Press review - page 150
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The Dow Jones 30 as you can see initially fell during the week, but found the 16,400 level to be supportive enough to turn things back around. Ultimately, the market ended up closing with a slightly positive candle, and with that the week ended up running a hammer that is pressing up against the 16,600 resistance level. With that in mind, we are buyers on a break above the highs from the week as it should signal a breakout to the upside in a continuation of the longer-term uptrend.
The US Dollar Index fell during the bulk of the week, but found enough support down at 79 to turn things back around and form a massive hammer. Because of this, we believe that a break above the 80 handle is in fact a longer-term buy signal, as this area has been so reliable over the longer term. On the other hand, if we broke down below the bottom of the hammer from the past week, that would be a very bearish sign. That of course would have this market really kind of coming undone, probably heading to the 75 level.
On the upside, we could hit the 81.25 level without too many issues. Above there, we could head to 82, 83, and then possibly as high as the 85 level. It really comes down to what the Federal Reserve is going to do, and we have recently heard that they are going to back off of quantitative easing, which of course has been bringing down the value of the Dollar.
Keep an eye on the Federal Reserve and its statements, but the latest one was a little bit of a mixed bag in the sense that we did hear that they are pulling back quantitative easing little bit, but at the same time suggests that perhaps there are some cracks in the economy yet again. Before going forward, we also have to pay attention to other currencies such as the Euro, which of course has been under significant pressure due to the fact that the European Central Bank is likely to do something in June if the market does in correct the pricing of that particular currency against the US dollar. Remember, the Euro is worth 40% of this contract, said that by itself almost ensures that we will probably go higher at this point. On top of that, the Yen is probably going to be on the back foot soon as well, as the Bank of Japan is likely to continue to jawbone that particular currency down. Between the two currencies, that is enough to move this market.
The silver markets fell during the bulk of the week, but still remain within the support area that we have been testing for some time. If we can break above the $20 level, we feel that this market should continue to go higher, probably aiming for the $22 handle. On the other hand, if we close on a daily candle below the $19 level, we feel that this market could start to come undone at that point and probably aim to reach the $15 level as that’s the next massive support area.
Gold markets initially tried to rally during the week, but found far too much in the way of resistance above the $1300 level to continue that move. That being the case, we ended up falling enough to form a shooting star but there are two hammers just before this candle as well, leading us to believe that we are probably getting ready to grind sideways. With that being the case, we think that ultimately this market will probably go higher, and a break of the top of the shooting star from this past week would be a buying opportunity. We suspect that the “floor” in this market is at the $1200 level.
The USD/JPY pair fell during the bulk of the week, but as you can see the trend line has held up as support. Because of this, we feel that this market continues to go higher, but recognize that it would be difficult to get to the 103 level initially. However, if we break above the 103 level, we are buyers as well, as it would send this market looking for the 105 level which is our longer-term target. As far selling is concerned, if we get below the 101 level, we feel that the 100 level will be targeted first, and then ultimately the 97 level.
The USD/CAD pair fell during most of the week, but as you can see bounced enough to form a hammer overall. The 1.09 level was a level that needed to hold by the end of the week, and that’s essentially where we have closed. Because of this, it still very likely that we will bounce, and a move above the 1.10 level has the market looking for the 1.1250 handle over the course of the next several weeks. On the other hand, there is the possibility that we break down, but the downside seems to be somewhat limited in our opinion.
The NZD/USD pair tried to rally over the course of the week, but as you can see struggle that the 88 level. The market fell back down and formed a shooting star, which of course is very bearish. Nonetheless, it appears that we are still within consolidation, and we feel that the “floor” in this market is at the 0.85 handle, so thereby making this a market that’s probably not can it be able to be traded from a longer-term perspective quite yet. However, we would be buyers near 0.85 off of the daily chart and supportive action.
The GBP/USD pair initially tried to rally during the week, but as you can see the 1.70 level of course did offer the resistance and we anticipated seen. With that, it appears that the market found a lot of sellers in that general vicinity, turning the market completely around and forming a massive shooting star by the end of the week. The target has been hit with that we have been talking about for some time, so quite frankly we are flat of this market at the moment. However, we still believe that the buyers will take control the market again. However, it might take a minute.
The shooting star doesn’t have us selling, rather it has us looking for some type of buying opportunity lower as we pull back from lofty levels. That being the case, the reality is that the buyers will be very interested in going long as lower levels.
The 1.65 level is massively supportive obviously, and therefore any move down to that level would be very interesting for us as it would provide a longer-term buying opportunity. However, the 1.67 level could also be an area where we find buyers. On the other hand, if we break the top of the shooting star, that’s a very bullish move, and we would be very bullish of the British pound at that point time as it should send the market to the 1.75 handle first, and probably much higher than that.
We also see a taut of support just below the 1.65 handle, so we think that is essentially the “floor” in this marketplace. If we managed to break down below the 1.64 handle, at that point time we could very easily see this market turned around and perhaps have a trend change again. That is without a doubt the least likely scenario, but it is a possibility that we have to keep in mind. Ultimately though, we do have a longer-term target 1.75, and possibly 1.80 by the end of the year given the right conditions.
The EUR/USD pair initially tried to rally to the 1.40 level, but as you can see turned everything back around and form a nasty looking resistive candle. The shape of the candle is somewhat like a shooting star, and as result it looks as if the market is ready to continue falling from here. The 1.37 level will be supportive, but we believe that the closing of the week at such lows in the range means that we will see continued bearish pressure, and as a result we aren’t looking to buy at all now.
The euro fell to one-month lows against the dollar on Friday, extending steep losses from the previous session after the European Central Bank indicated that it could ease monetary policy as soon as next month.
EUR/USD ended Friday’s session at 1.3756, the weakest level since April 8, down 0.60% on the day. For the week, the pair was off 0.85%.
The euro fell from two-and-a-half year highs against the dollar on Thursday after ECB President Mario Draghi said the banks is “comfortable” with acting to shore up growth and stop inflation from falling too low at its next meeting in June. The comments came after the ECB left rates on hold, as expected.
Draghi also said the strength of the euro was “a serious concern” and added that the bank would be closely monitoring exchange rate developments.
The single currency came under additional pressure after data on Friday showed that German exports fell 1.8% from a month earlier in March and the country posted a smaller-than-forecast trade surplus.
The euro dropped to two-month lows against the yen, with EUR/JPY at 140.09 late Friday, the weakest since March 4. The pair ended the week down 1.15%.
Elsewhere Friday, the dollar gained ground against the yen and the Swiss franc on Friday. USD/JPY was at 101.85 late Friday, holding above the three-week trough of 101.42 reached on Tuesday. For the week, the pair was down 0.27%.
USD/CHF settled at a one-month high of 0.8862, 0.62% higher for the day and extending the week’s gains to 0.95%.
Sterling was also lower against the dollar, with GBP/USD down 0.48% to 1.6849 at the close. Earlier in the week, the pair touched highs of 1.6994, the most since August 2009 on the back of expectations that the Bank of England will raise interest rates ahead of other central banks.
The Canadian dollar fell back from a four-month high against the U.S. dollar on Friday, following an unexpectedly weak domestic jobs report. Statistics Canada reported that the economy shed 28,900 jobs in April, confounding expectations for jobs growth of 12,000.
USD/CAD rose 0.62% to 1.0897 at the close, after falling as low as 1.0813 in the previous session.
In the week ahead, investors will be looking ahead to the BoE’s quarterly inflation report for further indications of the expected course of monetary policy. The euro zone and Japan are to release preliminary data on first quarter economic growth, while the U.S. is to publish reports on retail sales, consumer prices and consumer sentiment.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, May 12
- Japan is to release data on its current account. Australia is to publish private sector data on business confidence.
- In Europe, Switzerland is to produce data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
- Later Monday, the U.S. is to publish data on the federal budget balance.
Tuesday, May 13- Australia is to produce data on house price inflation and home loans, while the government is to release its annual budget report.
- China is to release data on industrial production and fixed asset investment.
- The U.K. is to release private sector data on retail sales.
- The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
- The U.S. is to produce data on retail sales, as well as reports on import prices and business inventories.
Wednesday, May 14- The Reserve Bank of New Zealand is to publish its bi-annual financial stability report. Governor Graeme Wheeler is to hold a press conference to discuss the report. Meanwhile New Zealand is to release data on retail sales.
- The U.K. is to release official data on the change in the number of people unemployed and the unemployment rate and average earnings. The BoE is to publish its quarterly inflation report, and Governor Mark Carney is to hold a press conference to discuss the report.
- The ZEW Institute is to publish a report on economic expectations in Switzerland, a leading indicator of economic health.
- The euro zone is to produce data on industrial production.
- Later Wednesday, the U.S. is to release data on producer price inflation.
Thursday, May 15- Japan is to publish preliminary data on first quarter gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth. The nation is also to release a report on tertiary industry activity.
- Bank of Japan Governor Haruhiko Kuroda is to speak at an event in Tokyo; his comments will be closely watched.
- New Zealand is to release its annual budget statement, as well as private sector data on manufacturing activity.
- The euro zone is to publish preliminary data on first quarter GDP, as well as revised data on consumer inflation.
- Switzerland is to publish data on producer price inflation.
- Canada is to release a report on manufacturing sales.
- The U.S. is to release data on initial jobless claims, consumer inflation and industrial production, as well as a report on manufacturing activity in the Philadelphia region.
Friday, May 16