25/02/2014: Investors take a pause for breath after the S&P shies away from an all-time high

Market Overview

The European markets have begun the day in a cautious mode despite gains on Wall Street which yesterday saw an intraday all-time high for the S&P 500. However, the fact that the move could not be sustained (a close of 1847.61 was just under the 1848.38 all-time high from January), is giving European traders something to ponder early on today. Asian markets though reacted positively , with the Japanese Nikkei 225 seeing gains of 1.5%.

After a day of consolidation yesterday, major forex pairs are pushing higher in early trading today. However being close to the end of the month and with a raft of key data out next week, investors are unlikely to take huge bets on the direction of the market. Furthermore, some people might see the rejection of an all-time high on the S&P 500 as a warning signal.

After German GDP was confirmed at 1.3% this morning the key economic announcements for the remainder of the day come from the States. The housing market in the US remains in focus with the Case-Shiller House Price Index (at 14:00GMT) and the big question will be if investors continue to make allowances for the weather if there is to be another disappointing release on housing. Consumer Confidence (at 15:00GMT) is another number that could be impacted by the weather. Traders have tended to give the benefit of the doubt recently, so this makes the reaction around the data today even harder to predict.

Chart of the Day – CAC 40 Index

With these equity markets around the world testing the barrier of their key highs which one looks the best. Well, the French CAC 40 Index has made a clean and very bullish breakout. Unlike many markets which are challenging all time highs (the CAC all time high was way up at 6168) but in many ways this gives the CAC more upside potential. With two closing highs above the key resistance a 4356 and yesterday with a bullish marabuzo candlestick (open at the low of the day to push higher all day to close at the high) the outlook is strong. RSI is a touch stretched but is unwinding with some early weakness today. We now look to use any correction into the support band 4290/4352 as a chance to buy.

CAC   25022014

EUR/USD

The sideways consolidation on the daily chart continues to build, with the rate now trading in a tight range below the resistance at $1.3773 and above the band of support around $1.3700. Daily momentum indicators are bullish and suggest this should resolve to the upside. On the hourly intraday chart, the big uptrend in place since 6th Feb was breached yesterday. However a quick rally has gone some way towards remedying the situation and the Euro looks to be building upside pressure once more again today for a test of $1.3773. The 200 hour moving average (currently $1.3719) continues to be used as the basis of support for the major intraday corrections.

EURUSD   25022014

GBP/USD

The support around the 38.2% Fibonacci retracement at $1.6603 seems to be increasingly important near term. Having acted in previous sessions as the basis of support, again yesterday a brief dip below was enough to encourage support once more, at $1.6581. An instant recovery has pulled the rate to trade above the shorter hourly moving averages for the first time in over a week, with them also beginning to turn higher, which is a positive development. Momentum indicators have far more of a bullish configuration now and the inference is that a correction now should be viewed as a buying opportunity for a retest of $1.6724. There is overnight support at $1.6643.

GBPUSD   25022014

USD/JPY

Another uninspiring session for Dollar/Yen yesterday as the rate remains stuck under the key resistance at 102.83. As moving averages and momentum studies on the daily chart continue to flatten off and become increasingly neutral, this chart appears to be waiting for an event driven move. The intraday position shows us little more now, with an intraday low in place at 102.14, which is now above the historic pivot level which has formed around 102. Hourly momentum and moving averages are equally unable to indicate direction, so we must continue to play the range. Until there is a serious change of sentiment, any move towards the resistance around 102.68 is a selling opportunity, while a retreat towards the 102 pivot level is a chance to buy.

USDJPY   25022014

Gold

After  recent bout of consolidation the gold price began to make its next move higher yesterday. A move above the recent resistance $1332.10 has now re-opened the target from the base pattern at $1350. Daily momentum indicators remain in bullish configuration, while the moving averages are also increasingly positive. Technical indicators also look bullish on the intraday hourly chart, while there is a good band of support between $1319/$1328. Any weakness would now look to be an opportunity to buy. Expect a move back above yesterday’s high at $1338.60 further gains towards the base target on the daily chart at $1350.

Gold   25022014

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