European traders have been given an uninspired handover as first Wall Street and then Asian markets drifted slightly lower. US markets were held back by weaker than expected Consumer Confidence, whilst trading in Asian equities was disappointing with property stocks continuing to decline in China amid the prospect of tightening liquidity conditions. This has left European traders with a muted open. Unless something drastic happens soon this week could turn out to be rather a drab end to the month as traders become increasingly cautious over the huge data announcements next week.
The second reading of UK GDP will dominate the European morning with a release at 09:30GMT. Although there is no change expected at 0.7% for the quarter, the Sterling bulls will be hoping to at least hit expectations. Traders will have another opportunity to make excuses for the bleak US winter today as more housing data is released this afternoon, with New Home Sales announced at 15:00GMT. Housing data in the US has been mixed of late, with the Case-Shiller index yesterday showing an improvement, while the recent existing home sales were weaker.
Chart of the Day – EUR/JPY
We have seen a mixed set of technical signals from Euro/Yen since the break above the key resistance around 140.30. A sharp decline and rebound used the old downtrend as support last week, which was a positive. However, the 55 day moving average has become the basis of resistance at 141.18, whilst momentum indicators are losing upside impetus and rolling over, which is a warning. The intraday chart shows a band of support around 140.20 , with technical indicators increasingly neutral. The support at 140.09 needs to remain intact for the bulls to retain control. The initial resistance at 141.96 is guarding the 141.26 high.
The trading band that has formed over the past week or so shows little sign yet of breaking. The support on the daily chart comes in around $1.3685, with the ceiling at $1.3773. There is still arguably a slight upside bias with the rate trading above the moving averages and momentum in bullish configuration. The intraday hourly chart also remains towards the bullish side, with the rate continuing to use the rising 200 hour moving average (currently $1.3727) as the basis of support for the big intraday corrections. However, the uptrend has been broken as the consolidation continues. Continue to play the range until there is a decisive breakout.
Cable appear to be gradually regaining its poise once more after the drift back towards the 38.2% Fibonacci retracement of the previous bull run to $1.6822. The daily chart continues to show that this correction has been nothing more than an unwinding of overbought momentum and something that has helped to renew upside potential. The intraday hourly chart now shows that the sequence of lower highs over the past few days has now been broken, whilst the moving averages have all turned positive again and are becoming supportive. With hourly momentum indicators once more looking to turn positive, corrections now appear to be chances to buy. There are lows in pace at $1.6660 and yesterday’s key reaction low at $1.6640. A move above $1.6726 re-opens the upside.
Within the on-going consolidation in Dollar/Yen under the key resistance at 102.83, the intraday chart has begun to leave a sequence of lower highs and lower lows over the past few days. Despite hourly moving averages all flattening off, the Dollar will need to rally back above the resistance now in place at 102.40 as the lows move back toward the pivot level around 102.00. Momentum indicators have taken on a slightly more bearish configuration in the past 24 hours and this suggests that downside pressure within the consolidation is beginning to grow. Such is the nature of a consolidation, a move below yesterday’s low at 102.04 opens the downside towards 101.65, whilst above 102.40 opens 102.62.
Having undergone a short period of consolidation the rally in the gold price has decisively resumed. The move towards the target from the base pattern at $1350 is very much in full swing again, whilst the next key resistance on the daily chart at $1361.60, the October high, should not be ruled out either. Intraday technical are equally as bullish with the price using the rising 55 hour moving average as the basis of resistance, currently at $1335; while the hourly momentum indicators are all very strong. The first support comes in at $1337.24.