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23/04/2014: Trading outlook ahead of the US session


There is a flight into safe havens again today. In forex there has been a strengthening of the yen and the Swiss franc, while the dollar has pared losses against sterling, and the commodity currencies. Equity markets are lower, gold is higher, while in the bond markets, US treasurys, gilts and bunds are all showing strength.

The only real notable exception which is bucking the trend is the strength of the Euro today. The flash PMI data for the Eurozone was broadly positive (with the exception of France) and this has helped to support the single currency today. The Bank of England meeting minutes this morning gave little steer on spare capacity in the UK economy and the pound has been hit. With very little US data to speak of this afternoon, forex pairs could be set for a tough afternoon.

EUR/USD broke above $1.3830 this morning which has opened a test of the key near term reaction high at $1.3865. The way this Euro/Dollar chart is now shaping up, it looks like buying into weakness is the way to pay it. Perhaps look for long positions $1.3820/30.

GBP/USD, I spoke in the morning report video today about how I was concerned about the lack of conviction in yesterday’s attempt at $1.6841 and now is seems as though the profit taking could be looming. The confirmation would come with a break of $1.6770 which is as yet still intact.

USD/JPY is another pair that I have been concerned by the onset of a correction and again it looks to be ready. The break below 102.34  breaks a 7 day sequence of higher lows and the daily momentum indicators are all turning lower again. I am still running my medium/longer term long position on Dollar/Yen, but I will be watching this very closely and may be tempted to lock in a small profit. Be careful to manage stops on any long positions.

Gold has been supported by today’s flight to safety and is looking to develop the support just above $1277 which although seriously tested yesterday, remains largely intact. This is a tough near term call as the pressure remains to the downside and this would be another reaction towards the falling 55 hour moving average around $1286 before the selling pressure resumes. Only a move above $1292.50 would begin to fell as though there is meaningful support.

The European indices have corrected back slightly after the huge gains from yesterday. Once more it appears as though the DAX outperforms FTSE 100 on the way up, but underperforms on the way lower. Today we see both indices falling ans the DAX slightly underperforming again. Still, this looks to be a healthy correction for the DAX with a band of support 9540/9580. The FTSE 100 failed to breach its reaction high at 6706 yesterday and is in reverse now. It is worth bearing in mind that there is little real support until the band that comes in around 6597/6620. S&P futures are showing a slight 2 point decline at the open today.


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