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26/08/2014: Weekly Trading Notes


KEY DRIVERS

  • 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

 

NEXT WEEK

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

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At Hantec Markets Ltd we provide an execution only service. Any opinions expressed by analyst Richard Perry should not be construed as investment advice or an investment recommendation. This report does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. Forex and CFDs are leveraged products which can result in losses greater than your initial deposit. Therefore you should only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions.