Traders Look To US Rates For Next Direction

by Phil Moore August 7, 2014

The Big news of the week this week will of course come in the form of the US rate decision due for announcement on Wednesday. This time round, talk of a QE3 ‘tapering’ is likely to make markets more volatile than usual around this event.

Most markets will be looking to the rate decision before they make their next move. Having fallen significantly from their highs, the global Indices have found key levels of support. Wednesday will prove significant as to whether they remain above them and look to retest highs or break lower.

Other news to look out for this week includes the UK MPC Meeting minutes due on Tuesday. News flow for the British economy is quite heavy this week with Retails Sales figures also something to look out for.

The Pound has rallied strongly from recent lows, but with a wide range of important data due for release this week, recent gains could quickly be erased.

Ending the week the Canadian Dollar will be one to watch. Both CPI and Retail Sales figures due for announcement to the markets on Friday.

Key News This Week

In Focus

EUR/USD - The EUR/USD could prove to be the pair to watch this week given the US rate decision. With the February high sitting just above the current level at 1.3433 and resistance from a daily falling trend line at 1.3450, moves towards this level could see a fast reversal.

Currency Majors

EUR/USD - See Above

USD/JPY - in the past few trading sessions the pair has fallen back sharply after trading above parity for several days. After reversing strongly from support at 93.68 we would look for the potential for additional recovery over the coming sessions.

USD/CHF - Having formed a low at 91.30 the pair remains in a similar situation to the EUR/USD (in reverse). Could this be a short term low with the potential for significant gains? Wednesdays events could provide the impetus for a rally.

GBP/USD - The story of the Pound has been all about recovery from the recent low at 1.4830. However increasing the pair looks to be forming a ‘top’. With a strong area of resistance approaching up to 1.5780 we would be biased to the downside.

Major Indices

DOW - Falls on the DOW last week have still seen the pair holding above the 15,000 level. A break of 15,400 to the upside or key 15,000 support will set the medium term trend.

NASDAQ - The Index bounced at previous resistance at 3400 which could mark a temporary low. Bias remains long with 3300 looking a long way down but a good area for support if needed.

FTSE - After having given up over 500 points on the week, support was finally found at 6200.This has proved to be a pivotal level for the market previously and the fact that the market bounced, would suggest additional gains over upcoming sessions. Look higher.

Commodities

Oil – Gains over the previous sessions have taken the price back towards highs at the 98.00, above which further gains can be expected. Look higher towards $99.00 and a run at $100.00.

Gold – Price action has continued to be largely range bound over recent sessions with the price firmly locked between the 1350 - 1420 range. The price is likely to be consolidating but direction will be dictated by risk flows in global markets.