The document provides a weekly outlook and analysis of key economic events and financial markets. It summarizes that central banks continue to influence market sentiment, with the ECB signaling a move towards tapering asset purchases and the Fed acknowledging that sluggish inflation may require a slower pace of rate hikes. Key events this week include inflation data from the Eurozone and UK and central bank decisions from the ECB and BoJ. Technical indicators are analyzed for various currency pairs, equity indexes, commodities and bonds.

1. Weekly Outlook
Monday 17th July by Richard Perry, Market Analyst
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.
WHEN: Thursday 20th July, 1245BST
LAST: 0.0% main, -0.4% deposit
FORECAST: 0.0% main, -0.4% deposit
Impact: There will be no moves from the ECB this
week on rates or asset purchases but Draghi’s recent
speech proclaiming that “deflationary forces were being
replaced with reflation ones” has ramped up
expectation that the ECB could be on the way towards
tapering its asset purchases in the coming months. It is
too soon to expect this time, but the potential for
September is increasing. The euro has jumped recently
on the less dovish rhetoric and it would be a surprise if
Draghi reined in expectations in the presser this week.
German yields and EUR/USD will be key markets.
Key Economic Events
Date Time Country Indicator Consensus Last
Mon 17th Jul 10:00 Eurozone CPI - final (headline / core) +1.3% / +1.1% +1.4% / +1.0%
Mon 17th Jul 13:30 US Empire State Manufacturing (NY Fed) +15.0 +19.8
Mon 17th Jul 23:45 New Zealand CPI +1.9% +2.2%
Tue 18th Jul 09:30 UK CPI (headline / core) +2.9% / +2.6% +2.9% / +2.6%
Wed 19th Jul 13:30 US Building Permits / Housing Starts 1.20m / 1.15m 1.17m / 1.09m
Thu 20th Jul 02:30 Australia Unemployment 5.6% 5.5%
Thu 20th Jul n/a Japan Bank of Japan monetary policy No change, -0.1% -0.1%
Thu 20th Jul 09:30 UK Retail Sales (ex-fuel, YoY) +2.4% +0.6%
Thu 20th Jul 12:45 Eurozone ECB monetary policy (+ Draghi press conference) No change 0.0% / -0.4%
Fri 21st Jul 13:30 Canada CPI +1.1% +1.3%
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1N.B. Please note all times are British Summer Time BST (GMT+1), data source Reuters
Macro Commentary
Central banks have resumed as the drivers of market sentiment. As is often the case, it is the direction of travel that
is key. It is interesting to see the outlook of the Federal Reserve is suddenly looking less hawkish than previously
thought. Janet Yellen’s bi-annual testimony to Congress reveals that there is a concern that sluggish inflation may
in fact not be as “transitory” after all and that the FOMC stands “to adjust policy if it appears this inflation
undershoot appears consistent”. FOMC policy is not on a pre-set course and the committee will be watching
inflation carefully. So, we must also watch the data then. The path of inflation through the past few months has
been consistently lower and there is now confirmation that this could cause the Fed to take its foot off the gas. CME
Group FedWatch expectation of a December hike is now around 50/50 and it is interesting to see a subsequent
hike possibly into H2 2018. The market does not believe the Fed can follow through with the current dot plots which
suggest three hikes in 2018 and three hikes in 2019. The dollar continues to correct the “Trump bump”. But this is
coming as other central banks begin to move away from ultra-loose monetary policy. The Bank of Canada began to
hike last week and ECB rhetoric is setting up for a move towards tapering later in the year. The one central bank
not playing the game though is the Bank of Japan which is likely to be confirmed once more this week.
Must Watch for: ECB Monetary Policy & President Draghi’s press conference
German 2 year Shatz yield
The Shatz has broken a mult-year downtrend as Eurozone
economic prospects have improved this year.

2. Weekly Outlook
Monday 17th July by Richard Perry, Market Analyst
Foreign Exchange
Interest rate differentials have key medium to longer term impact on forex pairs. The spread between the
German 10 year Bund yield and the US 10 year Treasury closely compares to the moves on EUR/USD. As the
ECB has been positioning away from a dovish stance, the Fed could be driven by persistent low inflation to
increasingly rein in the pace of its hiking cycle. Subsequently as the German 10 year yield broke decisively
above the 2017 range high of 0.50% recently, the yield spread has been tightening and EUR/USD has been
breaking higher. This is a trend that is continuing to underpin the bullish position on EUR/USD over recent
months and therefore the yield spread is a key chart to watch for EUR/USD traders in coming weeks and
months. The ECB monetary policy will also have a key role to play and in the press conference this week the
prospect of tapering asset purchases is bound to be raised. The Bank of Japan will also play a role in the
coming months with its yield curve control policy still in force. The continued dovish stance of the BoJ means
that despite the US dollar coming under consistent pressure against other majors recently, the yen has been
underperforming. However, the Dollar/Yen bulls have been hit on the back of Yellen and now weaker US
inflation. If the BoJ downgrades Japanese inflation and delays the path to achieving its target inflation beyond
FY2018, this could weaken the yen once more, but the market is increasingly dollar negative for now.
WATCH FOR: Inflation numbers for Eurozone, UK; also ECB and BoJ monetary policy
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FX Outlook
GBP/USD
Watch for: Holding on to the breakout above
$1.3000/$1.3050 is key for the bulls now
Outlook: Friday’s strong breakout was a key
move that took Cable to its highest since
September 2016. If this breakout can be
confirmed it would put the market into a new
band of trading between $1.3000/$1.3500. The
technicals continue to improve over the past few
months with a sequence of higher lows, positive
bias to momentum and pressure on resistance.
The bulls will now be looking to bolster the
support above the old key breakout at $1.2775
with last week’s key higher low at $1.2808. Near
to medium term corrections are a chance to buy
now.
EUR/USD
Watch for: A closing break above $1.1489
would re-open the upside again
Outlook: The bulls have had a quiet time of late,
but the market still just seems to be biding time
before pushing for the next breakout. The three
month uptrend continues to be tracking with
rising moving averages and positive momentum
configuration. Corrections are being used as a
chance to buy with the support building around
the previous breakout around $1.1300. The high
at $1.1489 is resistance to break and such a
move would open moves to test the key 2016
high of $1.1615 which is part of the key
resistance of the two and a half year trading
range on EUR/USD.

3. Weekly Outlook
Monday 17th July by Richard Perry, Market Analyst
Equity Markets
Equities are a higher risk asset class, so when central banks have been dovish, equities have historically
performed well. The prospect of tighter monetary policy tends to be negative for equities, however, if the
tightening comes as a result of positive economic conditions and growth improvement, then traders tend to take
a more sanguine view of higher rates. Of late though there have been a lot of mixed signals for equity traders to
decipher. The Fed wants to tighten and that has been seen as a good thing after so many years of zero interest
rate policy. However, it is tightening into sluggish inflation and questionable growth trends. The fiscal expansion
that had been promised by Donald Trump remains illusive and the excuses to just buy equities almost
regardless are seemingly running thin. Markets are therefore unsure how to interpret this data. Friday’s drop in
inflation may result in the Fed reining in its tightening, but this would be because the data is not strong enough
and this is a concern for equity markets. Eurozone markets have been threatening to correct for a while and
these threats are just not going away. China may have posted another decent set of trade and growth which is
risk positive, but signals from the western side of the Atlantic are mixed, especially with another weak reading
on US Retail Sales. The big banks kicked off US earnings season with a mixed picture, but with earnings rolling
over in 2017, once more hefty valuations could be called into question. For equity markets, key resistances this
week are 12,730 on the DAX, 7450 on FTSE 100, even though S&P 500 is into all time highs again.
WATCH FOR: Inflation for the Eurozone and UK, in addition to central bank decisions for ECB and the
BoJ, whilst earnings season in the US is also an impact
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3
DAX Xetra
Watch for: The resistance at 12,730 is
preventing the bulls from regaining control
Outlook: The DAX remains better positioned
than the FTSE 100 on a technical basis with the
market seemingly still holding the upside
breakout above 12,490. The near to medium
term outlook subsequently looks more neutral
between support at 12,490 and resistance at
12,730. The interesting factor will be if the
market continues to run the recovery on the
momentum indicators. The support at 12,316
has been bolstered by the breakout in the past
week but there is still a question mark over
whether the bulls can reclaim control now. The
resistance at 12,730 is key.
FTSE 100
Watch for: The top pattern remains intact below
7450
Outlook: The seven week top pattern that
completed below 7378 has been questioned by
last week’s rebound, but the whilst the
resistance of the old 7447 pivot remains intact
the bears will still consider themselves in with a
shout. The six month uptrend was tested
recently and remains intact following the rally off
7303 but it will be interesting to see how the
bulls react if the market starts to trade back
below 7378 again. The six month uptrend comes
in at 7350/7370 this week. Near term momentum
has picked up but there is a fear that with the
rally failing, these signals could be simply a sell
into strength.
Index Outlook

4. Weekly Outlook
Monday 17th July by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Dollar weakness has supported commodities. Gold has engaged in a sharp rally as Janet Yellen’s testimony
and subsequently US CPI and Retail Sales data disappointment have hit the dollar. Whether this decisively
changes the trend will depend upon the size and length of the move back into US Treasuries, which would in
turn pressure the dollar and support gold. A less hawkish Fed is supportive for gold and it seems as though my
ongoing expectation of choppy trading throughout 2017, remains the case. Technically gold needs to break
through the resistance c. $1240 to turn sustainably more positive again. Oil has also bounced in the past week
and is suddenly WTI is testing the key July high of $47.32, with a historic pivot around $47.00. The weaker
dollar is helping to support oil but it will be the outlook for supply that remains the key driver. US rig count
pressures could be diminishing, whilst OPEC pressure on Nigeria and Libya to curb production would support.
Treasury yields are falling sharply again as Janet Yellen has admitted for the first time that disappointing
readings on US data, specifically inflation could begin to weigh on the Fed’s ability to hike rates. 2.300% is an
interesting level to watch on the US 10 year Treasury as this has been a level that has turned the market
frequently in the past eight months. However, this reversal lower on Treasury yields has come as the German
10 year yield sits firmly above the key breakout level of 0.50%. The ECB will be key for direction this week
WATCH FOR: CPI for Eurozone and UK, with ECB and BoJ impacting also.
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4
Gold
Watch for: The broken downtrend changes the
outlook but a move above $1240 to turn more
positive
Outlook: The five week downtrend has been
broken as the market rallied sharply on Friday.
As the market has traded in a sideways range
throughout 2017, ending a trend at around five
weeks has been common. A series of up and
then downtrends have lasted between 3 and 5
weeks before reversing. This is also reflected on
the MACD lines. That makes the resistance of
the old pivot at $1240 increasingly key now for
the near term outlook. A successful breach
would free the bulls for the next few weeks and
also re-open the $1296 June high.
Markets Outlook
Brent Crude oil
Watch for: A rally back towards the long term
pivot at $50 is increasingly likely.
Outlook: Brent Crude has broken higher
throughout the past week and is once again
homing in on the key resistance around $50.00.
Momentum indicators continue to point to
recovery with the Stochastics and MACD lines
rising, but watch for the RSI pushing above 60 to
be a harbinger for a possible upside break back
above $50.00. The overall outlook for oil is still
somewhat mixed and looking at the big macro
trends the market is recovering from the long
term range lows $42/$44 towards the mid-range
pivot at $50. Momentum indicators continue to
oscillate and reflect the long term range. Support
at $46.10 is increasingly key.

5. Weekly Outlook
Monday 17th July by Richard Perry, Market Analyst
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5
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