Traders Braced For Volatility With Busy Market Schedule

by Phil Moore May 7, 2014

Following on from what was a quiet week in the markets, this week sees the potential for high volatility with several key events on the traders calendar.

Taking centre stage, the US dollar will be under intense scrutiny this week, staring on Monday with the release of the ISM Manufacturing figures. While broadly expected to show a tick up, any hint of weakness could see further dollar losses.

Later in the week things hot up with both the ADP Nonfarm employment change on Wednesday and of course the Nonfarm payrolls of Friday. These figures will be more keenly anticipated by the markets than usual as they will also include the impact of Octobers government shut down.

The figures are expect to post a small gain which would help to extend expectations of QE tapering. However any contraction is likely to have the opposite effect. With the dollar marking time at its November top, we could see a firm break higher or a slump back down from these levels.

Elsewhere, Rate statements from the European Central Bank, Bank of England, Bank of Canada and Royal Bank Of Australia promise to keep things lively in what is expected to be a week of high volatility.

Key News This Week

Forex

EUR/USD - The pair has continued to push higher over the past two weeks. However it is important to note that the pair has so for failed to close above the rising trend line that has contained downside action since April. Look immediately higher with a break and close below 1.3490 likely to lead the pair lower.

USD/JPY - Pushing above 102.00 last week, the next obstacle of resistant is 102.50. Given the recent gains the pair could stall here to gain breath. A push through this level opens up a run at 103.15 May high. Look to the 100.50 area on a pullback.

USD/CHF - Little change to the USDCHF with the pair continuing to slip slower along the top the trend line starting in June. Again the pair bounced and closed above 0.905. The USDCHF grind lower mirrors the EURUSD grind higher.

GBP/USD - Now that the pair has pushed through and far exceeded 1.6250 we would continue to look higher. Look for a retest of the year’s high at 1.630 over the coming sessions. A close above makes 1.6450 a realistic near term target.

Major Indices

DOW - Although closing above the 16,000 level, the Dow lost most of the gains made over the course of the week. A break below 16000 should see any move lower supported at 15800. The market has been bullish for so long that a pullback should be expected.

NASDAQ - The bullish tone continues with the Index advancing beyond 4000 to end the week at 4059. From here further gains are expected, with 4000 providing the new level of support for any pullbacks or consolidation over the week.

FTSE - Last week the range bound movement of the Index was pointed out and this continued. 6600 remains intact to the downside and 6800 to the upside. Until either of these levels is breached we expect to see continued range bound movement.

Commodities

Oil – The price of Crude briefly dipped below $92.00 last week, to end the week above $92.50 support at $92.78. This should provide a strong support level but given the bearish tone we would look lower. Next support is the $90 handle.

Gold – Price tested the $1250 level again last week and struggle to stay above this level at the close. The metal continues to look weak and we see a real likelihood of a test of $1200 as a possibility this week. A move to this level could play out a double bottom in the market over the coming sessions.