30/09/2014: Weekly Trading Notes

KEY DRIVERS

  • Dollar strength continues to impact across markets.
  • Drop in core Eurozone CPI inflation has resulted in selling pressure on the euro and resulted in further broad dollar strength.
  • Pressure on Draghi and the ECB is mounting, but only expected to add meat to the bones of ABS and covered bonds purchases on Thursday.
  • Crucial economic data throughout the week will create volatility in forex markets – special focus on manufacturing PMIs, ECB and US employment data.
  • Non-farm Payrolls report is expected to show improvement back above 200k, but also watch for improving labor force participation and average earnings growth above +0.2%.
  • Strength of the dollar continues to put pressure on precious metals prices.
  • Indices looking for guidance only have another week to wait for the next earnings season.
  • WATCH FOR: ECB and Draghi’s press conference on Thursday, Non-farm Payrolls on Friday 

 

EUR/USD – Consolidation continues to be sold into   

  • The drop in Eurozone core CPI highlights problems in the region – and the pressure on the ECB to further ease monetary policy will heap further downside pressure on the euro.
  • Losing the $1.2660 support opens $1.2463 as the next low.
  • However there is very little real support now until the key July 2012 low at $1.2040.
  • Momentum remains incredibly weak.
  • Watch for: US ISM Manufacturing, ECB, Non-farm Payrolls

GBP/USD – Significant downside pressure suggests selling into strength

  • The outlook is weakening again.
  • The higher low at $1.6160 is being tested, if breached opens $1.6050 again.
  • Momentum indicators suggest the recent rebound was just a bear market rally and that any gains will be sold into now.
  • Watch for: UK PMIs for manufacturing and services, ISM Manufacturing, Non-farm Payrolls

USD/JPY – Looking to buy into any weakness for 110.65

  • A recent consolidation 108.24/109.45 has broken to the upside and implies a target of 110.65.
  • This is also the next key resistance from August 2008.
  • The outlook remains strong for the dollar and any weakness is being bought into.
  • There is a basis of support now 108.50/109.00.
  • Watch for: Non-farm Payrolls

 

Gold – Use rallies as a chance to sell for weakness to $1200 and then $1184.50

  • The outlook for commodities remains under pressure from the strong dollar.
  • The underside of the old downtrend channel (currently $1231) is an excellent basis of resistance in the past couple of weeks.
  • There is little reason to suspect that prices will not no retest the key December 2013 low at $1184.50.
  • Strong resistance comes in at $1241.
  • Watch for: Any dollar strength hitting commodity prices

 

Indices – Continue to prefer Wall Street over European markets.

Indices have struggled outside earnings season, but the Tier 1 macro data this week could be a positive drive.

  • S&P 500 has corrected recently but looks ready to resume the primary uptrend. Good support in the 1945/1955 band.
  • DAX remains in a corrective phase having lost the support at 9600. However the downside target of 9427 has been hit with support around 9400.
  • FTSE is similar to the DAX in having already hit its downside target at 6640, however there is no real support until the August low at 6529

 

WATCH OUT FOR

Tuesday 30th September

  • US – CB Consumer Confidence

Wednesday 1st October

  • China – Manufacturing PMI
  • Eurozone – German Final Manufacturing PMI
  • Eurozone – Final Manufacturing PMI
  • UK – Manufacturing PMI
  • US – ADP Employment Report
  • US – ISM Manufacturing PMI

Thursday 2nd October

  • US – Construction PMI
  • Eurozone – ECB monetary policy + Draghi’s press conference

Friday 3rd October

  • China – Non-Manufacturing PMI
  • US – Services PMI
  • US – Non-farm Payrolls
  • US – Trade Balance
  • US – ISM Non-Manufacturing PMI

 

NEXT WEEK

Tuesday 7th October

  • Japan – BoJ Monetary Policy & press conference
  • Australia – RBA Monetary Policy
  • Switzerland – CPI
  • UK – Manufacturing Production

Wednesday 8th October

  • US – FOMC Meeting Minutes

Thursday 9th October

  • Australia – Unemployment
  • UK – BoE Monetary Policy
  • US – Weekly Jobless Claims

Friday 10th October

  • UK – Trade Balance
  • Canada – Unemployment

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