23/07/2014: Trading outlook ahead of the US session

An early bout of profit-taking did not last long as equity markets have continued to push higher today. The driver has been the calming of geopolitical tensions in the past day or so as the Russian separatists have become more co-operative with international investigators into the causes and dealing with the flight MH17 air disaster.

With investors more settled in their sentiment financial markets have calmed down, with equities gaining, US Treasuries little changed and this means that the market can begin to concentrate on matters elsewhere. The announcement of Bank of England meeting minutes have added corrective pressure on Cable, as if the market has been disappointed with the unanimous vote to keep rates flat. If that is the case, then expectations are a little stretched considering the BoE’s Quarterly Inflation Report which is due on 13th August. It is likely to be after this report at which the voting will begin to possibly change more hawkish.

Much beyond that, there is little to get US traders interested from an economic standpoint today. The Eurozone consumer confidence at 15:00BST is expected to remain flat at -7.5 although with the recent run of weakness on the euro, perhaps any data that does not show a deterioration could encourage a minor short squeeze. The Reserve Bank of New Zealand announces monetary policy at 22:00BST this evening and is touted to be moving for a 25 bps cut. The Kiwi dollar is around a quarter of a percent higher currently and seems to be already anticipating the move so much is being prices in already.

After earlier weakness the euro has started to find a bit of support. With EUR/USD trading at a day high the immediate hurdle is the February low at $1.3475. However, the resistance comes in thick and fast for any recovery, with $1.3500 and $1.3550 ready to hold back any rally. With RSI around 30 I would be careful of chasing the euro lower and an unwinding technical rally would probably be better to be sold into.

Cable continues to drift into the midst of the support band $1.7000/$1.7060 after a slight “disappointment” in the Bank of England meeting minutes. Despite this six day decline continuing, I still expect support to be found above $1.7000 and I am now looking for a buy signal.

The recovery in Dollar/Yen did not last long and appears to have rolled over already. The lower highs, deteriorating technical indicators and pressure on supports continues.

Gold continues to form support on an intraday basis around $1305 which it has built for the past four days. As yet the outlook is uncertain on a near term horizon but I am still looking for a higher low above the $1291.70 low from last week (and the 144 day ma currently at $1294.70). I would prefer to stand aside to see how this one pans out in the near term.

The DAX is looking to make a move above the resistance around 9800 which is both old support and also the falling 21 day moving average which capped the latest rally.  The bulls would become much happier if there could be a rally through 9872. The FTSE 100 is also in recovery mode which, although makes for a very messy chart, is still improving as investor sentiment picks up again. Playing the FTSE 100 has been incredibly difficult in the past few months and there is little to suggest that this will not continue to be the case with geopolitical events still rumbling in the background.

 

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