Risk On? Risk Off? Bernankes’ Speech May Hold The Key
Following on from the ‘risk off’ tone seen in markets last week, this week continues in a similar vein from the off. However a number of key events could stall this rally, kicking off with FOMC chairman Bernanke’s speech later today.
Focus will be on whether additional monetary support is needed for the US economy, with any hint that this may be the case likely to fuel a further dollar sell off.
Later in the week we also have the retail sales figures due for release in both the US (mid week) and UK (Friday). These will have a big influence on dictating the near term direction of markets.
The figures will reflect how retailers fared over the holiday period, a key indicator of growth. If they come out lower than analysts prior expectations then expect to see retails stocks retreat.
Figures for unemployment claims in the US and the Spanish bond occupy the end of the week.
The Euro will be firmly in focus again and markets will be looking for a strong uptake of bonds with any weakness likely to dent the single currency’s recent gains.
Also pay attention to the British prime ministers speech on European membership. This is due on Friday morning and could have a bearing on movements on the British Pound and Euro as the contents of this speech hit the newswires.
Key News This Week
- Monday - USD - Fed Chairman Bernanke Speaks
- Tuesday - GBP - BOE Governor speaks USD - Core Retail Sales (m/m), PPI (m/m)
- Wednesday - USD - Core CPI (m/m) AUD - Employment change and unemployment rate
- Thursday - USD - Unemployment claims, Phily Fed Manufacturing Index EUR- Spanish 10 year bond auction,
- Friday - GBP-Retails Sales USD - Consumet Sentiment
In Focus - Gold
CALL - Given the ‘risk off’ tone of markets last week, Gold is back in focus. Having bounced from the 61.8 Fibonacci support it remains hovering around the 50.0% retracement level of its recent rise. This coincides with support from the rising trend line from May 2012.
Given the strong bounce seen when the price has previously pulled back to these levels, my bias would be to use any further pullbacks to look higher. End of day or weekly contracts could be a good play here.
EUR/USD - The pair made fresh gains last week breaking a key level of resistance at 1.3308. The scope for further gains remains up to key resistance at 1.3485. Remain bullish.
USD/JPY - The decline on the Yen continues with the currency continuing to look weak. However from a technical perspective the pair is beginning to look overbought on the RSI. With upper trend line support looming, 90.00 looks a could level for a short term PUT.
USD/CHF - The rise of EUR/USD naturally tends to see this pair headed lower. However as the pair is moving inside of a falling trend lines I remain neutral on the pair and look to the EUR/USD instead.
GPB/USD - A lot of indecision was shown in the chart moves on the British Pound last week. The currency is likely to mark time this week ahead of major news announcements. Outlook is neutral.
DOW - Fresh gains on the DOW last week see it approaching two year highs at 13600. Additional gains are likely to rely on additional stimulus so keeping a watch for Bernanke’s comments is probably the best way to play near direction this week.
NASDAQ - The outlook for the NASDAQ remains much the same as the DOW. A short term PUT at highs on anticipation of a pullback or CALL on a sustained break of market highs.
FTSE - The Index has held onto gains above 6000 made at the start of the year and now sits at a one year high. Treat 6000 as a line in the sand with moves back towards this level providing the opportunity to go long.
Oil - Last week oil broke through its upper trend line which now turns support at around 92.00 from a technical perspective. which could alter this view. You could play a short term CALL on a move back to towards this level, bearing in mind the fundamental risk this week which could quickly change the growth outlook.
Gold - (see above)
Apple - Worries over demand for the companies iPhone product have hit the stock price early in the week, seeing it lose over 4%. With earnings season due to kick off and the stock pricing hovering near its lowest point since March 2012 this could go either way. CALL above 500.00 or PUT on a strong break below.