All Focus Remains On Dollars Move
Another week, another focus on the dollar. It seems that the potential for US dollar tapering will fixate the markets up until the Christmas period and possibly beyond.
This week markets will be on heighted alert for any hint of tapering. In what is the last full trading week of the year we could be set to see some fireworks. There is a fair bit of dollar news for release this week (GDP xxx) but of course the big one is the FOMC statement on Wednesday. Expect plenty of volatility in the markets leading up to this announcement.
Elsewhere we get German manufacturing figures and an address to the markets from ECB president Draghi on Monday. Sterling has a reasonable news flow as the week progresses, with the MPC minutes on Wednesday offering a beginning the start of some important news flow. Thursday sees monthly Retail Sales Figures released while Fridays’ Month-on-month and Year-on-Year GDP figures are sure to provide volatile trading.
In terms of commodities, Gold provides one of the more interesting trading possibilities this week. From a technical perspective it could be carving out an inverse ‘head and shoulders’ formation on the chart. Realistically the price needs to keep above $1200 to keep this scenario alive. The potential for dollar tapering also provides some fundamental backup to this scenario.
Key News This Week
EUR/USD – After 7 consecutive trading days of gains, the EURUSD pulled back at the end of last week. It still however has a bullish stance. 1.3705 coincides with a rising line of support. Look for a break here to signal a lower move this week.
USD/JPY – The pair is back testing recent highs above 103.00 reaching 103.97 last week. We would continue looking higher from this level over the course of the week. Levels of support if needed are at 103.25 and 102.75.
USD/CHF – The trend is likely to remain lower for the pair despite last week’s bounce at 0.8830. A close back above 0.8893 is needed to have faith in the pair carving out at least a temporary low.
GBP/USD – The pair has fallen back from it’s early highs last week. The next line of support of interest is 1.6240. If the pair rallies here we could see new strength and a push back higher.
DOW – Despite the bullish technical picture prior to last week, the Index fell hard, holding at support just above 15750. 15600 is the most obvious area of interested here. If the bullish trend is to resume then the Index will need to hold this level this week.
NASDAQ – For the second week in a row the 4000 level proved support. This time however the Index barely held with the Index finishing directly on this level. Look for an early move lower at the beginning of the week to signal further losses. 3900, 3850 and 3800 are areas of support.
FTSE – Ending the week at 6439, the FTSE feel for a 6 successive week. The 6300-6400 area is a fairly major support area so we would expect the market to find some support here. Given the current bearish tone in global markets we would have to look lower from current levels.
Oil – Crude lost some of its previous week’s gains. Initially pushing higher towards $99 per barrel, price pulled back to end the week at $96.48. While we would expect some further falls, staying above the $95.00 would give the potential for gains.
Gold – Despite the ‘risk off’ mood in markets, the Gold price saw little benefit, ending the week down but off the previous weeks lows. $1200 remains a key level of support. It could prove a floor to a double bottom on the chart, but a bounce would need to be seen early in the week.
There are two stocks to be aware of reporting this week. FedEx post their Q2 figures on Wednesday, with Nike offering a potential trading opportunity on Thursday. Again Q2 figures are due for release.