28/03/2014: Trading outlook ahead of the US session

There has been no stand-out reason behind market moves this morning. Reports of weaker regional inflation data in German suggests a softer national figure when it is released at 13:00GMT. Coupled with stronger Bunds, investors appear to be positioning for a weaker inflation environment, and hence the early Euro weakness. However the early move from this morning’s trade has been unwound as Euro traders have halted a sell-off, albeit perhaps temporarily.

US data is focused on the final reading of the University of Michigan Consumer Sentiment at 13:55GMT which is forecast at 80.5.

EUR/USD has rebounded from just above the $1.3700 level back towards the resistance around $1.3748. This should act as a near term ceiling and a potential selling opportunity once more. There is support around $1.3700 which is an old pivot level, but the next key support is not until $1.3641. The falling 21 hour moving average (currently $1.3740) continues to act as a basis of near term resistance.

GBP/USD continues to form support once more around the 38.2% Fibonacci retracemnt at $1.6603, a level that is becoming increasingly important in the near term. The rising 55 hour moving average (currently $1.6589) can be seen as a basis of support and if that breaks then the outlook is beginning to come under pressure. Trading consistently above $1.6600 suggests that Cable remains positive for further gains above yesterday’s high at $1.6647.

USD/JPY has rallied once more towards the resistance around 102.48 which has capped any thoughts of gains in the past few days. The technical indicators do not suggest any break to the upside, and a move back towards 102.00 can be expected.

Gold continues to struggle under yesterday’s breakdown which has now become the basis of resistance at $1300.00. The importance of the approaching support of the 50% Fib level at $1288.13 and the 144 day moving average at $1286.58 suggests caution with chasing this lower.

The DAX remains very strong following the breakout above 9377 and the bulls are very much in control, using corrections as a chance to buy. Intraday momentum is a touch stretched and could induce a correction near term. There is a gap still open at 9455 which needs to be filled. The drastic underperformance of the FTSE 100 continues as the index has unwound any early positivity (however it is being dragged down by the Life Insurance sector, which is cutting around 20 points off the index today). This is putting the outlook under pressure again and a breach of 9562 would re-open the recent lows at 9506 and 9493.

Current Trade – Short on Euro/Yen. I have opened a short position on Euro/Yen this morning following on from the range breakdown yesterday. The position has moved against me, but the rationale remains in place. There is the resistance of the falling 55 hour moving average at 140.65 and old key support turned resistance at 140.68. I continue to run the position as I believe the outlook for Euro/Yen remains weak.

 

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