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19/08/2014: Weekly Trading Notes


KEY DRIVERS

  • “Moderate progress” in talks over reducing tensions in eastern Ukraine – helping improve investor sentiment
  • Volatility continues to calm down, with VIX falling (below 12.5) and smaller ranges on forex pairs (such as Dollar/Yen) safe haven gold drifting lower.
  • Concerns over European stagnation continues to drive Eurozone sovereign bond yields lower.
  • Dollar remains strong and is looking to break higher once more after a period of consolidation.
  • Corporate earnings have been positive in both US and Europe – but almost at an end now.
  • Equity markets remain impacted by geopolitics and volumes have been
  • Jackson Hole symposium – key speeches by Janet Yellen and Mario Draghi

 

EUR/USD – Consolidation between $1.3330/$1.3445

  • Could be a volatile end to the week with the key Eurozone flash PMIs and then both Yellen and Draghi speaking at Jackson Hole.
  • Possibility of a technical rally due to bullish momentum divergences, but euro bulls are struggling to gain control.
  • A close below $1.3330 opens key November low at $1.3295
  • The pullback towards the neckline of the huge top pattern $1.3475/$1.3500 is yet to be seen.
  • Watch for: Fed meeting minutes, Eurozone flash PMIs and Jackson Hole and Eurozone HICP

GBP/USD – Selling any rallies Weakness towards $1.6700 support band looks likely

  • Plummeting after that UK CPI figure dropped to 1.6% from 1.9% and well below the 1.8% forecast.
  • Chances of a UK rate hike in 2014 now looking slim.
  • Falling to test the April low at $1.6552 and possibly the March low at $1.6459
  • Watch for: Meeting minutes from Bank of England and the Fed, Yellen at Jackson Hole

USD/JPY – Continue to play the range 101/103

  • Slight bullish bias within the trading range 101/103.
  • Calmer geopolitical tensions leading to lower volatility in the pair and a reduction in the “war premium”.
  • Slightly positive technical indicators, but do not point to an imminent upside breakout of the range.
  • Watch for: Geopolitical tensions and also Yellen at Jackson Hole

 

Gold – Price drifting lower as geopolitical tensions improve, sub $1300 opens $1280

  • In the absence of a “war premium” gold trades weaker, but there has been a habit of this changing very quickly in the past few weeks if geopolitics deteriorate.
  • The medium term outlook remains very mixed – with moving averages and momentum all neutral.
  • Key support remains intact at $1280.
  • Upside resistance remains $1324.50.
  • Watch for: Newsflow on geopolitics, with increased tensions positive for gold

 

Indices – Continue to prefer S&P 500

Indices bouncing back again.

S&P 500 outlook remains positive, whilst DAX is hugely volatile around the Russian geopolitics, FTSE more sedate.

  • S&P 500 is pushing through resistance levels and is once again eyeing the all-time high at 1991.
  • DAX pushing back towards the 9490 implied target. There is a key overhead supply between 9400/9600
  • FTSE has already hit its implied target of 6770 from its equivalent base and is pushing towards the key reaction high at 6834.

 

WATCH OUT FOR

Wednesday 20th August

  • UK – Bank of England MPC meeting minutes
  • US – FOMC meeting minutes

Thursday 21st August

  • China – Manufacturing PMI (Flash)
  • Eurozone – French Manufacturing PMI (Flash)
  • Eurozone – German Manufacturing PMI (Flash)
  • UK – Retail Sales
  • US – Weekly Jobless Claims
  • US – Existing Home Sales

Friday 22nd August

  • Canada – Consumer Price Index
  • Jackson Hole Symposium – speeches by both Janet Yellen and Mario Draghi

 

NEXT WEEK

Monday 25th August

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

Tuesday 26th August

  • US – Durable Goods Orders
  • US – Consumer Confidence

Thursday 28th August

  • Eurozone – German Consumer Price Index
  • US – GDP (prelim)
  • US – Pending Home Sales

Friday 29th August

  • Eurozone – Consumer Price Index (Flash)
  • Canada – GDP

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