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26/06/2014: Trading outlook ahead of the US session

We have seen Cable jumping on the back of the Bank of England financial stability report this morning (see previous blog). However, much beyond that, the European trading has been fairly quiet this morning. There has been a gradual erosion of early gains in equities, whilst the dollar has managed to regain some lost ground.

Any suggestion that the equity indices would take the lead from Wall Street and embark upon a recovery following yesterday’s weakness has fallen on deaf ears, as the early reaction gains have slowly been eroded throughout the morning. The DAX is now increasingly at risk of forming a top pattern (needs a move below 9829 to complete and below 9810 to confirm). The less said about the FTSE 100 the better, however with yesterday’s decline the downside pressure seems to be pulling the index back towards a test of the key support band 6675/6700 where there is a series of key supports. There has been no real reaction on the FTSE 100 to the financial stability report.

Forex trading has seen the dollar gradually claw back some lost ground as the morning has progresses. The initial sense of positivity for the Euro has been removed and EUR/USD is now back towards a test of the initial support at $1.3600. GBP/USD has rallied above $1.7000 again and the bulls will now be looking for support to form above what I see as now becoming a key pivot level near term. USD/JPY is still managing to hold above the test of the low at 101.57, with very little impact seen throughout the morning. Perhaps traders are waiting for the Japanese CPI data that is due overnight?

Traders will be looking at the US Weekly Jobless Claims this afternoon at 13:30BST. However, if the forecast is anything to go by, there will be little to get the pulses racing with the forecast improvement of just 1,000 jobs on the week to 311,000.

Gold has maintained its early weakness and is back around $1310. The key near term support remains $1306.25, but we should wait to see whether this support begins to fail before looking to use this recent rally as another chance to sell around the key resistance of the primary downtrend.

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