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16/09/2014: Weekly Trading Notes


KEY DRIVERS

  • FOMC meeting on Wednesday could contain a hawkish change to the wording of the statement
  • Scottish independence referendum is too close to call – markets do not like uncertainty
  • Sterling being sold off again, equities under pressure (especially those with Scotland exposure); dollar consolidating in front of FOMC
  • Gold looking to recover as ceasefire in eastern Ukraine creaks and US dollar consolidates
  • Equity markets falling amid a lack of positive catalysts.
  • Volatility increasing amid uncertain markets, VIX back above 14 – suggests a demand for portfolio protection by fund managers.
  • WATCH FOR: Dollar consolidation in front of the FOMC and then big end of week volatility, especially with the Scottish independence referendum  

 

EUR/USD – Consolidating, but still expecting further downside   

  • Consolidation into its 8th day now, should continue until FOMC.
  • Sideways ranges have consistently broken lower over past few months as the dollar strength has continued.
  • Momentum indicators suggest that any rallies continue to be opportunities to sell.
  • Key resistance at $1.3000, a break above opens $1.3100 at least.
  • Sub $1.2860 re-opens downside to $1.2750
  • Watch for: FOMC

GBP/USD – Massive volatility depending upon the outcome of the vote

  • In front  of the vote , the risk will be towards caution and meaning a drift lower.
  • However the FOMC could impacting this further tomorrow night if the y move hawkish.
  • This could be one of the most volatile weeks since the financial crisis of 2008.
  • Some financial institutions are forecasting huge moves (JPMorgan saying 3% to 4% upside on a “No” and 6% to 7% downside on a “Yes”).
  • A “No” vote should mean a retracement of the recent decline from $1.6600, where Cable was trading prior to the polls tightening.
  • A “Yes” vote could mean an immediate test of the $1.5850 November 2013 low.
  • Watch for: FOMC and Scottish Independence referendum result

USD/JPY – Buying into a near term correction towards 106.00/106.50 support band

  • Multi-year highs have opened upside with the next real resistance not until 110.65.
  • Momentum remains extremely strong but consolidation in front of FOMC is setting in.
  • Use any unwinding towards 106.00/106.50 support as a chance to buy.
  • Watch for: FOMC

 

Gold – Use rallies into $1240/$1260 resistance as a chance to sell

  • The outlook has turned medium term bearish after the loss of support at $1240 opened $1184.50.
  • Dollar strength remains the big drag.
  • A flimsy ceasefire in eastern Ukraine breaking could drive some near term recovery in gold.
  • But there is plenty of resistance between $1240/$1260 to use as a chance to sell.
  • The real resistance comes in at $1280.
  • Watch for: FOMC – US data driving dollar strength (subsequently gold lower)

 

Indices – Continue to prefer Wall Street over European markets. Prefer DAX over FTSE

Cautious sentiment is a drag on indices.

Wall Street is struggling to regain the upside impetus outside of earnings season.

S&P 500 outlook remains positive medium/long term even if it threatens a near term correction.

European markets dragged lower by Russian sanctions and Scottish independence vote.

  • S&P 500 is in consolidation mode with support between 1955/1990.
  • DAX needs to hold above the 9600 pivot level that has now become support, with the 61.8% Fibonacci retracement of the big sell-off at 9612 also now supportive. A break above 9800 re-opens the highs.
  • FTSE however looks more concerning with a top pattern completed intraday and threatening  a correction towards 6640. However, a “No” vote could induce a technical rally.

 

WATCH OUT FOR

Wednesday 17th September

  • UK – Unemployment
  • US – CPI Inflation
  • US – FOMC rates decision plus press conference
  • New Zealand – GDP

Thursday 18th September

  • Switzerland – SNB rates
  • Eurozone – TLTRO begins
  • UK – Retail Sales
  • US – Building Permits
  • UK – Scottish Independence Vote

Friday 19th September

  • Canada – CPI Inflation

 

NEXT WEEK

Monday 22nd September

  • US – Existing Home Sales

Tuesday 23rd September

  • China – Flash Manufacturing PMI (HSBC)
  • Eurozone – French Flash Manufacturing PMI
  • Eurozone – German Flash Manufacturing PMI

Wednesday 24th September

  • Eurozone – German Ifo Business Climate
  • US – New Home Sales

Thursday 25th September

  • US – Durable Goods

Friday 26th September

  • Japan – CPI Inflation
  • US – Q2 GDP (final reading)
  • US – University of Michigan Consumer Sentiment (final reading)

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Research Risk Warning

At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.