18/02/2014: Trading Outlook for the start of the US session

The improvement in risk sentiment had become more cautious today as investors waited to see what Russian President Putin’s response was to the referendum result in Crimea and a follow on from his assertion that Crimea was now a sovereign state. However, the suggestion that Russia did not want the breakup of Ukraine has helped to improve risk appetite once more. Stocks have rallied, the Euro is up, the Yen and gold are lower.

EUR/USD tested the intraday uptrend that dates back to 6th March but has held on and a sharp spike higher suggests another higher low is now in place at $1.3888. Pressure is back towards the upside and corrections or dips should be used as a chance to buy for an expected retest of the $1.3967 high an ultimately towards $1.4000.

GBP/USD remains stuck in a rut and needs a decisive break above $1.6665 to induce a buy signal, or below $1.6584 to create a sell signal. Despite this the rate is improving with the pick up in investor risk sentiment and upside momentum is building within this tight range. I am not interested in Cable though until a breach of either of these two levels.

USD/JPY the jump higher is the past hour from 101.30 re-opens the potential for a base pattern. A decisive move above 101.95 would complete a base and suggest further recovery towards 102.50. I await the upside break though.

Gold is back to test the support around $1354.80. This medium term bull market correction could be seen as a chance to buy once more, with the support of an uptrend from early February coming in also around $1353.50. I would look for a move above $1364.10 which would complete a small base pattern. It may be best to wait for the price to settle in the near term though.

The prospects for equity indices have improved significantly since Putin’s speech. A rally from 6534 on FTSE 100 improves the prospect of a recovery now as it could be a higher low above 6500. If the recovery can make it through 6600 this would also be a significant hurdle that the recovery would have tackled. The DAX shows a similar picture with the potential for a key low above 9100 which is above the recent low at 8913.

 

 

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