Market Overview
Despite the major markets being stuck in a series of ranges in recent weeks are we finally starting to get some ground with some key technical breaks? The main mover has been the sell-off on Cable as sterling has come under pressure following increased fears of a hard Brexit. After three months of sideways ranging, with renewed weakness, sterling has now fallen to new multi-year lows. This could be a pivotal week to decide matters with Theresa May’s first big conference speech as Prime Minister which could put further pressure on the currency (whilst continued sterling weakness would also be a positive for the FTSE 100 once more as the strong negative correlation was renewed yesterday). The drifting dollar strength of the past week has added to the downside pressure on Cable but has also now broken long term trends with a key downtrend on Dollar/Yen and the uptrend on gold both being broken. For now this looks simply to be a continuation of the medium term range plays but it could turn into something a lot more in the coming days.
Wall Street unwound some previous gains yesterday with a dip on the S&P 500 by -0.3%. Asian markets have managed to hold off the bears and pushed higher, with the Nikkei (up +0.8%) helped by the slip in the yen recently. European markets are taking more of a cautious route today, although there will be added volatility with the DAX having been closed and issues with the capitalisation of Deutsche Bank as yet still unresolved. Forex markets show the dollar strength continuing, especially against the Euro, Yen and Sterling. The Aussie is slightly weaker as the RBA stood pat on monetary policy (rates at +1.5%). Gold and silver are mixed today although recent sessions have seen the selling pressure coming later in the day. Oil is marginally weaker.
Traders will be watching for the UK Construction PMI at 0930BST which is expected to remain below 50 at 49.1 (49.2 last). There are also a couple of FOMC speakers today which could drive some volatility, but it is also worth noting that neither Jeffrey Lacker (leans hawkish) or Charles Evans (dove) are voting members.
Lucky 8 – FX Trader of the Year 2016 competition update
Continuing to trade the markets in Week 1 of our competition that we are running throughout October. I will be giving daily updates on how the 8 instruments of the week are performing.
• USD/JPY – The improvement in the dollar continues and has now broken out above 101.85 a breakout which has opened the key resistance at 102.80. Intraday dips are being bought into, with 101.60/101.85 now supportive. Outlook changes below 101.20. (see below for more detail).
• AUD/USD – The Aussie has dropped back slightly on the RBA monetary policy but the technical outlook remains positive near term with support around $0.7640/50. With the bulls still in control near term a retest of $0.7690 looks on with $0.7710 resistance key.
• AUD/NZD – After the RBA pulled the Aussie lower there is still the prospect of a big top pattern, with the support around 1.0470 protecting a big head and shoulders top completing. The initial support is at 1.0500 today whilst the pivot at 1.0555 is resistance with 1.0585 key.
• GBP/JPY – Yesterday’s sterling weakness has bounced and the neutral outlook is back in play near term with moving averages flattening. Continue to play this as a bit of a range near term so the oscillating RSI is giving classic signals. Initial support 130.00.
• USD/SEK – The market is choppy and to an extent is a range play. This should mean being able to use classic overbought/oversold momentum signals on the hourly momentum indicators.
• US30 (Dow Jones Industrial Average) – An extremely choppy range play has formed between 17,992/18,450 with hourly momentum suggesting to play the range. Above 18,370 re-opens 18,450 but expect the range to continue.
• Silver – Breaking to the downside below $18.89 has re=opened a move back to $18.50 again. The momentum indicators are correctively configured and suggest that using rallies as a chance to sell. The old support band $18.89/$19.00 is now resistance.
• Coffee (KCc1) – The breach of 149.00 has now opened 147.00 and if that goes the way is open for 145.00. Resistance at 154.95 is now key, but yesterday’s high at 151.70 is also important. Momentum indicators suggest selling into any strength near term.
Read the rest of the article and analysis on Hantec Markets website.