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29/07/2014: Weekly Trading Notes


KEY DRIVERS

  • Geopolitical tensions over Ukraine and Russia – sanctions on Russia continue to be increased to “Stage 3” which have “far-reaching consequences for relations on a broad range of economic areas”
  • US Earnings Season progressing well with strong showing on both earnings and revenues, positive outlook statements for Q3
  • A raft of key US economic data this week
  • Caution in equity markets, but the US dollar continues to strengthen, gold trading on geopolitics still.

 

EUR/USD – Extremely bearish. Sell into any strength

  • Despite now having RSI below 30 there is little sign of any support.
  • The double top (completed in May targets $1.3375 and is a realistic near term target.
  • Longer term downside target is $1.3000 from the head and shoulders top pattern.
  • A technical rally is due but there is little appetite for a recovery.
  • Watch for: US GDP, FOMC, Eurozone HICP and Non-farm Payrolls

GBP/USD – Near term correction towards 89 day ma. Now looking for a buy signal around $1.6900

  • The strength of the dollar continues to drag Cable lower.
  • Now looks like it may come directly back to the 89 day moving average which is c. $1.6890.
  • This has been the basis of support for each of the 3 big corrections of 2014.
  • Technical indicators have now unwound too.
  • Recent downside in Cable looks to be a good lesson in making sure you buy once support has been confirmed…
  • Watch for: US GDP, FOMC, UK Manufacturing PMI, US ISM Manufacturing and Non-farm Payrolls

USD/JPY – Look to sell within the range for a retest of February low

  • 8 consecutive up-days would be the longest of the year.
  • The dollar rally has dragged Dollar/Yen back to the pivot around 102.00
  • Medium to longer term technicals remain negative but the rally has been impressive recently
  • Technical indicators do not suggest a dollar break above 102.30 will be seen.

 

Gold – Continues to move on geopolitics but longer term technical outlook is showing signs of improvement

  • The safe haven trade will continue to be closely linked to how severe the tensions with Russia are.
  • But technical levels are becoming supportive now, with a key low above $1280 and the 144 day moving average again the basis of support (currently $1295)
  • As geopolitics ease some of the “war premium” may be removed but the support is growing on a longer term basis.
  • Above $1324 would re-open the reaction high at $1345.
  • Sub $1280 questions the bull control.

 

Indices – Continue to much prefer S&P 500

With earnings season supportive, S&P 500 is performing very strongly.

DAX continues to suffer and European earnings are struggling to be heard above the geopolitical noise

DAX underperforms FTSE 100 when tensions with Russia flare up due to reliance on its energy imports.

  • S&P 500 continues to find support at higher levels (1955 is now increasingly strong) and pushes ever towards 2000
  • DAX is having the number of negative signals mount, breaching the primary uptrend and seriously testing support of the 144 day ma. Key support remains c. 9600.
  • FTSE remains very messy on technical but is looking to sustain a move above 6800 resistance at 6800, which would re-open 6895.

 

WATCH OUT FOR

Tuesday 29th July

  • US – CB Consumer Confidence

Wednesday 30th July

  • Eurozone – German CPI (July flash)
  • US – ADP Employment Report
  • US – GDP (Q2 Advance)
  • US – FOMC statement

Thursday 31st July

  • Eurozone – CPI (July flash)
  • Canada – GDP
  • US – Weekly Jobless Claims

Friday 1st August

  • China – Manufacturing PMI (Govt and HSBC)
  • UK – Manufacturing PMI
  • US – Non-farm Payrolls
  • US – ISM Manufacturing PMI

 

NEXT WEEK

Tuesday 5th August

  • Australia – RBA rates decision
  • UK – Services PMI
  • US – ISM Non-manufacturing PMI

Wednesday 6th August

  • UK – Manufacturing Production
  • US – Trade Balance

Thursday 7th August

  • Australia – Unemployment
  • UK – Bank of England rates decision
  • Eurozone – ECB rates decision plus press conference
  • US – Weekly Jobless Claims

Friday 8th August

  • China – Trade Balance
  • Japan – BoJ rates decision
  • Canada – Unemployment

Saturday 9th August

  • China – CPI

 


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