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27/06/2014: Trading outlook ahead of the US session


Another quiet morning for the European traders with very little to get the pulses racing. UK GDP came and went and few would have noticed the difference. Amid light news flow and trading volumes, the European indices have almost flat-lined, whilst the Dollar Index remains under pressure due to the yen strength, and gold remains in consolidation mode.

UK GDP was confirmed at +0.8% for the first quarter (although the year-on-year figure was slightly down to +3.0% from the second reading of +3.1%). Sterling traders have not really reacted to the news and GBP/USD and also EUR/GBP are both trading basically flat on the day. The German regional CPI figures are showing a slight improvement in inflation, but again as yet this is not really having much of an impact on the Euro, with EUR/USD also basically flat.

USDJPY   27062014

The big move of the day has been with Dollar/Yen following the news that Japanese Core CPI at 3.4% was the highest for 32 years. This has pulled the rate back to its key band around 101.30. There has not been a close below 101.30 since February, and even then there has only been one (3rd Feb which was the day of the 100.74 key 2014 low) since late November. This means that any close below 101.30 would heap pressure on the Dollar which is already in correction mode. With the Dollar Index sliding, these key supports (such as 101.30 on Dollar/Yen and 0.8906 on Dollar/Swiss) are coming under pressure. Curiously of note though, is that Euro/Dollar seems reluctant to push back for a test of $1.3670.

DXY   27062014

European indices had opened with minor recovery gains as Wall Street clawed back losses into its close, but this move has petered out as the morning has progressed. Indices are now trading just above flat in Europe, waiting for a steer from the US again. This is all not really giving US traders too much to go on as the session approaches. S&P 500 futures are suggesting the index will open around 4 to 5 points lower. Perhaps the Michigan sentiment can give the markets a boost. It would need to beat the 82.0 expected at 14:55BST.

Despite the warnings from the Russian deputy foreign minister that Ukraine would face grave consequences for signing the EU pact, there has been very little reaction on either gold or silver this morning. I am increasingly concerned by the lack of buying pressure on gold as the dollar continues to weaken. If the dollar begins to find some support again, this could be negative for gold.


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