The US Presidential election is growing ever nearer and the markets are becoming more considered. The markets will though be looking towards crucial economic growth data this week which will indicate how the UK is performing post Brexit and a first look at Q3 GDP in the US as traders price in a Fed hike in December.

1. Weekly Outlook
Monday 24th October by Richard Perry, Market Analyst
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WHEN: Fri 28th October at 1330BST
LAST: +1.4% (for final Q2)
FORECAST: +2.5%
Impact: The FOMC expects that “economic activity will
expand a moderate pace”. This has been the message
for months now and there is little sign of this picking up.
Q2 GDP growth finished around +1.4% annualised and
although the consensus expects Q3 to have picked up
slightly, there is nothing really in the growth data that
will drive the Fed to change its stance. The Atlanta
Fed’s GDPNow tracker model has been slashing
growth forecasts for Q3 for the past few months and
believes it is going to be around 2.0%. The Fed will be
in no rush for its hiking cycle but December remains on.
Key Economic Events
Date Time Country Indicator Consensus Last
Tue 25th Oct 09:00 Eurozone German Ifo Business Climate 109.5 109.5
Tue 25th Oct 15:00 US CB Consumer Confidence 101.5 104.1
Wed 26th Oct 01:30 Australia CPI (Q3) +0.5% +0.4%
Wed 26th Oct 15:00 US New Home Sales 601,000 609,000
Wed 26th Oct 15:30 US EIA Crude Oil Inventories -5.2m
Thu 27th Oct 09:30 UK GDP (Q3 prelim) +0.3% +0.7%
Thu 27th Oct 13:30 US Durable Goods Orders +0.2% -0.4%
Fri 28th Oct 00:30 Japan CPI core Sept (Tokyo CPI for Oct) -0.5% (-0.5%) -0.5% (-0.5%)
Fri 28th Oct 13:30 US GDP (Q3 Advance) +2.5% +1.4%
Fri 28th Oct 13:30 US Employment Cost Index (Q3) +0.6% +0.6%
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1N.B. Please note all times are BST (GMT+1), data source Reuters
Macro Commentary
As we move closer to just over two weeks before the US elects a new President, are markets moving a bit more
with caution? It is interesting to see that despite the US dollar strength (drive even further following the dovish ECB
meeting), there is an improving performance of the safer haven plays once more. The classic yen, gold and
Treasuries triumvirate have started to pick up again. The gold price may be bottoming after a big sell-off, but there
is an outperformance developing, whilst the yen is resisting the dollar bulls and also finding traction against other
major currencies again. Furthermore, Treasury yields are also beginning to pull lower again. Could it be that the big
evens that 2016 may be remembered for are getting closer? The Presidential election and the prospective FOMC
rate increase. Aside from the first look at how the US economy performed in Q3, there is another intriguing event
this week. The preliminary look at UK GDP growth in the first full quarter following the EU referendum. Remarkably,
the final reading of Q2 (which accounts for a lot of the late data around the time of the referendum) was upgraded
to +0.7%, whilst economic data has been positive in the past few months, with a rolling three month average of
retail sales the highest since February 2015. Will the UK consumer help GDP to beat the +0.3% forecast? It is likely
to be the lack of investment amidst the Brexit uncertainty that would account for the drag.
Must Watch for: GDP (Q3 Advance)
US Q3 GDP
Atlanta Fed GDPNow tracker has been steadily falling

2. Weekly Outlook
Monday 24th October by Richard Perry, Market Analyst
Foreign Exchange
On Friday, the trade weighted dollar index broke yet another resistance to its highest level since early February
and looks well on course now for a test of the 2016 high at 99.82, but also the big psychological 1000 level.
Corrections are being bought into, but the major reason behind the selling pressure has been the strength
against the euro. The ECB has opened the way for another six weeks of bearish outlook for the euro as ECB
President Mario Draghi, said that the Governing Council had not even discussed the concept of tapering asset
purchases. This will now mean that traders will have until 8th December to brood over the necessity of further
QE. This is coming at a good time for the dollar bulls as the White House is slipping ever further from the grasp
of Donald Trump, something that means the dollar strength can be sustained as the market moves to price in
what is the increasingly likely Fed rate hike on 14th December. Fed Funds futures are now pricing well over 70%
probability for a Fed move in December according to the CME Group FedWatch tool. It is interesting that this
dollar strength against the euro is coming despite the yen beginning to stabilise. USD/JPY is one of a few major
pairs that are ranging now, between 112.80/114.60. However, near term selling pressure is growing again with
sterling pulling lower could again test key range support $1.2085/$1.2130 this week. The Aussie is also looking
corrective in a range between $0.7400/$0.7730, whilst the Kiwi is near term falling back from $0.7260.
WATCH FOR: GDP for both UK and US will be key, Tokyo CPI could also be a signal for the yen
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FX Outlook
NZD/USD
Watch for: The bulls will remain in control longer
term whilst the bull trend is intact.
Outlook: The bulls are less in control now than
they have been for a few months, however whilst
the bull trend of the past 10 months remains
intact the outlook will be positive (currently c.
$0.7055). The issue is that the recent top pattern
is corrective and the 55 day ma is now a basis of
resistance whilst the RSI has lost its bullish
configuration. There is though a battle of the
moving averages with the 144 day ma
supportive and flanking the. It could be that the
move through either of the moving averages is
the next trigger for the outlook. In the mean time
the trend is your friend and that is higher.
EUR/USD
Watch for: The euro remains under pressure for
a test of $1.0800
Outlook: The long term chart shows how the
key levels on EUR/USD have coincided with the
big Fibonacci retracements of $1.0540/$1.1615
in the past few months. The loss of the July low
$1.0950 (and 61.8% Fibonacci level)
subsequently opens the 73.6% Fibonacci
retracement of $1.0792 which is around the key
long term support around $1.0800. It now means
that $1.0950 is a key resistance overhead and
there is a big “sell-zone” for the coming months
between $1.0950 and $1.1050. Expect pressure
towards $1.0800 now. However keep in mind
also the RSI is looking historically stretched and
another near term rally could be seen. It would
though be a chance to sell again.

3. Weekly Outlook
Monday 24th October by Richard Perry, Market Analyst
Equity Markets
Doing some analysis last week on the correlation between the S&P 500 and movement on WTI suggested that
during US earnings season, the oil price becomes much less of a positive correlation for Wall Street. This time
seems to be no different, with the 30 day correlation between the two having fallen back from +0.5 (a fairly
strong correlation) at the end of September to now sit at zero (no correlation). With earnings season beginning
a couple of weeks ago, that suggests that Wall Street is looking more at earnings season but also perhaps the
Presidential election and probably the increasing prospect of a Fed rate hike by the end of the year. This means
that despite oil testing its key 2016 resistance levels, the S&P 500 is way back. Earnings season has been
strong so far, with the banks all performing well (the pick up in fixed income trading was especially interesting),
but also the nerves surrounding the Presidential election. There have been diminishing returns from the
“winning” performances of Hillary Clinton in the debates (Clinton is generally seen as risk positive and therefore
equities positive) but it is interesting to seen the S&P 500 is basically flat on a net basis from the debates. The
market is yet to get much of a kick forward from the positive earnings and there seems to be a fear of a Fed
rate hike. For now, Wall Street is struggling, but although the DAX has bee outperforming over the past week, it
will be interesting to see if the bulls can hold the profit taking at bay at the old resistance 10,802. FTSE 100 has
also been somewhat muted in the past week and signs of tiring in the momentum indicators suggests there
could be further pressure on key support 6930/6955 could be seen this week.
WATCH FOR: US earnings continue, whilst UK and US growth will be watched for sentiment.
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3
DAX Xetra
Watch for: The resistance band 10,705/10,802
is key this week
Outlook: The DAX has been in a recovery rally
that has outperformed other key major markets
in the past week, however every time the market
gets to within touching distance of the key
overhead supply at 10,705/10,802 the bulls get
vertigo and the selling pressure resumes. The
momentum indicators have a positive look to
them but it is also notable that since posting the
key high at 10,802 in August, every time the RSI
gets to around 60, the impetus cannot be
sustained and profit taking kicks in. Will this time
be different? The early move today is higher but
the resistance is still an issue. The response this
week could be the breakout.
FTSE 100
Watch for: Is the rally in the process of building
a topping pattern again?
Outlook: Since breaking out above 6955 the
market has been in a developing uptrend.
However the recent consolidation of the past
three weeks has come in the wake of a couple of
failed attempts for the bulls to hold a break into
new all time high ground. The momentum
indicators are now beginning to wilt slightly and
the trend higher could begin to come under
pressure. The key support that needs to be
watched is the band between 6930 and 6955
which was a series of old peaks between August
and September which the bulls are holding on to.
However if this is broken it would be a bearish
move opening 6780, with 6612 support key.
Index Outlook

4. Weekly Outlook
Monday 24th October by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Despite the dollar strength of recent sessions it has been interesting to see the gold price holding up well.
Physical buying of gold is increasing due to Indian wedding season and festivals such as Diwali, whilst Chinese
prices are also at a decent premium suggesting increased demand. This comes as the gold price has started to
improve again. The move above $1265 resistance means that the bulls will now be eying $1277 as the next key
near term level. Support for silver may be less secure and a potential base pattern is yet to be seen though and
this also suggests that there is a safe haven element to the buying too. The oil price has once more backed
away from a confirmed break above the resistance of the June high, whilst newsflow on inventories are a key
driver still in conjunction with any indication of global supplies and especially the OPEC production cuts.
The yields on major bonds starting to drop back again. The rally that lasted about 3 weeks is losing steam and
this reflects a somewhat more cautious mind-set creeping back into markets. The German Bund yield will not
have been helped by the comments from Draghi about tapering and this has driven the Bund yield back to a
two week low back below zero. There has been a suggestion that a “hard-Brexit” would drive UK yields higher
and the mild outperformance versus other major yields would play into this. However the move has not been
run-away and Gilt yields are stuttering along with the rest. The moves have not become entirely uncoupled..
WATCH FOR: Growth data for UK will impact on Gilts. US data will drive commodities off dollar moves
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4
Gold
Watch for: Consistent gains back above $1265
would increase the prospects of a recovery rally.
Outlook: The support for gold is rather
impressive considering the recent strength of the
US dollar. This would suggest an underlying
demand for gold. The near term chart shows that
the bulls actually have a shot at a recovery whilst
trading above $1260 this week, especially with
improving momentum indicators. Looking further
out though as long as the market can continue to
build on the higher low at $1247 above the key
sell-off low posted at $1241, then the potential
for a recovery will be in play. A move higher
beyond $1277 would also mean little real
resistance until the previous top breakdown at
$1300/$1302. There has also been no pullback
rally to speak of yet either.
Markets Outlook
Brent Crude oil
Watch for: The bulls are struggling to breakout
and the momentum is suffering as a result
Outlook: Oil prices made a second attempt of
the month to make a confirmed breakout above
the key June high at $52.86 only to once more
be thwarted. The concern is that the drop back is
now being accompanied by a deterioration in the
momentum indicators that are suggesting the
support at $50.90 is more likely to be broken.
This would complete a top pattern that would
imply $48.70 and a near term bout of profit
taking. The longer term trend remains bullish and
as long as the support at $45.10 remain intact,
any dip would be considered to be corrective
within the bull trend. There is a big band of old
breakout support around $50/$51 too.

5. Weekly Outlook
Monday 24th October by Richard Perry, Market Analyst
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5
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