weekly outlook april 13 2015

Weekly Outlook

Forex and CFDs are high risk leveraged products that can result in losses greater than your initial deposit and you should therefore only speculate with money you can afford to lose. FX and CFD trading are not suitable for everyone. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions. You should first carefully consider your investment objectives, level of experience, and risk appetite and only invest funds you are prepared to lose entirely. For our full risk warning, please go to the end of this report

13th April 2015 by Richard Perry, Market Analyst

Macro Commentary

Markets continue to be pulled around by two factors, the US dollar strength and the question of when the Federal

Reserve will tighten interest rates. Neither are mutually exclusive and it may be difficult to ascertain exactly which is

driving which. Rate hike expectations are driving dollar strength, but hampering corporate profits and hampering

inflation and growth, which is then an argument against a rate hike. The FOMC meeting minutes last week showed

concern over the impact of the strength of the US dollar. If this caution continues it may begin to hamper the strength of

the dollar. However, that does not appear to be a concern for the market in the wake of the meeting minutes There had

been a dialling back of expectations of a rate hike after the policy statement a couple of weeks ago, as the market had

run ahead of itself in potential expectation of a hike perhaps as early as June. However, the minutes showed that there

are a number of members (surely including an increasingly hawkish Jeffrey Lacker) pushing for a June rate hike after all.

Furthermore, there was also talk of unwinding the Fed’s asset purchases. A trigger for another dollar bull run. The market

is currently pricing an 8% chance of a June rate hike, with September now at 36% and the more likely October is at 54%.

WHEN: Fri, 27th Apr, 1330BST

LAST: 0.0%

FORECAST: +0.0% (Year-on-Year)

Impact: The minutes from the latest Fed meeting

have sharpened the expectations that the FOMC is

becoming increasingly data dependent. Any

economic announcement that pushes the Fed

towards its stated targets will drive expectations of

a rate hike. The decline in CPI seems to have

stabilised in the past couple of months and the

expectation of holding zero is pencilled in. If CPI

comes in ahead of this then it would drive a

stronger dollar. However Wall Street may take a

hit as traders are increasingly concerned by the

strong dollar in addition to a tighter Fed policy.

Must watch for: US CPI

Key Economic Releases

Date Time Country Indicator Consensus Last

Tue 14th Apr 09:30 UK CPI 0.0 0.0

Tue 14th Apr 13:30 US Retail Sales (MoM) +1.0% -0.6%

Wed 15th Apr 09:30 China GDP (Q1 2015) +7.0% +7.3%

Wed 15th Apr 12:45 Eurozone ECB monetary policy + press conference +0.05% +0.05%

Wed 15th Apr 14:15 US Industrial Production (MoM) -0.3% +0.1%

Wed 15th Apr 15:00 Canada BoC monetary policy +0.75% +0.75%

Fri 17th Apr 09:30 UK Unemployment +5.6% +5.7%

Fri 17th Apr 10:00 Eurozone CPI (final YoY) -0.1% -0.3%

Fri 17th Apr 13:30 US CPI (YoY) 0.0% 0.0%

Fri 17th Apr 15:00 US University of Michigan Consumer Sentiment 94.0 91.2

Trust Through Transparency T: +44 (0) 20 7036 0850 │ E: [email protected] │ W: hantecfx.com

1

US CPI (Year-on-Year)

N.B. Please note all times are GMT, data source Reuters

Weekly Outlook 13th April 2015

by Richard Perry, Market Analyst

Foreign Exchange

There are several factors which are helping to drive a renewed strong dollar trade. The dollar bulls had a bit of a reality

check after the FOMC statement a couple of weeks ago, as a surprisingly more dovish outlook on the committee than had

been anticipated, resulting in a sharp correction on the dollar. However, now we have the minutes of the meeting it

transpires that there are a significant number of members pushing for a rate hike potentially as early as June. This has

helped to drive the dollar bulls in recent days. Add in the continued concern over the ability of Greece to be able to re-

pay its debts and this is a recipe for a significant selling pressure on EUR/USD. The ECB monetary policy could cause

further volatility this week, although despite signs of improvement in the Eurozone, Draghi will be unwilling to rock the

boat so early into his QE programme. However, sterling is not without its bears either, with the significant uncertainty of

the outcome of the UK general election to be held on 7th May. It appears that a hung parliament is ever more likely, and

not only that, the chances of a coalition agreement are also low, meaning that a weak minority government could result.

It appears that most scenarios are likely to put downward pressure on sterling in the coming weeks and perhaps months.

WATCH FOR: Key US data will be the focus with retail sales, industrial production and CPI taking attention.

Euro traders will watch the ECB whilst sterling traders will hope for positive inflation and unemployment.

the UK and Japan will also impact on sterling and the yen.

EUR/USD

Watch for: Pressure on the key low at

$1.0455 is increasingly likely.

Outlook: The bears have grabbed control

ever since last week’s FOMC minutes. With a

two day close below support at $1.0710 this

leaves the euro wide open for a test of the

key March low at $1.0455 this week. With

momentum indicators giving a raft of sell

signals now the selling pressure is mounting.

Looking to sell any rallies would be the ideal

strategy with $1.0710 looking a good area on

a bounce. If the momentum escalates this

week there could even be major inroads

made in the move towards parity.

GBP/USD

Watch for: Further weakness towards the

next key lows $1.4345/$1.4230

Outlook: Sharp weakness in Cable has

resulted in a breach of the key low at

$1.4630. This has now opened the levels not

seen since 2010 when the pair finally

bottomed out at $1.4230. The technical

indicators have certainly got a bearish

configuration and the concern would be that

there is also considerable downside

potential for a run lower if the bear catch an

offer this week. Ideal selling opportunities

would be a rally towards $1.4700/$1.4800

which could then see a fall back to test

initially $1.4345 before the crucial low at

$1.4230.


FX Outlook

2



Indices

With traders now focusing on US earnings season, if results run to expectations then Wall Street could continue to lag the

stellar gains that are being seen in European indices such as the German DAX. Alcoa kicked off with a slight beat of

expectations on earnings but revenues have struggled. Attention will now turn to the big banks, with the financials

actually expected to be one of the few sectors to show earnings growth on the quarter. As a sector, earnings are

expected to have grown by just 1% (after an adjustment is made to Bank of America’s earnings). The S&P 500 as a whole

is expected to decline by 4.6%. Over in Europe we continue to see the DAX being driven higher (back to all-time high

ground) by a weaker euro. The huge exporting exposure to the DAX means that a weaker euro is a significant boon for

the German exporters. FTSE 100 is a strange index as every time it begins to gain traction it hits the buffers. The latest

break to new highs comes as the new tax year has kicked in (investors using their ISA allowance to invest), but the

uncertainty of the UK General Election could easily drive profit taking as the month goes on. Something to be aware of.

WATCH FOR: US earnings season is likely to be the driver of Wall Street, whilst the DAX will be impacted

by further euro weakness/dollar strength so the US data will be key this week, as will the ECB monetary

policy decision. Movement in commodity prices continue to have an impact on the FTSE 100.

FTSE 100

Watch for: Support band around 6975 needs

to hold to retain a bullish outlook this week

Outlook: From experience I say beware

when the FTSE 100 is breaking out as it

seems as though the bulls are never entirely

in control. Just when you think that FTSE 100

has made a clean break, there is a sharp

retracement. After a week of strong gains

(much on the coat-tails of the DAX) FTSE has

broken to an all-time high above 7065.

However none of the RSI, MACD and

Stochastics confirm the move which is a

concern. With the election uncertainty this

could be seen also as an ideal profit-taking

opportunity.

S&P 500

Watch for: A test of the all time high at 2120

could finally be seen this week.

Outlook: As earnings season gets underway,

the S&P 500 seems to be stuck, rangebound

under the all time high at 2120. Technical

momentum indicators are fairly neutral and

hardly suggesting an imminent breakout,

however the market has been gradually

making a series of higher lows in the past

few months and there is still a bullish bias to

the medium term outlook. Positive earnings

would certainly help to pull the market

higher for a test of the resistance band

2115/2120 this week. The key support

remains 2040/2050.


INDEX Outlook

3



Other Assets: Commodities & Bonds

Despite gold still performing as a safe haven asset, the fact is that it continues to perform better on a relative basis

against the dollar than all the forex majors. Gold is subsequently holding up well whilst the forex major are under selling

pressure. However, silver continues to trade with far greater volatility so if you can correctly call the direction you get far

more traction. The strong increase in the US oil supplies have so far failed to dampen the rally on WTI which is again

looking to pull higher towards its range highs.

US Treasuries are interesting to watch as the yield on the 10 year has been fairly well correlated to other safe haven

assets such as gold and the yen. However, it is interesting to see the yield curve on US Treasuries beginning to steepen

once more, helped by the slightly hawkish minutes from the FOMC. Last week we saw Switzerland became the first

country to sell 10 year government debt with a negative yield, whilst we continue to see the German 10 year Bund yield

dropping ever closer towards zero as it traded at all-time lows around 0.15%.

WATCH FOR: US Retail Sales and Industrial Production will keep the focus on the US economy and help to

drive Treasuries and commodities. Tier 1 US economic data remains now crucial with inflation in focus.

Gold

Watch for: A strong performance means

that gold is increasingly rangebound

Outlook: The strong performance of gold

has meant that there has been no real

damage done to the medium term

recovery of the past month. The selling

pressure has though meant that there is

far more of a ranging look to gold now,

with the support at $1191 holding up.

However the momentum indicators are

increasingly suggesting consolidation,

with the key overhead resistance band

$1220/$1224 capping the upside. The

bears are back in control below $1178.

Brent Crude oil

Watch for: A test of the resistance band

around $57.80

Outlook: It is interesting that the outlook for

WTI has become more positive than for

Brent Crude in recent weeks. Despite this

though there is a strong element of support

that is now building between $52.50/$54.00.

Technical indicators are now almost entirely

neutral now medium term with moving

averages flattening off and the momentum

indicators broadly neutral. Above resistance

at $60 improves the near term outlook with

the key resistance overhead at $63.00. Brent

seems to be waiting for the next trigger.

Below $52.50 re-opens the key lows

$45.20/$47.60.


COMMODITIES & BONDS Outlook

4

T: +44 (0) 20 7036 0850 │ F: +44 (0) 20 7036 0899 │ E: [email protected] │ W: hantecfx.com

Risk Warning for Financial Promotions

This report is issued by Hantec Markets Limited, who is authorised and regulated by the Financial Conduct Authority (FCA) in the UK, No. 502635. The report is prepared and distributed for information purposes only. Trading in Foreign Exchange (FX), Bullion and Contracts for Differences (CFDs) is not be suitable for all investors due to the high risk nature of these products. Forex, Bullion and CFDs are leveraged products that can result in losses greater than your initial deposit. The value of an FX, Bullion or CFD position may be affected by a variety of factors, including but not limited to, price volatility, market volume, foreign exchange rates and liquidity. You may lose your entire initial stake and you may be required to make additional payments. Please ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such transactions. Before deciding to enter into FX, Bullion and/or CFD trading, you should carefully consider your investment objectives, level of experience, and risk appetite. You should only invest in FX, Bullion and/or CFD trading with funds you are prepared to lose entirely. Therefore, only your excess funds should be placed at risk and anyone who does not have such excess funds should completely refrain from engaging in FX and/or CFD trading. Do not rely on past performance figures. If you are in any doubt, please seek further independent advice. This report does not constitute personal investment advice, nor does it take into account the individual financial circumstances or objectives of the clients who receive it. All information and research produced by Hantec Markets is intended to be general in nature; it does not constitute a recommendation or offer for the purchase or sale of any financial instrument, nor should it be construed as such. All of the views or suggestions within this report are those solely and exclusively of the author, and accurately reflect his personal views about any and all of the subject instruments and are presented to the best of the author’s knowledge. Any person relying on this report to undertake trading does so entirely at his/her own risk and Hantec Markets does not accept any liability.

Trust Through Transparency

Hantec House, 12-14 Wilfred Street, London SW1E 6PL

T: +44 (0) 20 7036 0850

F: +44 (0) 20 7036 0899

E: [email protected]

W: hantecfx.com



weekly outlook april 13 2015

Economy & Finance