Markets Hold Steady Before Potential Big Move
The big story from last week comes from the falls that were seen in the global equity markets. Follow previously strong gains, the Dow led the fallers with the Index losing 1.5% on Friday alone as it struggled to stay above what many traders see as the key 15,000 level.
Equities received a triple whammy over the week with disappointing earnings, a decent amount of economic data and Fed Taper speculation all contributing to the sell-off. A big beneficiary of the ‘risk off’ mood that hit markets was Gold. The metal moved higher to end the week at $1375 recording its highest level since the 19th June.
Further falls in equity markets will likely spark a dollar surge as confidence in the markets leaves traders look for safe havens. The risk averse move will exacerbate many dominate trends including a devaluation of the Euro, British Pound and Yen. The dollar will look to provide much needed liquidity and stability in unstable markets.
Of course if this is the case then positioning for a longer term dollar rally would be a sensible move. The FOMC meeting minutes due for release on Wednesday could provide some hint of what is in store. The following day we also get the Initial Jobless Claims - another potential catalyst for sparking interest in the Greenback.
Elsewhere this week, market fundamentals could shed new light on the state of global growth. The Chinese HSBC Manufacturing PMI figures could help to set the global tone. In the Euro region both German and UK GDP figures could help to either further or curtail recent gains for the respective currencies.
Key News This Week
Trading above the falling trend line since the end of January, the EUR/USD certainly seems to have a bullish look about it. However unable to break above 1.3400 the pair has since fallen back. Could it be carving out a head and shoulders? Given the fundamentals and potential dollar supportive news due on Wednesday we would look lower.
EUR/USD - See Above.
USD/JPY - A move higher for the USDJPY back above the 50% retracement level puts the pair in a bullish tone. A low could be in place and we would look higher from this level.
USD/CHF - A rally up towards 0.9400 was met with renewed falls back toward 0.9244. The pair continues to struggle to sustain any gains. Expect continued sideways movement as a potential base forms over the coming sessions.
GBP/USD - Sterling seems intent on moving higher with the pair moving strongly through the 200 day moving average. Stay long for now with 1.5750 a likely level of reversal where the longer term bearish resumption could kick in.
DOW- Last week’s sell off saw the market fall a good distance and we would expect to see a ‘bounce’. Though markets remain a little nervous summer volumes are unlikely to see too many follow through moves. 15000 provides near term support then 14800 and 14500 if needed. Use a binary options higher call from these levels if tested.
NASDAQ - In line with other markets the Tech Index saw a broad based sell-off over the week but ultimately found support at 3600. We would expect any further falls to be supported at 3500 in the event of a move lower.
FTSE - The Index found support at 6500 (6499 to be precise) and should see a bounce from this level over the coming sessions. However as with most of the major Indices we are likely to require an early move for support to be established.
Oil – Retaining its recent bullish momentum, the Crude price once again moved higher, but failed to push beyond recent highs finishing the week below $108. From here it is likely that we will see a range building between here and around $102 on the downside.
Gold – Strong gains were seen on the week as money moved away from equities into the perceived safe haven. Given the current backdrop it is likely that the market will see additional gains. Look for a move upwards to test $1400 this week.