Daily Morning report: 14/01/2014

Overview

Risk appetite continues to be pressured in the wake of the poor Non-farm Payrolls number seen on Friday. As FOMC member Dennis Lockhart suggested that the Fed would continue on its path of tapering, equity investors have taken this as something of a chance to take profits. The S&P fell into the close with the negative sentiment spilling over into first Asia and now the European session. The Nikkei fell over 3% as the strength of the Yen pulled weighed on equities, while in early trading in the European session is also under pressure. The Dollar has been under pressure early on with both the Euro and Sterling both catching a bid in early European hours. Cable investors will be looking out for the UK inflation data due out at 9.30am, while also being mindful of US Retail Sales.

Chart of the Day – S&P 500

The S&P had a sharp move lower overnight which took the index to a 3 week low. However the move, at this stage looks to just be a corrective move within the long uptrend and helps to unwind some overbought momentum. The chart is now simply back towards the breakout support around 1813, with a nice band of support to hold up a correction between 1775/1813. RSI and MACD have just rolled over but remain positive while the Stochastics have also got room to unwind.

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EUR/USD

The medium to longer term technical remain reasonably positive, With the uptrend since July intact and momentum indicators still bullish. After a fairly sedate session yesterday, the Euro has looked to make a move in early trading. A sharp move higher has broken through the resistance that has held since the announcement of Non-farm Payrolls last Friday. With the rate now unwinding an overbought position and back into the support band $1.3670/$1.3675 this looks to be a chance to buy.

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GBP/USD

As with EURUSD the uptrend since July remains intact and Cable is finding support once more amid positive momentum indicators. The intraday chart shows the Sterling bulls are pulling Cable higher once more, above the trading band just below the $1.6400 level and on towards the $1.6465 resistance. Cable is overbought on the 5 minute chart on the RSI which could mean a better entry for long positions once ithis is unwound, but at the moment the outlook look positive for Cable today.

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USD/JPY

After 2 days of decline the outlook for Dollar Yen has improved. The rate pulled back towards the band of support 101.50/102.50 and now seems to have formed a low at 102.83. An intraday uptrend is now in place and with a a sharp break above the resistance at 103.57 the outlook is positive for a bounce back towards 103.88 resistance which is the neckline of the small top pattern. On the daily chart there still looks to be some scope for a correction back towards the 101.50/102.50 support with the top I place, but for the moment we go with the bounce back towards the neckline and look to see whether that can be breached to the upside.

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Gold

2014 continues to be good for gold, so far, with a reaction higher low at $1218. However, with the 12 month downtrend coming in around $1275 and the resistance of old lows turned to rally highs around $1270, the upside looks to be limited. Momentum indicators remain in bearish configuration and the bounce could quickly begin to run out of steam. Intraday a move back below $1250 is slightly oversold on the 5 minute chart but the $1243 low from yesterday is now open.

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