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20/03/2014: Trading outlook ahead of the US session


The dollar has remained strong into today as traders continue to come to terms with the hawkish shift in Janet Yellen’s FOMC press conference yesterday. There will now be speculation over whether this will now herald the beginning of renewed dollar strength. All major currencies have been significantly hit relative to the dollar, as has gold and silver. The initial move today showed early signs of a retracement in Asian trading, but the dollar has strengthened once more and the downside pressure remains. The Euro has borne the brunt of this, but Cable has also turned lower. Equities are under pressure again as well.

EUR/USD is now a concern for the Euro bulls. The move has broken the 6 week uptrend and on a daily basis the chart looks set to retest the support around $1.6700. There is little resistance until $1.3808, the overnight low, but the way that a head and shoulder top pattern has formed on the hourly chart , a test of the key lows from early March around $1.3720 look likely now. Look to sell into any strength as this reaction looks to be running now.

GBP/USD has been more resilient that the Euro, which in the context of the past few days is surprising. Sterling is now right back to the support of an uptrend dating back to August 2013. We must now wait to see if this support of the uptrend begins to break down. I closed my short position in Sterling/Dollar this morning concerned of a potential retracement to the overnight move, however, the dollar strength has continued and it now looks as though rallies will be sold into. There is a band of resistance $1.6543/$1.6568 which I now see as a potential sell zone.

USD/JPY still does not convince me as a long. The daily chart remains rangebound and the intraday rate has spent the morning consolidating. The dollar strength should pull the rate higher, but the geopolitical risk with the situation in Russia and Ukraine still having potential to flare up again creates downside risk in Dollar/Yen. I feel that there are better plays elsewhere currently.

Gold remains under pressure today. It is now seriously testing the uptrend around $1321 that dates back to the key December low. Also the key support at $1319.61 is being eyed. A breach would open the way towards $1300 again. The sellers remain firmly in control here and this correction has further legs in it.

The FTSE 100 is back to test the key low around 6500. Already breaching on an intraday basis (today’s low is at 6492) increases the pressure for a full retracement back to the February low at 6417. The sellers are once more in control here and there is resistance around 6535. The DAX is in far better shape, trading above Monday’s low at 9137 still. Whilst this remains the case the outlook actually remains quite positive for a recovery.

 

 


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