Weekly Outlook April 13 2015

Weekly Outlook
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13th April 2015 by Richard Perry, Market Analyst
Macro Commentary
Markets continue to be pulled around by two factors, the US dollar strength and the question of when the Federal
Reserve will tighten interest rates. Neither are mutually exclusive and it may be difficult to ascertain exactly which is
driving which. Rate hike expectations are driving dollar strength, but hampering corporate profits and hampering
inflation and growth, which is then an argument against a rate hike. The FOMC meeting minutes last week showed
concern over the impact of the strength of the US dollar. If this caution continues it may begin to hamper the strength of
the dollar. However, that does not appear to be a concern for the market in the wake of the meeting minutes There had
been a dialling back of expectations of a rate hike after the policy statement a couple of weeks ago, as the market had
run ahead of itself in potential expectation of a hike perhaps as early as June. However, the minutes showed that there
are a number of members (surely including an increasingly hawkish Jeffrey Lacker) pushing for a June rate hike after all.
Furthermore, there was also talk of unwinding the Fed’s asset purchases. A trigger for another dollar bull run. The market
is currently pricing an 8% chance of a June rate hike, with September now at 36% and the more likely October is at 54%.
WHEN: Fri, 27th Apr, 1330BST
LAST: 0.0%
FORECAST: +0.0% (Year-on-Year)
Impact: The minutes from the latest Fed meeting
have sharpened the expectations that the FOMC is
becoming increasingly data dependent. Any
economic announcement that pushes the Fed
towards its stated targets will drive expectations of
a rate hike. The decline in CPI seems to have
stabilised in the past couple of months and the
expectation of holding zero is pencilled in. If CPI
comes in ahead of this then it would drive a
stronger dollar. However Wall Street may take a
hit as traders are increasingly concerned by the
strong dollar in addition to a tighter Fed policy.
Must watch for: US CPI
Key Economic Releases
Date Time Country Indicator Consensus Last
Tue 14th Apr 09:30 UK CPI 0.0 0.0
Tue 14th Apr 13:30 US Retail Sales (MoM) +1.0% -0.6%
Wed 15th Apr 09:30 China GDP (Q1 2015) +7.0% +7.3%
Wed 15th Apr 12:45 Eurozone ECB monetary policy + press conference +0.05% +0.05%
Wed 15th Apr 14:15 US Industrial Production (MoM) -0.3% +0.1%
Wed 15th Apr 15:00 Canada BoC monetary policy +0.75% +0.75%
Fri 17th Apr 09:30 UK Unemployment +5.6% +5.7%
Fri 17th Apr 10:00 Eurozone CPI (final YoY) -0.1% -0.3%
Fri 17th Apr 13:30 US CPI (YoY) 0.0% 0.0%
Fri 17th Apr 15:00 US University of Michigan Consumer Sentiment 94.0 91.2
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1
US CPI (Year-on-Year)
N.B. Please note all times are GMT, data source Reuters

Weekly Outlook
13th April 2015
by Richard Perry, Market Analyst
Foreign Exchange
There are several factors which are helping to drive a renewed strong dollar trade. The dollar bulls had a bit of a reality
check after the FOMC statement a couple of weeks ago, as a surprisingly more dovish outlook on the committee than had
been anticipated, resulting in a sharp correction on the dollar. However, now we have the minutes of the meeting it
transpires that there are a significant number of members pushing for a rate hike potentially as early as June. This has
helped to drive the dollar bulls in recent days. Add in the continued concern over the ability of Greece to be able to re-
pay its debts and this is a recipe for a significant selling pressure on EUR/USD. The ECB monetary policy could cause
further volatility this week, although despite signs of improvement in the Eurozone, Draghi will be unwilling to rock the
boat so early into his QE programme. However, sterling is not without its bears either, with the significant uncertainty of
the outcome of the UK general election to be held on 7th May. It appears that a hung parliament is ever more likely, and
not only that, the chances of a coalition agreement are also low, meaning that a weak minority government could result.
It appears that most scenarios are likely to put downward pressure on sterling in the coming weeks and perhaps months.
WATCH FOR: Key US data will be the focus with retail sales, industrial production and CPI taking attention.
Euro traders will watch the ECB whilst sterling traders will hope for positive inflation and unemployment.
the UK and Japan will also impact on sterling and the yen.
EUR/USD
Watch for: Pressure on the key low at
$1.0455 is increasingly likely.
Outlook: The bears have grabbed control
ever since last week’s FOMC minutes. With a
two day close below support at $1.0710 this
leaves the euro wide open for a test of the
key March low at $1.0455 this week. With
momentum indicators giving a raft of sell
signals now the selling pressure is mounting.
Looking to sell any rallies would be the ideal
strategy with $1.0710 looking a good area on
a bounce. If the momentum escalates this
week there could even be major inroads
made in the move towards parity.
GBP/USD
Watch for: Further weakness towards the
next key lows $1.4345/$1.4230
Outlook: Sharp weakness in Cable has
resulted in a breach of the key low at
$1.4630. This has now opened the levels not
seen since 2010 when the pair finally
bottomed out at $1.4230. The technical
indicators have certainly got a bearish
configuration and the concern would be that
there is also considerable downside
potential for a run lower if the bear catch an
offer this week. Ideal selling opportunities
would be a rally towards $1.4700/$1.4800
which could then see a fall back to test
initially $1.4345 before the crucial low at
$1.4230.
FX Outlook
2

Weekly Outlook
13th April 2015
Indices
With traders now focusing on US earnings season, if results run to expectations then Wall Street could continue to lag the
stellar gains that are being seen in European indices such as the German DAX. Alcoa kicked off with a slight beat of
expectations on earnings but revenues have struggled. Attention will now turn to the big banks, with the financials
actually expected to be one of the few sectors to show earnings growth on the quarter. As a sector, earnings are
expected to have grown by just 1% (after an adjustment is made to Bank of America’s earnings). The S&P 500 as a whole
is expected to decline by 4.6%. Over in Europe we continue to see the DAX being driven higher (back to all-time high
ground) by a weaker euro. The huge exporting exposure to the DAX means that a weaker euro is a significant boon for
the German exporters. FTSE 100 is a strange index as every time it begins to gain traction it hits the buffers. The latest
break to new highs comes as the new tax year has kicked in (investors using their ISA allowance to invest), but the
uncertainty of the UK General Election could easily drive profit taking as the month goes on. Something to be aware of.
WATCH FOR: US earnings season is likely to be the driver of Wall Street, whilst the DAX will be impacted
by further euro weakness/dollar strength so the US data will be key this week, as will the ECB monetary
policy decision. Movement in commodity prices continue to have an impact on the FTSE 100.
FTSE 100
Watch for: Support band around 6975 needs
to hold to retain a bullish outlook this week
Outlook: From experience I say beware
when the FTSE 100 is breaking out as it
seems as though the bulls are never entirely
in control. Just when you think that FTSE 100
has made a clean break, there is a sharp
retracement. After a week of strong gains
(much on the coat-tails of the DAX) FTSE has
broken to an all-time high above 7065.
However none of the RSI, MACD and
Stochastics confirm the move which is a
concern. With the election uncertainty this
could be seen also as an ideal profit-taking
opportunity.
S&P 500
Watch for: A test of the all time high at 2120
could finally be seen this week.
Outlook: As earnings season gets underway,
the S&P 500 seems to be stuck, rangebound
under the all time high at 2120. Technical
momentum indicators are fairly neutral and
hardly suggesting an imminent breakout,
however the market has been gradually
making a series of higher lows in the past
few months and there is still a bullish bias to
the medium term outlook. Positive earnings
would certainly help to pull the market
higher for a test of the resistance band
2115/2120 this week. The key support
remains 2040/2050.
INDEX Outlook
3

Weekly Outlook
13th April 2015
Other Assets: Commodities & Bonds
Despite gold still performing as a safe haven asset, the fact is that it continues to perform better on a relative basis
against the dollar than all the forex majors. Gold is subsequently holding up well whilst the forex major are under selling
pressure. However, silver continues to trade with far greater volatility so if you can correctly call the direction you get far
more traction. The strong increase in the US oil supplies have so far failed to dampen the rally on WTI which is again
looking to pull higher towards its range highs.
US Treasuries are interesting to watch as the yield on the 10 year has been fairly well correlated to other safe haven
assets such as gold and the yen. However, it is interesting to see the yield curve on US Treasuries beginning to steepen
once more, helped by the slightly hawkish minutes from the FOMC. Last week we saw Switzerland became the first
country to sell 10 year government debt with a negative yield, whilst we continue to see the German 10 year Bund yield
dropping ever closer towards zero as it traded at all-time lows around 0.15%.
WATCH FOR: US Retail Sales and Industrial Production will keep the focus on the US economy and help to
drive Treasuries and commodities. Tier 1 US economic data remains now crucial with inflation in focus.
Gold
Watch for: A strong performance means
that gold is increasingly rangebound
Outlook: The strong performance of gold
has meant that there has been no real
damage done to the medium term
recovery of the past month. The selling
pressure has though meant that there is
far more of a ranging look to gold now,
with the support at $1191 holding up.
However the momentum indicators are
increasingly suggesting consolidation,
with the key overhead resistance band
$1220/$1224 capping the upside. The
bears are back in control below $1178.
Brent Crude oil
Watch for: A test of the resistance band
around $57.80
Outlook: It is interesting that the outlook for
WTI has become more positive than for
Brent Crude in recent weeks. Despite this
though there is a strong element of support
that is now building between $52.50/$54.00.
Technical indicators are now almost entirely
neutral now medium term with moving
averages flattening off and the momentum
indicators broadly neutral. Above resistance
at $60 improves the near term outlook with
the key resistance overhead at $63.00. Brent
seems to be waiting for the next trigger.
Below $52.50 re-opens the key lows
$45.20/$47.60.
COMMODITIES & BONDS Outlook
4

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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
13th April 2015

Weekly Outlook April 13 2015

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