Taper Back In Focus Following Poor NFPS

by Phil Moore May 20, 2014

The recent Non-Farm Payrolls release will again haunt the market this week. The weaker than expected figures lead to last week’s dollar rally with the expectation of government tapering receding.

Data due for release this week could make or break this view and either quash or fuel the current Greenback rally. Thursdays Existing Home Sales will be one to watch and could provide an opportunity to profit from moves in dollar crossed pairs.

Monetary policy will also be in focus in Asia this week with possible additional stimulus to be announced by the Bank of Japan. Watch Tuesdays Bank of Japan press conference for clues. The USD/JPY may see strong gains if further stimulus is announced.

Traders of the Euro which has been struggled to hold up against the dollar last week will be looking to the German Manufacturing PMI figures due on Thursday. This is the only news directly related to the Euro this week. The direction that the EUR/USD takes this week is in the hands of the dollar.

Other news of note this week comes in the form of the Canadian central banks Interest rate decision. While there is no real expectation of an increase on the cards, this Central Bank has surprised in its decisions before.

As mentioned previously, Gold is one of the more interesting commodities from a technical standpoint. The current technical chart reading shows a great potential for a bottom to be forming on the chart. This could be a good point to position for longer term gains.

Key News This Week

Forex

EUR/USD – Having broken rising support the bias has now slipped to bearish for the pair. A move back towards 1.3450 is likely early in the week on momentum. Look for 1.3400 to provide support.

USD/JPY – Following significant gains the pair has remained resilient to pullbacks over the past weeks, finding buyers at 102.80. With the potential for further Yen stimulus this week we would back the pair on ending the week higher.

USD/CHF – Back above the falling trend line we anticipate further gains this week for pair; particularly if the EURUSD breaks down. 0.9031 acts as support with a move above 0.9111 a realistic target.

GBP/USD – The pair continues to oscillate in a range broadly from 1.6300-1.65000 with little real conviction to break in either direction. Given the technical pattern emerging on the chart we would be biased lower and look for a move towards 1.6260 this week.

Major Indices

DOW – We expected a pullback on this market over the course of the week and this is what we got. However by the end the week the Dow had regained most of the loss seen in the early part of the week to close above 16450. Against 16400 look higher this week.

NASDAQ – The Index broke below 4150 support before finding support at 4100. From this level it bounced strongly, ending the week at a new closing high of 4197. Bullish momentum remains with this market with 4100 now a strong level of support to any future pullback.

FTSE – A strong push on the FTSE saw it rise and beyond the key 6800 level. This has been seen as the upper range limit so a close above this level at 6829 is seen as a bullish signal. We would look for a new assault on all time higher over the coming weeks.

Commodities

Oil – Of the back or buoyant global markets, Crude Oil saw an upswing in price to close the week at $94.12. It is still difficult to make a bullish case for the market however and we would prefer to sit on the side-lines at present. Above $96 suggests further gains with the $92.00 acting as a floor for support.

Gold – Although it is too soon to call a bullish market in Gold, the metal continues to grind higher. This adds more credibility to the view that a bottom is being carved out in this market. Price seems well supported and we would look to $1300 as a first target.