- Volatility is huge around the US economic announcements as markets are now increasingly data dependent. The weaker than expected Non-farm Payrolls put sharp downside pressure on the US dollar but this move seems to have been overdone and is now unwinding (in fact the move has unwound even more than the original loss. So it seems as though there has been little to taken from market moves over the past few days other than some rather neurotic swings.
- The FOMC minutes this week will interesting although on a general note the economic announcements are fairly think on the ground which may see market settle down and move into more of a consolidation phase. We have seen little real ground made in recent weeks, amid fairly volatile moves but this could begin to calm down.
- FOMC members are also playing an increasing role in terms of market direction, with any hawkish comments strengthening the dollar and pulling equities lower. This week, FOMC dove Bill Dudley (permanent voter) is speaking, in addition to centrist Jeffrey Lacker (voter) and dove Narayana Kocherlakota (non-voter).
- Treasury yields have been drifting lower with the yield curve flattening over the past three weeks. Notably though the 10 year yield is quite volatile since the payrolls data which reflects the lack of decision over where the market sits. As this volatility begins to reduce the market could also begin to settle.
- The Dollar Index (DXY) continued in a near to medium term volatile consolidation, with now real direction being taken from the movement.
- In other events, markets wait to see if Greece is able to re-pay a €450m loan made by the IMF when it comes due on Thursday.
- Alcoa also kicks of earnings season in the US on Wednesday this week
- Watch for: US ISM Manufacturing, Non-farm Payrolls
EUR/USD – Trading in an increasingly tight range under $1.1098
- PMI data for the Eurozone have shown that the major countries are holding on to a slightly improving outlook, however with eyes focusing firmly on the US economic data to drive sentiment this could mean more of a week of consolidation and settling could be approaching..
- There is little real trend in the euro at the moment as the resistance at $1.1098 continues to hold back any recovery. Near term charts show pivot trading around $1.0900 but with little direction the euro is becoming rather choppy as indicators become increasingly neutral for the near/medium term.
- Watch for: ISM Manufacturing, Non-farm Payrolls
GBP/USD – The loss of support at $1.4800 has re-opened the lows once more
- As we approach what is likely to be a very messy UK General Election, steeped in uncertainty, the pressure may begin to mount on sterling and become an increasingly volatile decline. The better than expected Services PMI (c. 8% of the UK economy) means that the run rate for Q2 GDP has started off on a positive note. A messy UK General Election could add the pressure back on sterling.
- For almost 3 weeks, since the spike of the FOMC meeting, Cable has been unable to breach the resistance band $1.4950/$1.5000. There has been a slight pick-up in momentum but there is little real sign of any recovery in sterling. I see more of a choppy consolidation and this makes running positions potentially damaging to any profit that has been built up as it could easily erode once more. I still see the resistance band $1.4800/$1.4850 looking to be a good selling zone.
- Watch for: Bank of England Monetary Policy, FOMC meeting minutes and various FOMC speakers
USD/JPY – Needs to breach the resistance band 120.30/120.60 top open 121.20/122
- The falling Japanese inflation is increasing speculation that the Bank of Japan may need to engage in further easing in the coming months and this is helping to underpin Dollar/Yen even in the face of the disappointing US data recently.
- The yen has been one of the worst performing of the majors in recent days and especially as the dollar has bounced back since the Payrolls. The choppy trading phase is not making it easy to take positions for more than a couple of days before moves are being retraced once more. The latest rally off 118.70 is now back around the key resistance band 118.30/118.60, which gives the nearer term traders an opportunity to lock in long profits but the medium term traders an issue. There is very much a range play at foot so riding out the range for ultimately a likely upside break seems to be the option or to add to longs at lower levels.
- Watch for: BoJ Monetary policy, FOMC meeting minutes
Gold – The bulls may have lost control as near/medium term negative signals come in again
- Again we see huge gold moves on the Non-farm Payrolls report in the opposite direction to the surprise confirming the negative correlation with the dollar. However, the dollar has begun to strengthen once more which is dragging on gold. I see a range play on the dollar and I subsequently see an opposite range play on gold.
- The rally hit resistance around the old high at $1223, but for now this is the limit of the move as the consolidation has set in. The latest two candles are negative (as the dollar rally has kicked in) and this is a concern near term that the rally may have run out of steam. Technicals are not suggesting that the bulls will be able to maintain control.
- Watch for: US dollar performance, FOMC minutes and FOMC speakers
Indices – Fear of Fed tightening still impacts Wall Street as earnings season approaches
Indices are becoming increasingly choppy with no overall concept of direction. The S&P 500 is now entering earnings season which is likely to be somewhat disappointing and this is meaning that traders are questioning valuation at a time at which the Fed could be moving towards tightening (if the data deems fit). The DAX is still helped by any euro weakening due to its highly weighted exporters.
- S&P 500 – Ranging still between 2040/2120, but in an increasingly choppy fashion.
- DAX Xetra – The big uptrend has stalled for now, but the prospect of QE is still underpinning the positive outlook. Key resistance at 12219. Key support is now at 11620.
- FTSE 100 – With support forming in the band 6700/6800 there is still a slightly positive skew, but the prospect of a messy UK election could increase the volatility and also dampen expectations on UK equities. Key resistance remains 7065.
WATCH OUT FOR THIS WEEK
Tuesday 7th April
- US – JOLTS job openings
Wednesday 8th April
- Japan – BoJ Monetary Policy & press conference
- US – Crude Oil Inventories
- US – FOMC meeting minutes
Thursday 9th April
- UK – BoE Monetary Policy
- US – Weekly Jobless Claims
Friday 10th April
- China – CPI
- Switzerland – Unemployment
- UK – Industrial Production
- Canada – Unemployment
Monday 13th April
- China – Trade Balance
Tuesday 14th April
- UK – CPI
- US – Retail Sales
- US – PPI
Wednesday 15th April
- China – GDP
- China – Industrial Production
- Eurozone – ECB monetary policy + press conference
- US – Industrial Production & Capacity Utilization
- Canada – BoC monetary policy
- US – Crude Oil Inventories
- US – NAHB Housing market index
Thursday 16th April
- Australia – Unemployment
- US – Building Permits & Housing Starts
- US – Weekly Jobless Claims
- G20 meeting
Friday 17th April
- IMF meeting
- UK – Unemployment
- Eurozone – CPI (Final)
- US – CPI
- US – University of Michigan Consumer Sentiment (Prelim)