.2450. There has been a consolidation in the price in the past couple of weeks and the pressure on 1.2350 is mounting. A closing break of the support would complete a small top pattern and imply a correction back towards 1.2000. The intraday hourly chart shows the dollar trading under all the hourly moving averages with weak near term momentum. Initial resistance comes with Friday’s high at 1.2536.

USDCAD   16022015

EUR/USD

The euro has begun the new week in a reasonably solid state. The consolidation range between $1.1260 and $1.530 continues but there is little sign of any real move to breakout. Momentum indicators continue to suggest that this minor technical rally can continue as RSI and MACD lines drift higher. The intraday hourly chart shows the rate settling down mid-range. The likelihood is that once again the euro will be settled throughout today with traders unlikely to want to take a view in front of the Eurogroup’s meeting with Greece over its debt negotiations this afternoon. We wait for the fallout from the meeting to give the euro some near term direction.

EURUSD   16022015

GBP/USD

We continue to see the recovery in Cable progressing well and notably progressing better than the relative recovery of the euro. Having made the upside break above $1.5350 the way is open for a move towards $1.5485 which marks the bottom of the next congestion band$1.5485/$1.5620. The momentum indicators continue to improve and are now looking increasingly positive and confirming the upside break in the price, with the Stochastics into strong territory, and the RSI pushing above 60. The 21 day moving average which is rising at $.5180 is the basis of support on the daily chart, with the key price support at $1.5200. Buying intraday corrections looks to be the way to play Cable on a near term basis. The intraday chart shows very minor support at $1.5370 but the breakout levels at $1.5350 and $1.5300 are more important.

GBPUSD   16022015

USD/JPY

The rate is beginning to settle down a bit after the suggestion last week that the Bank of Japan was possibly rethinking its strategy on further monetary stimulus. The sharp bearish reversal has neutralised RSI and MACD lines but the Stochastics are in decline so there is still a slight bearish bias. The intraday hourly chart shows a slowing of the selling pressure on Dollar/Yen which looks to be settling around the support band between 118.00/118.30. If this is the case then we shall have to stand aside for now to wait for the next signal to develop, however there is a slightly negative slant to the outlook now. Interestingly the old resistance of 119.20 has once again been used of the past couple of sessions as an intraday peak and looks to be a increasingly important ceiling for the near term. A breach of 118 support re-opens the support at 117.00.

USDJPY   16022015

Gold

The outlook remains uncertain on a medium term basis as the short term bearish sell off has just taken a pause for breath. The past two sessions have seen minor support build, with two successive positive sessions, something that has not been seen since the price topped out at $1306. However the 3 week downtrend remains firmly intact around $1250 and this move is still effectively counter-trend and looks to be a bear rally. I am still expecting the resistance band $1230/$1245 to contain the rally and see another lower high posted as the pressure of this corrective phase tells. Having previously lost the support around $1222, my concerns about the medium term outlook remain and I expect the low at $1216.50 to be retested.

Gold   16022015

WTI Oil

Another huge move on the day saw Friday’s price action breaking the resistance of a near 5 month downtrend. Whilst WTI has not yet been able to breakout above its reaction highs yet (at $54.24), the bulls look set for the move. A completed breakout to a new 6 week high would complete a bull flag that would imply a breakout target of $58.00. It would also open the likelihood of a test of the next key resistance which is the reaction high at $59.00. With the 21 day moving average continuing to provide a good basis of support at $48.70 the bulls will be gaining in confidence. Until the resistance at $54.24 has been breached this is still just a near term consolidation range, but with Brent Crude rising strongly following its own breakout the prospects of WTI continue to improve.

WTI   16022015

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