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24/04/2014: Trading outlook ahead of the US session

There are two themes at play today moving towards the US session. For equities, it is the positive corporate earnings out of the US which is helping to push European stock markets higher today. Strong earnings from both Apple and Facebook after hours last night have bolstered S&P futures and the FTSE100, DAX and CAC are all higher today.

Secondly, in forex it is the performance of the dollar, which had been struggling early on against the key major currencies but is staging a bit of a recovery in the past hour or so. This dollar rally in the past few hours has also seen gold come back under pressure today. The speech by Mario Draghi this morning shows that ECB continues to look to talk the Euro lower. Draghi noted that the ECB remains concerned over the level of the exchange rate, with his speech striking a dovish tone.

Traders will be looking towards the weekly jobless claims and durable goods orders, both at 13:30BST. Anything around or below 300,000 on the jobless claims would be dollar positive, while if the durable goods order can prevent a slight reduction in growth to 2.0% that has been forecast, this would also benefit the dollar.

EUR/USD has been dragged lower by Draghi’s speech. Despite the slight improvement in the German Ifo, with Draghi talking the Euro lower, downside pressure is growing. The technical charts still suggest that the intraday corrections have been bought into in the past few days and there has been a lack of real conviction behind this morning’s dip which could suggest this is once more a chance to buy. This is the way I have taken the move, having opened a long Euro position.

GBP/USD is still a big struggle and near term signals are highly uncertain to call. Cable has traded in an 81 point range for the past week, and until this consolidation period comes to an end it is a very difficult call. The US data today could make a difference, especially if the data is strong.

USD/JPY has retraced early weakness but the threat of a correction remains with a series of lower highs now in place. The rally in the last few hours has brought the rate back towards the resistance around 102.40 which has become a pivot level in the last few days. The downside pressure is building and with the 89 hour moving average providing the basis of resistance now around 102.50 this could be a chance to shave some long positions or look at new near term short positions.

Gold is once more under pressure as the dollar bounces back intraday.  The key low at $1277.10 has subsequently come under threat. This move shows that the bulls are very nervous still and a recovery is built on soft ground. Expect further pressure on the $1277.10 low. The risk to this is further escalation of events in eastern Ukraine.

Indices have jumped this morning. Once more, on a positive day for markets, the DAX is outperforming the FTSE 100 (as is the CAC). The prospect of looser monetary policy by the ECB is certainly helping to garner support, while the positive German Ifo number has also helped. A break back above 9600 has re-opened the upside towards the 9721 high, although price action in the last couple of days suggests this move would be choppy, with dips seen as a chance to buy. The FTSE 100 has now made a strong breach above the former key intraday resistance at 6706. This now forms a base pattern which suggests a return towards the February high at 6866. S&P futures are currently around 8 points higher at 1880 to suggest a positive open on Wall Street.

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.