- Meeting between Putin and Poroshenko could drive investor sentiment either to or from safe haven assets in the next couple of days.
- Jackson Hole has been supportive of the dollar strength (Yellen failing to rein in the FOMC hawks with a mixed speech), while the euro remains weak after Draghi talked about the divergence in monetary policy between central banks and ECB using all the tools available.
- Plunging Eurozone sovereign bond yields in focus again this week in the approach to Eurozone inflation on Friday.
- Gold being driven by geopolitics still
- Corporate earnings have been positive in both US and Europe
- Equity markets remain positive as Wall Street pushes on new all-time highs and European markets continue to rebound
- Volatility has settled down, with VIX falling (below 12).
- Eurozone CPI is the key release this week
EUR/USD – Sell into strength into resistance band $1.3240/$1.3300
- Should be driven lower by both Draghi and Yellen at Jackson Hole.
- A retest of the September 2013 key low around $1.3100.
- Watch for: German CPI, Eurozone CPI
GBP/USD – Selling any rallies within the 6 week downtrend
- Improving US economic data and comments from FOMC members are driving the dollar strength
- Resistance of the 6 week downtrend currently around $1.3390, with key resistance at $1.6700
- Minor consolidation may turn into a technical rally within the downtrend but indicators remain weak
- A retest of the March low at $1.6459 I likely
- Watch for: US Consumer Confidence and US Q2 GDP
USD/JPY – Continue to play the range 101/103
- Breakout above 103.00 has changed the outlook.
- Technical indicators now increasingly medium/longer term positive.
- Slightly overbought near term and a near term correction is threatening.
- Support at 103.50 and then 103.00 with any correction that forms a new low around there looking to be a good chance to buy.
- Watch for: Further strong US economic data to drive expectations of a rate hike.
Gold – Price drifting lower as geopolitical tensions improve, sub $12800 has opened $1240
- In the absence of a “war premium” gold trades weaker, but there has been a habit of this changing very quickly in the past few weeks if geopolitics deteriorate.
- Key support at $1280 has been breached and should now open weakness towards $1240 in due course.
- Technical indicator turning negative.
- Upside resistance band $1290/$1305.
- Watch for: Newsflow from the meeting between Poroshenko and Putin
Indices – Continue to prefer S&P 500
Indices still looking strong as geopolitics calm down and following a strong earnings season.
S&P 500 outlook is strong, whilst DAX remains volatile around the Russian geopolitics, FTSE more sedate in its gains.
- S&P 500 is pushing through 2000 for the first time. Outlook remains positive with further upside potential. Support around 1980/1990
- DAX pushing back towards the 9600 pivot level resistance. 61.8% Fibonacci retracement of the big sell-off is at 9612.
- FTSE is testing the underside resistance of the old primary uptrend c. 6815, but needs a break above the key reaction high at 6834 to continue the rally.
WATCH OUT FOR
Tuesday 26th August
- US – Durable Goods Orders
- US – Consumer Confidence
Thursday 28th August
- Eurozone – German Consumer Price Index
- US – GDP (prelim)
- US – Pending Home Sales
Friday 29th August
- Eurozone – Consumer Price Index (Flash)
- Canada – GDP
Monday 1st September
- China – Manufacturing PMI (both official and HSBC)
- Eurozone – Manufacturing PMI
- UK – Manufacturing PMI
- US – Labor Day bank holiday
Tuesday 2nd September
- Australia – RBA Monetary Policy
- UK – Construction PMI
- US – ISM Manufacturing PMI
Wednesday 3rd September
- China – Services PMI
- Australia – GDP (Q2)
- UK – Services PMI
- Canada – BoC monetary policy
Thursday 4th September
- UK – Bank of England rates decision (plus statement)
- Eurozone – ECB rates decision (plus press conference)
- US – ADP Employment Report
- US – ISM Non-manufacturing PMI
Friday 5th September
- US – Non-farm Payrolls
- Canada – Unemployment