20/06/2014: Trading outlook ahead of the US session

Into the last trading day of the week, trading has managed to retain a slightly positive outlook. The glass seems to remain half full after the Fed’s less hawkish than expected tone to Wednesday’s FOMC statement. This means that the dollar remains under pressure today (although has fought back against the Euro and the Yen in the last couple of hours) and equities are gradually improving as the morning has gone on.

Trading seems to be fairly sedate though this morning. In the absence of any hugely market moving economic data this afternoon from the US, this could be a theme that runs through the US session in the final day of the week.

Despite investor sentiment improving, the Euro seems to be coming under pressure once more, as EUR/USD falls back below 1.3600, with the break in the past few minutes coming with high volume. This means an immediate retest of the support at 1.3585 is under pressure again. A failure of the $1.3585 support would quickly see the bears regaining control once more and open a retest of $.3540 support. I still see Euro/Dollar as a see into strength.

The dollar is finding it a bit tougher against sterling today as Cable looks to consolidate the break above $1.7000. The daily momentum on GBP/USD is a touch stretched and this could induce a minor consolidation near term. However, any move back towards the breakout support now around $1.7000 could be seen as a chance to buy.

USD/JPY  continues to trade around the 102 pivot level. The lack of overall direction on a day to day basis make this a very difficult trade. I am still bordering on the negative skew (with the 13 day downtrend still intact, however there is a lack of intent either way to make any sustainable break.

Gold remains the big news after yesterday’s short covering rally. However, today the move has seen some paring of the gains. With the primary downtrend dating back to October 2012 the basis of resistance at $1330, and the lack of demand for physical gold still evident, this is still likely to end up being just another chance to sell.

Equity markets remain supported by the continued positive sentiment that has stemmed from FOMC meeting on Wednesday. Volatility as measured on the VIX is back at record lows and the S&P 500 has now posted 5 straight days of gains.  The S&P 500 has also now not posted a daily close of over 1% move on the day for 44 consecutive sessions. Despite geopolitical tensions in Iraq and Ukraine, equity investors remain remarkably calm, or is that complacent?

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This follows a similar move yesterday on the DAX Xetra which has hit another intraday all-time today as the bulls look to have regained control. If the DAX can post a close above 10034 then this would constitute a clean break and with upside potential on he momentum indicators this would bode well for next week. The FTSE 100 rally is into its fourth day of its rally. This is now going a long way towards aborting the corrective outlook from the completed top pattern and a move above 6843 would re-open a test of the 14 year high at 6895.

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