Dollar Tapering And Syria Risk Will Define Market Direction

by Phil Moore September 16, 2013

The week opens with the dollar continuing to retreat following a worse than expected set of figures from last Fridays NFP. Cues as to the next most likely move for the dollar will come from focus on comments from the Fed this week. Markets will be trying to work out the most likely content from next week’s FOMC meeting.

Of course just as much as the focus on QE is shaping the bigger picture of the markets, so too will the US actions towards Syria. A risk off tone has become evident from the strong gains in gold over the past few sessions. Markets dislike uncertainty and a greater clarity on the plans for military intervention will be needed to quell short term market fears.

News due for release this week is somewhat light As mentioned above, the USD will take centre stage with key figures on Jobless Claims and Retail sales due for release towards the end of the week.

Elsewhere markets will be looking for further signs of recovery in the UK’s economy with Claimant Count figures due for release on Wednesday. Later that say, the Royal Bank of New Zealand will release its latest Rate Statement. No significant change in interest rate is expected.

Key News This Week

Currency Pairs

EUR/USD - With price having fallen as expected last week., the bias for the pair continues to be on the downside. From here we remain bearish with the expectation of a probable test of the 1.30 level if the coming sessions.
USD/JPY - A jump above falling trend line resistance last week sets up the scenario for further gains in the upcoming sessions. Against support at 9850 we would look higher for a break and close above 100.00.
USD/CHF - Gains in the pair last week saw a high of 0.9454 reached. Subsequent pullback to the 0.9370 region could provide a good entry level for further gains. A daily close below this level would negate the bullish scenario.
GBP/USD - The Pound continues to push higher against the dollar, with a run towards 1.5720 looking to offer a realistic target. From here we would expect at least a temporary pullback back towards the 1.5420 level.

Major Indices

DOW - The Index found support a little higher than expect at 14800, but ultimately failed to close back above the 15,000 level. To give confidence we would need to see a strong close of this level to restate the near term bullish case.
NASDAQ - As expected the market found support just below the 3600 level last week. As with most major Indices expect to see some ‘range bound’ movement while traders get a grip on the next move. Look at 3600 and 3500 as strong support.
FTSE - Last week we wrote that 6400 should prove to be strong support and this proved to be the case. Expect a test of 6600 to open a test of 6700 in the near term.

Commodities

Oil – Last week the price of Crude pushed higher, although unlike the previous week, this time it was able to hold onto its gains. Closing just above $110 per barrel, the price has taken out a key line of support. Look higher from here against support at $108.
Gold – Although the price moved higher to test $1450, the level was rejected with the price of gold closing back below $1400 by the end of the week. We would need to see a firm daily close back above this level to provide any real conviction of further gains.