Global Markets Brace For Rate Decisions

With many leading global markets sitting on the edge of making new record high’s, will figures due for release this week fuel additional gains or instead send global markets tumbling?

Europe is very likely to be high on the agenda this week as markets wait to see what action the European Central Bank will take with this week’s rate announcement.

Questions are already being asked as to whether the bank can continue with its ‘hands off’ approach to monetary policy in the face of weakening economic growth and lingering threats to stability (Spain, Cyprus, Italian elections).

Further rate decisions due for announcement this week will also put their respective currencies in focus. However no rate change or fundamental change in policy is expected from any Bank reporting this week (AUD, GBP, JPY).  Any hint or surprise policy change could therefore have strong repercussions for market. Expect a ‘risk off’ knock on effect throughout financial markets if this does occur.

If no changes are made, against this backdrop of ‘relative’ stability, gold could well be the loser. In particular, expectations for QE to be reigned-in in the US and current limited inflation expectations could see investors continue to sell out of this safe haven resource.

Key trading risk comes on Friday in the shape of the Non-Farm payrolls employment change. Markets may slow up before this announcement as these figures could well contribute to some end of week volatility in what could already prove to be a pivotal week.

Key News  This Week

• Monday – EUR – Spanish Employment change, GBP - Construction PMI, AUD - Retail Sales, Rate Statement
• Tuesday - GBP - Services PMI, USD - Non-manufacturing PMI
• Wednesday – GBP -BOE Governor speaks, USD - ADP No-Farm Employment Change, JPY - Monetary Policy Statement, Call Rate
• Thursday – JPY - BOJ Press Conference, CHF - SND Chairman Speaks, GBP-Rate, EUR - Rate, Spanish 10 yr bond auction, USD - Trade balance, Bank Stress results
• Friday – CHF - CPI (m/m), USD - Non-Farm employment change

In Focus

PUT- Having fallen back the pair has bounced from the 50% Fibonacci level. Given the recent gains further consolidation is likely to be seen over the coming days/ weeks.

Against 94.00 there remains potential for further pullbacks to the 61.8% retracement level (around 90.30) before the next leg up.

A good way to take to play this potental move could be to place a Put binary options contract when the price is close to 94.00, to finish lower on a daily and/or weekly close

Currency Majors

EUR/USD - The pair could well be carving out a ‘head and shoulders’ on the daily chart, with support at 1.2990 likely to prove critical to the next move. On a break below this level expect further falls, while a strong close back above 13018 could fuel further gains.
USD/JPY - (See above)
USD/CHF - The pair has broken the falling trend line resistance which up until now has restrained gains, to close above the 94.00 level last week. Against potentially strong support at  0.9385 expect further gains.
GBP/USD -  Further gains are expected from the recent low, however these are likely to be only corrective in respect of the recent falls. While 1.50 has held so far, a potential break of this level would see an expected continuation of moves lower to 14950.

Major Indices

DOW - As the recent recovery looks set to continue the outlook remains broadly positive. Look for additional gains above 14,000 against this level as support, but watch for fundamental risk as the week continues.
NASDAQ - Sitting below new highs the Index looks well supported a the 2700 level. A move above 2800 should see gains accelerate.
FTSE - Currency downgrades and poor sets full profit figures from many constituents run counter to the current party. However while the Index remains above support at 6328 more gains are expected.

Commodities

Oil – Further falls on oil and a push below 91.13 (50% Fib level) exposes the potential for additional falls to 89.45 support (61.8%) level. Any bounce should be capped at 92.80.
Gold – Despite a bounce back above 1600, Gold has continued its downwards momentum with further tests of support at 1570. A break below this level should see further falls to the 1554 or a break of 1589 should see a test of last week’s 1620 high.

Stocks

HSBC Holdings (Monday) and Standard Chartered (Tuesday) are two major UK banks reporting at the beginning of the week in a quiet week for profit announcements.

Elsewhere Apple Stock continues to move lower following the judge on the case lowering the damage claim payout from Samsung. While this works through it is likely that further share price weakness will be seen.