30/05/2014: Another cautious day beckons as the month draws to a quiet close

Market Overview

Wall Street posted new all-time highs once more yesterday, despite the disappointing GDP revision for the first quarter. These new highs helped Asian markets to post gains overnight. The exception of the Japanese Nikkei 225 which was held back by a slightly stronger yen once more after the Japan National CPI for April came in line with expectations with at 3.4% year on year. European markets are once again trading mixed around the open and appear apprehensive to follow Wall Street higher.

Forex trading shows little real moves on the forex majors with the exception of Sterling which has made early gains against the dollar, whilst the yen is also showing some strength.

On the final trading day of the month there is little macro data to move global markets, although Canadian dollar traders will be watching for the Canada GDP data which is due at 13:30BST and forecast at 1.8% annualised. Other than that there is the revision of the University of Michigan sentiment at 14:55BST which the consensus has pencilled in at 82.5.

Chart of the Day – DAX Xetra

The last two sessions have been full of consolidation on the DAX and with early trading today suggesting a third stunted day, the temptation to lock in profits may be increasing. The technical momentum studies on the daily chart show the RSI at historic extended levels, while the Stochastics are turning lower in overbought territory. This is also all coming as the DAX hits the upper limit of an uptrend channel that has formed in the past six weeks. Shorting in an uptrend channel is not often a wise strategy but chasing it higher may not be ideal either as the potential for a near term correction back towards the gap that remains open at 9780 could easily be seen and represent another chance to buy at a lower level.

DAX   30052014

EUR/USD

Despite the disappointing revision lower of US GDP there was just a 41 pip range on Euro/Dollar yesterday as an element of stability crept back. However, the daily chart shows very little improvement and gains just look to be another chance to sell as momentum indicators retain an extremely bearish configuration. On the intraday hourly chart, a downtrend has formed in the past 6 days and yesterday’s price action looks to simply be another consolidation prior to further downside. Hourly momentum indicators have unwound to renew downside potential. Selling in the resistance band $1.3624/$1.3635 would be ideal for a retest of the next key low on the daily chart at $1.3561. Ultimately the daily chart suggests a retest of the February low at $1.3475. The big resistance comes in around $1.3670.

EURUSD   30052014

GBP/USD

After Wednesday’s sharp move to the downside which threatens to change the outlook for Cable the support of the 89 day moving average (currently $1.6687) looks to be coming in once more as the limit of the big corrections. However the threat to the downside is not yet over as momentum indicators retain a corrective outlook and despite the weak GDP print from the US there has been little conviction yet behind a recovery for Cable. So far this move looks to be unwinding oversold near term momentum and is helping to renew downside potential. The resistance band that comes in between $1.6760/$1.6780 could be an opportunity for a retest of $1.6680. The key resistance comes in at $1.6815.

GBPUSD   30052014

USD/JPY

Despite the intraday rally seen yesterday which has left a second straight long downside tail on the daily candlestick chart, the inference is still that the downside tests continue to come as the Asian trading today has seen early selling pressure once again. Falling moving averages and momentum indicators that have turned lower having renewed downside potential reflect the bearish pressure. The hourly intraday chart shows a series of lower highs and resistance at 101.70 growing in significance, whilst the hourly momentum indicators such as RSI and MACD suggest that rallies should be treated as a chance to sell. The key pivot level remains around 102 with the 102.14 high from Wednesday the key resistance. Expect further pressure on the 101.41 low and 101.30, before a likely retest of 100.80.

USDJPY   30052014

Gold

There are initial signs of support coming in for gold with yesterday’s low at $1251.10 and that selling pressure has paused overnight. However, the daily chart retains a bearish outlook now and that rallies would be a chance to sell. Furthermore the intraday chart has shown resistance at $1260 is holding back a rally and that hourly momentum has now unwound to renew downside potential. The suggestion is that there will be further downside pressure towards $1237.94 in due course. Key resistance levels remain the old supports at $1268.24 and $1276.60.

Gold   30052014

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