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25/11/2014: Weekly Trading Notes


KEY DRIVERS

  • OPEC meeting on 27th Nov could be the most important meeting for years – calls for production cuts but Saudi Arabia are likely to resist
  • US Dollar Index is looking to breakout again after a period of sideways consolidation.
  • Dovish central bankers are driving equities higher – especially comments out of ECB helping Eurozone equities (FTSE 100 continues to underperform)
  • Swiss Gold initiative referendum on 30th November to drive gold volatility next week – could be a touch pensive on price in the run up to the vote.
  • Economic Data: Dollar driven by data Tuesday and Wednesday, but then in a quiet end to the week (due to Thanksgiving in the US) it is the euro driven by Eurozone flash CPI on Friday.
  • Eurozone sovereign yields continue to fall, with French 10 year at record lows and 10 year Bund eying a test of the 0.716 spike low – driven even further down by talk from ECB members on further asset purchases (Draghi, Coeure and Constancio).
  • WATCH FOR: OPEC meeting, Eurozone flash CPI and Swiss Gold referendum

OPEC

MARKETS

EUR/USD – Play the range $1.2357/$1.2600 for now, but expect a subsequent breakdown 

  • The euro spiked lower on Friday after Draghi’s dovish comments, with the desire clearly to jawbone the euro lower.
  • However the time is increasingly coming for action.
  • Could this be next week? Unlikely due to continued German/Austrian objection.
  • However this should continue to keep a lid on EUR/USD below $1.2600.
  • Any rally within the range $1.2357/$1.2600 looks to be a chance to sell.
  • Thursday could be quiet with Thanksgiving, but Eurozone CPI could increase interest on Friday.
  • Watch for: Eurozone flash CPI

GBP/USD – Looking to sell into any strength

  • Aside from the US Consumer Confidence the US data remains strong recently and is a driver of Cable lower.
  • A recent consolidation band below $1.5736 should be resolved to the downside but for now the range continues.
  • Technical indicators remain in negative configuration.
  • Watch for: New Home Sales, Thanksgiving holiday meaning a quiet end to the week

USD/JPY – Looking to use near term corrections into support c. 117.50 a chance to buy

  • Consolidation is underway having hit (within 11 pips) the 161.8% Fibonacci upside projection target.
  • Series of higher lows continues to suggest that buying into weakness remains a viable strategy
  • Good support now at 117.33 and 115.44.
  • Watch for: Japan CPI

 

Gold – Consolidation until Friday with huge volatility next week

  • The outcome of the Swiss Gold referendum could be crucial to the long term outlook for gold.
  • Therefore expect significant volatility on Monday (after Sunday’s vote).
  • However the run up may lead to consolidation.
  • Current support is coming above $1180 and with a slight positive bias.
  • A “no” vote would induce a potentially sizeable correction lower, whilst a “Yes” vote could see a spike high on Monday
  • Watch for: Result of the Swiss Gold referendum.

 

Indices – Indices continue to gain on dovish central bank policy

Wall Street remains very strong with no real correction since the bottom in mid-October. However the VIX continues to fall and with slow creeping gains it leaves the door open to a sharp correction. Eurozone indices have been buoyed by dovish comments from ECB members. This means underperformance by the FTSE 100 which is also weighed down by resources stocks (metals prices remain under pressure).

  • S&P 500 has seen 46 record closing highs so far this year (1 more than the total achieved in 2013). RSI is at 74 and this could induce a near term correction (much needed now).The support band is now 2020/2040.
  • DAX only c. 2% from its 10,050 all-time high again. The initial break above 9891 could not be held though. RSI is overbought and is at a 12 month high. Support band now 9520/9600.
  • FTSE 100 is 2.5% away from its key 6905 high. Playing slow and steady gains as it underperforms the major peers. Momentum is less strong, but not overbought. Support 6600/6640.

 

WATCH OUT FOR THIS WEEK

Wednesday 26th November

  • UK – Q3 GDP (Second reading)
  • US – Durable Goods Orders
  • US – Weekly Jobless Claims
  • US – UoM Consumer Sentiment (revised)
  • US – New Home Sales

Thursday 27th November

  • Eurozone – German CPI (flash)
  • OPEC – meeting all day
  • US – Thanksgiving public holiday
  • Japan – CPI

Friday 28th November

  • Eurozone – CPI (flash)
  • Eurozone – Unemployment
  • Canada – GDP

 

NEXT WEEK

Sunday 30th November

  • Swiss Gold Referendum

Monday 1st December

  • China – Manufacturing PMI
  • UK – Manufacturing PMI
  • US – ISM Manufacturing PMI

Tuesday 2nd December

  • Australia – RBS monetary policy
  • UK – Construction PMI

Wednesday 3rd December

  • Australia – Q3 GDP (Second reading)
  • China – Non-Manufacturing PMI
  • UK – Services PMI
  • US – ADP Employment Report
  • US – ISM Non-Manufacturing PMI
  • Canada – BoC monetary Policy

Thursday 4th December

  • UK – BoE monetary policy (plus statement)
  • Eurozone – ECB monetary policy (plus Mario Draghi press conference)

Friday 5th December

  • US – Non-farm Payrolls
  • Canada – Unemployment  

 


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