Market Overview
Almost in a manner just to confirm that equity markets are now in apparent denial of any interest in geopolitical events in Ukraine, Wall Street markets closed at all time highs once more last night as the S&P 500 pushed to close just shy of 1900.
This has given Asian markets a boost overnight, with the Nikkei 225 helped almost 2% higher by the weakness in the yen, whilst the Indian Sensex closed strongly as election polls begun to reflect a victory for the market friendly Narendra Modi. European stock markets are again strong with the DAX breaking above the resistance at 9721.
Forex trading has shown reasonable risk appetite once more with weakness in the yen and many majors trading higher against the dollar. One notable exception has been the AUD/USD which is weaker after the announcement of today’s budget.
Focus this morning will be on the German ZEW Economic Sentiment which is forecast to dip slightly to 41 (from 43.2), with a good number helping to support the Euro. US traders will also be keenly watching the US retail sales this afternoon. With the consumer sentiment gauges recently around multi year highs, the market will be pricing in for a good number, with +0.4% expected on the month.
Chart of the Day – FTSE 100
The FTSE 100 is now on the brink of a crucial breakout. In May 2013 the index hit a high of 6876 before a sharp correction set in. Now, after a series of higher lows, the index is back for the test. Daily momentum indicators remain strong, with further upside potential in the RSI.
If there were to be a move above the May 2013 high the index would be the highest since the final day of the last millennium, when on December 30th 1999 the FTSE 100 reached 6950.60. The intraday technicals are strong with the rising 55 hour moving average providing the basis of support at 6815 and hourly momentum indicators all positive. There is good support now in the band 6800/6838 for a correction.
EUR/USD
After the sharp declines of last week the EURO has begun to form support. However, in light of the performance of other currencies against the dollar yesterday, the attempt at a recovery has so far proved to be something of a damp squib. The Euro could now muster a move back above the old support turned resistance at $1.3775 and has since drifted back lower again. Still though the support at $1.3743 remains intact which is something to build on. Also whilst the rate trades above the 144 day moving average the outlook remains positive for the medium to longer term.
However, the intraday hourly chart shows the downside pressure on the Euro still. Significant overhead supply will make it difficult to gain any recovery momentum, while the MACD and RSI are both merely unwinding bearish oversold positions and are quickly renewing their downside potential. The outlook remains one to sell into rallies, with the resistance above $1.3775 at $1.3810.
GBP/USD
The outlook for CABLE remains positive despite having broken a 3 week uptrend. The rate continues to trade above all the rising moving averages and it is building from support around $1.6840 on the daily chart. A rally from $1.6830 hit an intraday peak at $1.6903 yesterday and the correction would have disappointed the bulls near term, coming around the underneath of the old uptrend which is now a basis of resistance.
However, it now leaves the prospect of a higher low in place at $1.6860 as the bulls look to build once more. A move back above $1.6903 today would turn the intraday chart bullish again as it would be above all the hourly moving averages. A move back below $1.6860 would re-open yesterday’s reaction low.
USD/JPY
The dollar bulls are battling hard and the rate on USD/JPY has now pushed back off the lower support of the slight uptrend channel which is currently at 101.60. The daily chart shows this move is neutralising the negative outlook with a rally that is up towards the moving averages and momentum indicators which now point towards Dollar/Yen being a range play. Furthermore an intraday barrier was cleared overnight with the push through 102.00. This completed a small base pattern which now implies a move towards 102.60.
The upside move has also seen a break above the resistance at 102.18, whilst also now using the rising 21 hour moving average at 102.12 as the basis of support in the past couple of days. The intraday chart shows that there is a historic pivot level around 102.30 which may induce come consolidation or even correction. With the improved outlook, look to use any weakness into the 102.00/102.20 band of support as a chance to buy. A move below 102.80 would re-open the lows.
Gold
Whether it be uncertainty over geopolitics in Ukraine or just general trading, but analysis of {{8830|gold} } is incredibly difficult currently. This comes as yet another false break above $1300 was seen yesterday with the price subsequently retreating back to trade around $1290 once more. The daily chart shows an attempt at an upside break from the 144 day moving average which has been unwound, with momentum indicators all neutral. This messy period of trading seems to be evident now and for that reason a series of false breaks may be seen.
Looking past the noise, what we have still got, is the 144 day moving average acting as a basis of support around $1282 and a near term band of resistance $1300/$1305. Seemingly also in the past 4 sessions, $1290 has become a pseudo level of equilibrium. There are now two levels to be interested in $1279.60 (yesterday’s one week low) and $1303.80 (yesterday’s 3 day high). 