Dow’s Eight Week Rise Comes To An End


After what has been a fairly ‘settled’ market in the last few weeks in terms  of Euro-Zone stability, this week binary options traders are going to have to prepare themselves for any fallout as the spotlight once again turns to the single currency.

The latest Cypriot bailout deal opens up a number of questions for the economic bloc and could well undermine stability. Panic could be sparked among investors following the talk of ‘tax levies’ on investors funds with the move potentially marking a dangerous precedence in approved. In particular investors in other bailout zones will be watching carefully no doubt for the next move.

On the other side of the pond the eighth week of consecutive rises on the DOW was brought to an end, with the dollar also looking softer across the board. This weakness if it continues may actually prove supportive of the Euro – or at least help to cushion a fall.

The upcoming week sees the Fed Rate statement and the key thing that investors will be looking for is any mention of an end to the current stimulus which has helped to fuel recent gains. It may prove to be that Fridays lower close turns into a temporary sell-off before markets move higher again.

Key News  This Week

  • Monday – AUD – Monetary policy minutes
  • Tuesday – GBP – CPI (y/y), PPI (m/m), EUR – German ZEW Economic Sentiment, USD – Building permits
  • Wednesday – GBP – MPC Minutes, Annual Budget, USD – FOMC Statement, NZD – GDP 9q/q)
  • Thursday – EUR – German Manu PMI, GBP – Retail Sales, USD- Unemployment Claims, Existing Home Sales, Philly Fed Manu Index
  • Friday – EUR – German IFO Business Climate

In Focus

eurusd-outlook-18-03-13

A strong bounce at the end of last week from 1.2910 saw the pair pushing back strongly above 1.30. Given the extent of the bounce the potential exists for additional gains back to towards 1.33 in the coming sessions.

However significant fundamental risk could occur at the beginning of the week (Cyprus). Until this shows some signs of being resolved look towards 1.2875. PUT

Currency Majors

EUR/USD – (see above)

USD/JPY – 95,34 provides near term support to pullbacks and any moves below this level could well see further near term falls to the 94.50 region. The overall trend however is seen as bullish.
USD/CHF –  The fallback to 0.9375 sees the pair testing a key support level. Look lower down towards 0.9000 for the week on a break of this level.

GBP/USD – A key determinate of direction this week is likely to come from the annual budget statement. Given the ‘risk’ to trading this week many binary traders may want to stand aside. However ‘technically’ the pair could be interesting with a rise to 1.5391 on the cards as the pair moves up strongly from recent low set at 1.4830.

Major Indices

DOW – Follow an extended run of gains, events this week could see the market look to consolidate its gains. On a pullback expect 14,000 to provide a level of solid support. .

NASDAQ – The Index has not shared so many of the gains of its cousins in recent weeks, although there is reason to expect accelerated gains if 2800 can be taken out. Look for a move above this level or below 2700 to determine the next strong move.

FTSE – Finishing in positive territory for the week, the FTSE looks ripe for some consolidation of recent gains. 6400 looks to provide an obvious level where a pullback, if it occurs this week, should be supported.

Commodities

Oil – Last week’s fall to and bounce from 89.34 indicates that a short term low could be in place. Against this level expect further gains, targeting 94.94. A break here will accelerate gains.

Gold – It seems that the metal may have formed a base at 1555. Given last week’s pressure on 1600 the outlook remains broadly bullish. Look for an early break of this level to ‘go long’ towards a target of 1650.

Stocks

Sportswear giant Nike is set to announce its results on Wednesday with growth in the stock expected to be propelled by higher demand from North America and across emerging markets.

Watch the stock for signs of these factors propelling growth and overcoming the impediments of rising  labor costs and unfavorable exchange rates. CALL on improved profit margins.