HantecFx weekly outlook 18th January 2016 by Richard Perry, Market Analyst

1. Weekly Outlook
Forex and CFDs are high risk leveraged products that can result in losses greater than your initial deposit and you should
therefore only speculate with money you can afford to lose. FX and CFD trading are not suitable for everyone. Please
ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such
transactions. You should first carefully consider your investment objectives, level of experience, and risk appetite and
only invest funds you are prepared to lose entirely. For our full risk warning, please go to the end of this report
18th January 2016 by Richard Perry, Market Analyst
Macro Commentary
Data and markets continue to point towards the Fed struggling to continue its “gradual” hike in March. With Treasury
yields at 2 month lows, economic data disappointments and FOMC members’ rhetoric suggest the Fed will hold off. Take
the comments by St Louis Fed President James Bullard last week. Bullard has previously been hawkish but now it seems
that as a new voter on the FOMC he is concerned about the impact that falling oil prices will have on inflation and
subsequently the speed of Fed tightening. With this apparent change of stance Bullard joins Dennis Lockhart (non-voting)
and Eric Rosengren (voter) in dovish rhetoric that seriously questions the potential for a hike in March. In the last two
weeks the probability of a March hike has dropped from over 50% to c. 24%, with June now also in the balance. I have
stated all along that the data is not supportive of four rate hikes this year and Friday’s clutch of worrying data including
Retail Sales, New York Fed manufacturing and Industrial Production all continued along this trend. Add into the mix the
continued deterioration in Chinese economic data and plummeting commodity prices this all adds up to a disinflationary
cocktail that the Fed will struggle to just for a rate hike. I am still thinking two hikes at the absolute most this year.
WHEN: Tue, 19th January, 0200GMT
LAST: +6.9%
FORECAST: +6.8%
Impact: Chinese economic data has been driving
the market moves in recent weeks. Whilst
European traders are safely tucked up in bed the
big news when they awake will be how well China
performed in the final quarter of 2015. There is
always a bit of scepticism over the validity of this
data, so taken in conjunction with the Industrial
Production (how well the old way of the
generating Chinese growth) and Retail Sales (the
new way the economy needs to perform) will be a
big driver of risk appetite on Tuesday. Safe haven
trading (yen, gold Treasuries) will be boosted on
weak data.
Must watch for: Chinese growth data
Key Economic Events
Date Time Country Indicator Consensus Last
Tue 19th Jan 02:00 China GDP 6.8% 6.9%
Tue 19th Jan 02:00 China Industrial Production (& Retail Sales) 6.0% (11.3%) 6.2% (11.2%)
Tue 19th Jan 09:30 UK CPI +0.2% 0.0%
Wed 20th Jan 09:30 UK Unemployment (Average Weekly Earnings x) 5.2% (+1.8%) 5.2% (+2.0%)
Wed 20th Jan 13:30 US CPI +0.8% +0.5%
Wed 20th Jan 15:00 Canada BoC monetary policy 0.5% 0.5%
Thu 21st Jan 12:45 Eurozone ECB monetary policy (& Press conf at 13:30) +0.05% +0.05%
Thu 21st Jan 13:30 US Philly Fed Business index -0.9 -10.2
Fri 22nd Jan 09:30 UK Retail Sales (YoY ex fuel) +3.5% +3.9%
Fri 22nd Jan 14:45 US Flash Manufacturing PMI 51.5 51.3
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1N.B. Please note all times are GMT, data source Reuters

2. Weekly Outlook
18th January 2016
by Richard Perry, Market Analyst
Foreign Exchange
The shifting sands of risk appetite continues to drag around the forex majors. The primary driving forces remain anything
to do with China, including the perception of a Chinese growth slowdown and the People’s Bank of China’s daily fixing of
the yuan mid-point, in addition to the direction in the price of oil. With the oil price under continued pressure the safe
haven plays are winning the battle. The days of risk aversion play out as gains on the euro and the yen which are bot seen
as safe haven plays, whilst the commodity currencies (Aussie, Kiwi and Canadian Loonie) all come under pressure. The
market will therefore be looking anxiously at the announcement of the China growth data on Tuesday which will once
more drive risk appetite (either positive, or more likely negative). It would appear that only the price of sterling is
independent to the volatility, in that it continues to slide in the face of a Bank of England that is concerned by the impact
of persistent low inflation and the struggle for wages to pic up. Subsequently, it looks likely to be a volatile weeks for
sterling again as inflation, wage growth and unemployment (and retail sales) are all announced.
WATCH FOR: Risk appetite to be driven by the clutch of Chinese growth data on Tuesday. UK inflation
wage growth and unemployment will drive sterling, with the added volatility of ECB monetary policy (the
market expects little change but Mario Draghi is well-practised at jawboning the euro lower by now).
EUR/USD
Watch for: Continued safe haven flow will
help the euro to a test of $1.1050
Outlook: As one of the two major safe haven
currencies (the other being the classic yen),
the euro has managed to outperform the
dollar in 2016. This now means that a 5 week
downtrend channel is breaking to the upside
and the near term resistance around $1.0950
is creaking. A decisive breakout opens
$1.0990 initially but the big overhead longer
term 50 pip pivot band at $1.1050/$1.1100
will be back into sight again. If the safe
haven flows continue this week then the
euro could easily have a test of the
resistance. The $1.0810 support is again key.
AUD/USD
Watch for: A confirmed break of the
September low at $0.6893 is deeply bearish
Outlook: January has not been pretty for risk
appetite in forex markets and the Aussie is a
key signal of this deterioration. The key
September low was breached on Friday and
this now brings the possibility that if this
becomes a decisive break (a two day close
below) then we must start to treat this as a
break lower from a 5 month trading range.
Already a near 7 year low, the measurement
of almost 500 pips in the range would then
imply a longer term target of $0.6300 which
is around the lows from 2009. Not a great
signal for risk.
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FX Outlook
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3. Weekly Outlook
18th January 2016
by Richard Perry, Market Analyst
Indices
The repeating theme in the report this week is the return of risk-on, risk-off trading. However, the volatility and general
market fear that is present amongst investors and traders currently means that the outlook has a definite bearish bias.
Rallies are being sold into and equity markets remain under real pressure in the early days of 2016. The sell-off has been
to the extent that Wall Street has now entered official “correction” territory (greater than 10% off the highs).
Furthermore, the major global market are all now retreating to test some critical levels. The support of the August 2015
low marks a key floor for these indices. Subsequently the levels to watch for a closing breakdown include 1867 on the
S&P 500, the September low at 9325 on the German DAX, and the three year low of 5768 on the FTSE 100. The Eurozone
indices continue to be more volatile than the FSTE 100 (especially the export heavy DAX), whilst the French CAC 40 has
already broken down to below its 4230 support to hit a 12 month low. Will the market take any notice of US earnings
season? It does not seem to be touching the sides at the moment as the strong earnings from the US banking giants
(including some pretty robust numbers from JPMorgan Chase) have been ignored. Still, the bulls will hope that the
earnings are a trend that is better received in the coming days.
WATCH FOR: Anything that drives risk appetite, so primarily this week that means looking at the Chinese
growth data. Also keep an eye on the all important price of oil too.
DAX Xetra
Watch for: A test of the 76.4% Fibonacci
support around 9300.
Outlook: The QE inspired gains on the DAX
continue to be unwound. Although the DAX
is clearly not the only market in this
predicament the volatility is more
pronounced. Although the DAX tend to
outperform on the positive days, they are
few and far between now as the market is in
selling mode and the DAX subsequently
underperforms on the way down. The
massive August/September lows of 9235
and 9338 were very close to the support of
the 76.4% Fibonacci retracement at 9308
and these are under pressure this week.
FTSE 100
Watch for: The key lows from the late
summer are under big threat this week
Outlook: The FTSE 100 is almost 19% off the
all-time high in the past 9 months with a
sequence of numerous lower highs and now
the key support of the August spike low of
5768 is under attack. The concern is that the
momentum indicators are not even that
stretched and the RSI actually shows further
downside potential. If the support at 5768 is
breached the next real level of price support
on the FTSE 100 is the November 2012 low
around 5605. Even if there is a technical
rally, the sellers will be quick to pounce. This
bear run is not done yet!
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INDEX Outlook
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4. Weekly Outlook
18th January 2016
by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Despite the tendency towards the market preferring safe haven trades, the fact that gold has been trending lower in
recent days is a concern for the gold bugs. Despite Friday’s rally, gold has not managed to keep pace with the strength of
gains in other safe haven plays such as Treasuries, the euro or the yen. Another issue is that the gold/silver ratio is once
again close to the 80 level which is generally considered to be the point at which a mean reversion (i.e. a relative silver
rally) will begin to kick in. Where will the oil price find a low? With $30 taken out traders are concerned with the
imminent “Implementation Day” after the international watchdog the IAEA deemed Iran as having met the conditions of
its nuclear agreement and can start supplying the world with oil again, possibly an extra 0.5m barrels per day in 2016.
Well this was certainly not the way that the text books would have a Fed rate hike pan out in Treasuries. With the US
yield curve significantly flattening, the 2 year yield is back at a two month low and the 10 year yield at an 11 week low.
Concerns over the speed of the next 25 basis point rate increase by the Fed are a concern for the 2 year yield, whilst the
10 year is suffering as growth expectations are hit. Safe haven trading continues to shove traders towards Treasuries.
WATCH FOR: China continues to impact risk appetite which is driving both commodities and bonds.
Gold
Watch for: Support band between $1077/
$1098 needs to be intact for bull control
Outlook: On a long term basis, the recent
base formed above $1089 was a mere blip
within the huge bear market, so the bulls
will have to do much more to convince
this move is a recovery. The downside
pressure of the 144 day ma (now c.
$1112) is a key factor in holding back the
recovery. Although the recent safe haven
flow has helped to bolster support, on a
medium term basis the range of overhead
supply at $1077/$1098 needs to be
convincingly cleared to open the recovery
and for now this is not being seen.
Brent Crude oil
Watch for: Further weakness with $27 the
next technical target
Outlook: The sell-off shows little or perhaps
even no sign of stopping any time soon. The
downside break below $30 last week is the
latest move to a multi-year low back to
levels not seen since 2004. The concern now
is that the next real level of convincing price
support is not until the 2002 low of $17. In
the meantime we use Fibonacci projection
levels to give us the next potential downside
target. The 100% Fibonacci projection of the
May to August sell off ($69.60 to $42.25)
measured from the August reaction high at
$54.30 gives a $27.00 target.
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COMMODITIES & BONDS Outlook
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only invest in FX, Bullion and/or CFD trading with funds you are prepared to lose entirely. Therefore, only your excess
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Weekly Outlook
18th January 2016
by Richard Perry, Market Analyst