After the huge swing in positioning for the Fed to turn dovish, this week's meeting of the FOMC will be crucial for the medium term outlook on financial markets. We look at the impact on forex, equities and commodities markets in the coming days. 

1. Weekly Outlook
Monday 17th June 2019 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.
Key Economic Events
WHEN: Wednesday 19th June, 1900BST
LAST: No change 2.25%/2.50%
FORECAST: No change 2.25%/2.50%
Impact: Simply put, it could be an absolutely crucial
meeting of the FOMC. The sharp decline in Treasury
yields in the past six months (the 10 year has fallen by c.
115 basis points) shows a market positioning for lower
growth, lower inflation and likely precedes a move to a
rate cut cycle from the Fed. However, a cut is not forecast
on consensus this time out. So it will be how the Fed sets
out forward guidance (dot plots, growth and inflation
forecasts) and in its statement that will be key. How will
Fed chair Powell also present in the presser. Treasury
yields, the dollar and Wall Street indices will be volatile.
Date Time Country Indicator Consensus Last
Tue 18th Jun 1000BST Eurozone German ZEW Economic Sentiment -5.8 -2.1
Wed 19th Jun 0900BST Eurozone Current Account +$24.7bn
Wed 19th Jun 0930BST UK CPI (headline / core) +2.0% / +1.7% +2.1% / +1.8%
Wed 19th Jun 1900BST US FOMC monetary policy No change (2.25% / 2.50%) No change (2.25% / 2.50%)
Thu 20th Jun 0530BST Japan Bank of Japan monetary policy No change (-0.10%) No change (-0.10%)
Thu 20th Jun 0930BST UK Retail Sales (core ex fuel YoY) +2.4% +4.9%
Thu 20th Jun 1200BST UK Bank of England monetary policy No change (+0.75%) No change (+0.75%)
Thu 20th Jun 1330BST US Current Account -$123.0bn -$134.4bn
Fri 21st Jun 0900BST Eurozone Flash PMIs (Manufacturing / Services / Comp) 48.0 / 53.0 / 51.8 47.7 / 52.9 / 51.8
Fri 21st Jun 1445BST US Flash PMIs (Manufacturing / Services) 50.5 / 51.0 50.5 / 50.9
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1N.B. Reuters data where possible. Please note all times are now British Summer Time (GMT+1)
Macro Commentary
Wednesday’s FOMC meeting could be crucial. Since US and China divisions over trade deteriorated, market
sentiment has plummeted. A realisation that a trade dispute would drag perhaps long term, global growth forecasts
and inflation expectations have reduced, and bond yields are sharply lower. How could the Fed continue to tighten
amidst such perceived economic deterioration? The market is pricing for c. 75 to 100 bps of Fed rate cuts over the
next 12 months. Are we set for the Fed to complete a remarkable shift and turn dovish this week? Maybe, but not to
the extent of expectation. Markets have gone way too aggressive in Fed easing. The US is not immune to a global
slowdown but certainly appears to be relatively sheltered. Household spending accounts for just under 70% of the
US economy and retail sales held up well on Friday. Furthermore, consumer confidence remains supportive
(especially on the Michigan Sentiment expectations component). The Fed won’t cut rates in June but could still
signal a shift in guidance through the statement, dots and economic projections. A statement change may see the
FOMC no longer “patient”, perhaps more “ready to act”, amidst minor downward revisions to inflation and growth
projections. The dots will get a lot of attention but given the relative strength of the US data, the Fed will not be as
dovish as the market expects. Perhaps the 2019 dots will remain steady and a cautious cut of 25 bps in 2020. This
could induce a jump in Treasury yields, a dollar rebound but in a topsy turvy way, induce a correction in equities.
Must Watch for: Federal Open Market Committee (FOMC) monetary policy
US Fed Funds rate
The sharp decline in Treasury yields over recent months (see 10
year yield on left y-axis below) suggests that the market is pricing
for rate cuts.

2. Weekly Outlook
Monday 17th June 2019 by Richard Perry, Market Analyst
Foreign Exchange
With Average True Ranges of forex major pairs just slipping back in the past couple of weeks, this could be one
where we start to see volatility coming back in again. A raft of central bank meetings (FOM, BoJ, BoE), elevated
geopolitical risk (oil tanker attacks) and political risk (US trade disputes and a Tory leadership battle in the UK)
could all combine to pull markets around more than usual. The Fed meeting is the biggest volatility factor. It is
too soon for a rate cut, but will the Fed signal a shift an easing bias? The market is pricing for between
75bps/100bps of easing in the coming 12 months. How the Fed navigates a move in a dovish direction in the
June FOMC meeting could be crucial for the near term dollar outlook. Shifting away from a “patient” stance
would be a start. The Bank of Japan is another central bank worth keeping an eye on. As the yen has
strengthened this is disinflationary and the calls for the BoJ to ease policy are growing. A deposit rate cut (by 10
or maybe even 20 bps) is possible but would be controversial. Widening the yield curve control range for the 10
year is more likely. Yield differentials have been a key factor in yen strength and allowing the 10 year yield to
fluctuate by a further 10 basis points (to -0.3%) would be a defensive measure in a world of falling yields. No
action is expected but any guidance would be interesting too. The Bank of England has been itching to hike in
recent months, constrained by Brexit. Brexit uncertainty is likely to prevent a rate hike this year, especially if a
Brexiteer such as Boris Johnson becomes Prime Minister. Elevated risk of a “no deal” exit is a drag on sterling.
WATCH FOR: Central bank meetings for FOMC, BoJ, BOE. Flash PMIs for Eurozone and US.
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FX Outlook
GBP/USD
Watch for: A consolidation is turning sour once
more and pressure is mounting on support.
Outlook: As the market has to price for elevated
prospects of a no deal Brexit, sterling is under
pressure. A period of near term consolidation
ended last week as Cable dropped back towards
the key May low at $1.2555 again. This is now a
key support this week. Bulls will be increasingly
concerned as momentum indicators deteriorate
once more, with downside potential. If the MACD
lines bear cross lower this will join the negative
configuration on RSI and Stochastics. Given the
deterioration, a close below $1.2555 opens the
crucial December/January support around
$1.2475.
EUR/USD
Watch for: Losing the breakout support at
$1.1265 opens for renewed correction.
Outlook: The outlook has taken a turn for the
worse in the past week as a breakout above
$1.1265 has been unwound. How the euro
responds to $1.1265 which is now resistance
again, will be important. However, looking at
momentum indicators, there is a correction
setting in. As momentum of a correction is
growing, if the sell signal on Stochastics is
added to y corrective slides on RSI and MACD
then the impetus for a move back towards
$1.1110 would grow. Below $1.1200 would open
the door for this.

3. Weekly Outlook
Monday 17th June 2019 by Richard Perry, Market Analyst
Equity Markets
Equities bounced strongly a couple of weeks ago in the wake of comments from Fed chair Powell who opened
the door to easier monetary policy from the FOMC. However, the move has lost steam as markets have
consolidated. The Fed meeting could have a huge impact on equity markets this week. Friday’s consumer data
held up enough to suggest that there is little reason to panic by the FOMC. If this is the case then this may not
be such good news for Wall Street. In the wake of solid retail sales and industrial production numbers on Friday,
Wall Street futures fell. Last week, we talked about how a dovish Federal Reserve has been the life blood of the
huge gains on Wall Street in the past ten years. Recent move to price for a dovish Fed, drove a rally, but could
that rally unwind this week if the Fed is less dovish that the market has been anticipating? Global sentiment is in
favour of safe haven assets now, something that is not conducive to positive moves on Wall Street in the
absence of a dovish shift from the FOMC. Considering the strength of the June rebound, a sizeable chunk of this
6% (in one week) rally could be retraced. A disappointment could bring the 2788/2840 support band on the S&P
500 back into range. It is likely that the DAX would be an underperformer, whilst the support band 11,620/11,845
could also come into play. For the FTSE 100 there is still a key band of support between 7040/7147. With
regards to key resistance areas to note this week, watch for the June high at 2910 on the S&P 500, whilst 12,227
is key on the DAX, and 7420 on FTSE 100.
WATCH FOR: FOMC meeting is crucial, but also developments in the trade dispute too..
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3
DAX Xetra
Watch for: A recovery has hit the buffers and is
on the brink of turning corrective again.
Outlook: The early June rally has run out of
steam in the past week as consolidation has set
n. This consolidation comes at a key crossroads
for momentum indicators and the bulls have a
decision to make. The RSI is again tailing off
around 60, MACD lines plateauing around
neutral and Stochastics around 80. A near term
pivot support sits around 12,060 so any closing
level below 12,000 would constitute renewed
selling pressure and a likely corrective move.
Resistance at 12,227 is growing especially if
momentum indicators begin to post sell signals.
FTSE 100
Watch for: How the bulls respond to the near
term drift will be key this week.
Outlook: Having seen the early June rally tailing
off, this becomes a key moment for FTSE. Is it a
bull flag or the start of a renewed corrective
move? Whilst resistance is mounting overhead
on a daily basis, there is little real sign yet of
momentum indicators pulling the market lower.
The RSI is drifting back towards 50, whilst
MACD lines are still rising (close to being above
neutral) and Stochastics holding above 80. This
suggests that it is not a market under excessive
pressure. Perhaps FTSE 100 will be dragged
back by external forces though. Resistance is in
at 7420 and holding back under a medium term
pivot at 7375 would not help the bulls. Watch
momentum for any acceleration lower.
Index Outlook

4. Weekly Outlook
Monday 17th June 2019 by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Gold broke out to a 2019 high on Friday. The question is whether this run can continue? The basis of the move
higher has been the growing expectation of monetary easing across major central banks. Inflation expectations
falling to record lows in the Eurozone, whilst suddenly the market is pricing at least three Fed rate cuts in the
next 12 months. Strong conditions for gold to perform well. Last week’s breakout on elevated geopolitical risk
may well unwind on a near term basis but this would be a chance to buy between $1324/$1348. However,
watch out for the FOMC meeting (which could arguably disappoint the doves).
Elevated geopolitical risk has helped to support oil. The key lows above $50 on WTI and above $$60 on Brent
Crude remain intact. However, the fundamental outlook for demand is deteriorating. The EIA is the latest
organisation (after the IEA) to cut its forecast for demand growth this year. With OPEC not meeting until 25th
June there is an ongoing focus on demand, and for that expectations of the US/China trade dispute will be key.
Bond yields accelerate lower again on elevated geopolitical risk. The question is whether this is a false move
(which will unwind as the geopolitical risk dissipates) or whether the downwards trend simply continues. Yields
could have a tumultuous week with the crucial June FOMC meeting looming large. So often a Fed meeting will
mark a key crossroads for Treasury yields. If the Fed fails to deliver for the doves, a rebound could set in.
WATCH FOR: Further news of the US/China trade dispute. FOMC meeting, also BoJ and BoE.
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Gold
Watch for: How the bulls respond to Friday’s
failed breakout will be key this week.
Outlook: A strong break to a new 2019 high
could not be sustained. With strong resistance
$1348/$1375 (a crucial barrier to gains since
2016), this failed breakout could be seen as a
significant disappointment. How the bulls
respond to this failure will determine whether this
is a chance to buy again. There is strong support
$1319/$1324 but if this support is breached then
a correction could deepen. For now, momentum
signals are still very positively configured, with
bulls still well positioned. The market has been
closing at levels not seen since April 2018 and if
the failure can be put into context, the outlook
remains strong. If momentum holds up then the
bull run still has a lot going for it.
Markets Outlook
Brent Crude oil
Watch for: Resistance at $64.10 is key
Outlook: The support began to form on the
escalation of geopolitical tensions in the Middle
East. If the tensions continue then it will underpin
a floor in Brent Crude. Lows of $58.90/$59.45
have formed the basis for support on oil. It is still
very early days, but traders will be looking for
signs of whether this is a serious recovery or just
another selling opportunity. In the past couple of
months, oil has continually been sold off as
rallies are seen as a selling opportunity. The key
level to watch this week is therefore, the reaction
high at $64.10. Momentum indicators are still
negatively configured and unless $64.10 can be
broken there is little real prospects for a
sustainable rally.

5. Weekly Outlook
Monday 17th June 2019 by Richard Perry, Market Analyst
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