Financial Markets Reach Highs - Where Next?
Moving into a new week expect continued momentum with little news due for release that is likely to derail the current momentum.
Global markets continue to surge higher as expectations for growth increase and fears of continuing the financial crisis recede. With many markets from around the globe now at record highs, it seems there is little that can dampen the party.
This week traders will focus on events both sides of the pond, although the most important news will come from the United States at each end of the week. Retails Sales figures kick off the week with CPI (Consumer Purchasing Index) figures due for release on Thursday.
Midweek attention turns to Europe with the German ZEW Economic Sentiment figures due on Tuesday and GDP figures due on Wednesday. While signs of inflation creeping up in the UK in the BoE inflation report, could see the pound curtail its recent poor run.
Elsewhere commodity markets remain mixed in their outlook and gold still looks to remain vulnerable as its price fails to break 1485 support. Given the likely continued optimism in markets, the precious metal is likely to remain under pressure and could see further falls.
Key News This Week
Focus - Gold
For a second week I am keeping Gold as a prime market to watch.
The price should remain under pressure as money is switched to equities (Stocks). 1485 has proved a touch level to break so far and should remain so in the near future. While the price remains below this support level the overall outlook remains bearish.
PUT - Use rallies to position short for an expected test of recent lows at 1320 over the coming trading sessions.
EUR/USD - Little has changed from a technical perspective on the pair. Pushing as high as 1.3240 last week, gains were erased with support again found at above 1.30 (1.3030 to be exact). Continue to play the range until we see a decisive break either way.
The pair continues to remain largely range bound, showing little real conviction to break outside of the April/May trading range. Keep a close watch on the current live price and be prepared to go short if the 1.2934 support breaks. Then expect a fast acceleration to the downside form a technical viewpoint.
USD/JPY - Last week’s break of 100.00 continues the strong gains that have been made in the pair. Expect to see additional gains over the coming days and weeks. Expect gains to stall around the 101.50 region which is the 2009 high. This could be a place to position for a short -term pullback.
USD/CHF - With the dollar in demand at present (risk off) we could see some movement in this pair this week in the dollars favor. Look for a move above 94.80 (falling channel resistance) to target gains upto 96.00.
GBP/USD - Since hitting its low at 1.4830, the pair has posted a series of impressive daily gains. Expect high levels of volatility this week with the imminent rate decision. Look at 1.5600 as the likely ceiling for further gains.
Falls are expected in the pair with a break of near term channel support likely to signal further falls. On a break of channel support at 153.50 expect 1.5190 to act as the next level of support to further falls back towards March lows.
DOW – Now above 15,000 we are looking to see just how high this index can go. With all time highs broken and an optimistic view on markets, expect further gains to be posted. While the rally could stall on disappointing news, 14,400 would still prove a good point to go long.
NASDAQ – Key support sits down at 3300 although this is unlikely to be tested over the coming week. Bullish momentum remains strong with any likely setbacks likely to be supported above the 3400 level. Use pullbacks to position long.
FTSE – As with other major indices, expect further gains over the coming week. Here again look for any pullbacks or short term ‘corrections’ to position long. Stay with the current trend. 6500 looks to provide strong support from which to build.
Oil – The oil price has been bolstered by growing confidence in the economic outlook. Provided that optimism remains upbeat then further gains should be expected. Call above 96.60 and go short at 92.71.
Gold – See above
There are a few big stocks reporting this week which the binary trader should be alert of. The biggest of these is Wal-Mart which is due to report to the markets on Thursday. Keeping with the US, global Internet hardware provider Cisco is also due to update the markets on its earnings on Wednesday.
In the UK traders should keep a look out for figures for both BG Group (Tuesday), Aviva and Vedanta Resources (Thursday) and BT Group on Friday.