22/04/2014: Trading outlook ahead of the US session

A little bit of toing and froing on the forex markets this morning has given way to the a sense of general dollar weakness and a slight improvement in appetite for risk. The forex markets had become rather uncertain during the Easter holiday period with many of the US and European investors out of the market. However now we are back to a full compliment, the general attitude is fairly positive. After two day’s of public holiday, the European indices re-opened and have surged higher amid the catch-up. The gains have also been helped by positive news regarding the pharmaceuticals companies, with GlaxoSmithKline and AstraZeneca both in positive M&A stories. The proposed £60bn takeover of AstraZeneca by US company Pfizer is also helping to push Sterling/Dollar higher today.

This improvement in appetite for risk may have been fuelled by the news that the Peoples’ Bank of China would to reduce the reserve requirement ratio on rural banks in China. Investors will now be turning their attention towards the Existing Home Sales for the US this afternoon at 15:00BST which is expected to show a further decline to 4.55m (last month was 4.60m).

EUR/USD is now into the resistance band $1.3800/$1.3830. This could represent another selling opportunity for the Euro which has been on the slide for the past few sessions. This outlook would be aborted on a move above $1.3830.

GBP/USD has looked to confirm the break above $1.6822 this morning, however still has some work to do to break the recent consolidation. A move above $1.6841 though should be key.

USD/JPY has bounced off the support of the latest key reaction low and could now be leaving a 7th straight higher daily low. However for the nearer term outlook has just stalled of late and this may induce a bout of profit taking. I continue to run my longer term buy on Dollar/Yen from 101.93 as I see further gains towards the upper half of the current trading band up to wards 104.

Gold has formed some support today, once more with the 144 day moving average still acting as an excellent gauge. With $1285.50 now in place as an intraday higher low this is the first line of defence for the bulls and another potential recovery. With the recent selling pressure still not entirely over it would be a brave move to buy gold with a successful and confirmed move above $1300 still to be seen.

The European indices have been very strong today and  have rallied to within striking distance of some key levels. The DAX needs to now breach 9581 which is a lower reaction high, while the FTSE 100 needs above 6706. A closer look at the performance of the DAX versus the FTSE 100 in the past month shows that when the indices have been rallying the DAX has outperformed, but when the indices have been falling the FTSE 100 has outperformed. With the indices both higher today, the DAX is up 1.5% and FTSE 100 up 1.0%, hence the DAX is strongly outperforming.

DAX v FTSE

Leave a Reply

Your email address will not be published. Required fields are marked *