- 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
Monday 22nd September
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
Friday 26th September
- Japan – CPI Inflation
- US – Q2 GDP (final reading)
- US – University of Michigan Consumer Sentiment (final reading)