Markets Brace Themselves For Volatile Action
Markets kick off the week with financial concerns on both sides of the Atlantic in what promises to be important week. Throw in several key sets of data due for release over the course of the week, including Non Farm Payrolls and we have what could prove a pivotal turning point.
Two key pieces of news are causing markets concern from the off. The first is the continued power struggle in Italy with Silvio Berlusconi calling for the resignation of several cabinet ministers which would effectively destabilise the government in what is one of the Euro zones most indebted economies. The second centres around the US and fear of a US Government ‘shutdown’ with fears that a budget wont’ get passed by the 1st October deadline.
Both these events have the power to dictate market moves this week and therefore it is likely that price action will be fundamentally driven as each of these scenarios plays out. Markets of course dislike uncertainty and we can expect to see volatility increasing as the week unfolds.
In addition to the above mentioned risk, there are several key releases upcoming this week. Rate statements from both the Royal Bank of Australia, European Central Bank and Bank Of Japan are unlikely to present any major shock, though the subsequent press releases will be watched closely.
The big news of course comes at the end of the week when traders will focus yet again on the state of employment in the US economy. The Non Farm Payrolls surprised last time and so this month’s figures will be even more keenly watched than usual.
Key News This Week
In Focus
EUR/USD - The pair spent most of the week flirting with the 1.3500 level, eventually closing at 1.3520. While in the bigger picture there is scope for additional gains(potentially up to the channel top at 1.3700) we would look immediately lower for a corrective move back towards 1.3370.
USD/JPY - Looking to have found support at the rising trend line, currently at 98.18 we favour a constructive outlook for the USDJPY. Look higher and for a retest of 100.00 over the coming sessions. Support below begins at 97.70 if needed.
USD/CHF - The picture remains weak, with little in the way obvious gains imminent. Price action continues to move towards the yearly low and given current weakness in the pair we would continue to look lower.
GBP/USD - The British Pound has been much in demand and Cable has therefore shown some strong gains. However the technical picture does not necessarily inspire such confidence. Respecting recent gains, above 1.60 maintains a bullish stance.
Major Indices
DOW - Losses on the DOW over the week were maintained above the 15000 with the Index ending the week at 15259. While further immediate losses are possible, we would look to strong support levels at 14800 and 14500 to enter long again.
NASDAQ - The market continues to look higher with the 3750 area providing stellar support to pullbacks over the previous two weeks. Continue to look higher and stay long with a break of 3800.
FTSE - The UK Index has given back recent gains, just about maintaining support at 6500. This has probed a good area of support in the past and we would see any early bounce in the week from this level as providing scope for additional gains over the course of the week.
Commodities
Oil – From highs of $112 only a few weeks ago, the price of Crude fell heavily last week, eventually finding support at $102. From this level we would expect some near term volatile action. $100 should provide support. Any dips below however likely would start a new bearish phase.
Gold – Price held firm at $1300 which now looks a fairly solid level of support. We wouldn’t be bullish until we saw consecutive closed above $1450. However given recent support it makes sense to look higher from current levels.
Stocks
Tesco resports this week, with traders looking for signs of growth again from the UK global retailer. A good set of trading results are likely to see a significant bounce in share price.
