Senior Market Strategist

Total Content 115

Articles 115

Weekly look-ahead

By David Morrison  |  12/01/2018 16:50
”bullmarket”/
This article considers the recent price action in stock indices, FX, crude oil and gold and what to look for in the coming week.

Stock indices

Last week brought a succession of fresh record highs for all the major US indices and the UK’s FTSE100. The situation for European indices was more nuanced with weekly gains for some, but with a notable sell-off in the German DAX. The latter struggled even as Chancellor Merkel managed to cobble together a coalition with her old partners the SPD. This means that Germany should have a workable government for the first time since the general election in September. The trouble for German corporations is the current strength of the euro. There are concerns that this will damage the competitiveness of exporters, depressing sales and hurting earnings.
Meanwhile, the fourth quarter earnings season is underway with investors anticipating this will provide yet more ammunition for another push higher in US equities. The majors continue to post fresh record closes on an almost daily basis now with the latest leg of the rally coming in the wake of Trump’s tax reforms which passed through Congress last month.
Earlier in the week the US majors had a slight wobble following a report that China was considering halting purchases of, or even selling, US Treasuries. But even before the news was effectively dismissed by the Chinese authorities, investors had piled back in to “buy the dip” once again.
For now, the momentum is all to the upside. Traders continue to disregard warnings that the market is seriously overvalued. At the same time low volatility is disguising dangers inherent in the current frothy environment. Investors are still prepared to extend their exposure to stocks even as developed world central banks withdraw the monetary stimulus which boosted risk assets in the first place.

FX

The US dollar came under intense selling pressure last week. On Friday news that German Chancellor Merkel had managed to put together a workable coalition government saw the euro fly higher. After numerous failures, the EURUSD finally broke above significant resistance around 1.2100 to trade at a three-year high. The move followed on from gains made in the previous session after the release of a hawkish set of minutes from the last ECB meeting. The central bank was upbeat in its assessment of the Euro zone’s growth prospects and hinted that it may look to speed up the reduction of its Asset Purchase Programme, currently running at €30 billion per month until September this year.
The break of upside resistance on the EURUSD together with a retest of support around 91.00 on the Dollar Index raises the probability of further dollar weakness to come. However, traders will want to ensure that this isn’t a false breakout before adding to their short dollar exposure. It’s worth noting that US Treasury yields are holding on to gains made last week. This is despite China’s State Administration of Foreign Exchange (SAFE) rejecting a report from Bloomberg suggesting that China was considering halting, or even reversing, its purchases of US Treasury bonds. Higher US Treasury yields generally help to support the dollar.

Crude oil

WTI and Brent crude were a touch softer at the end of last week. The move lower looked like little more than profit-taking after both contracts hit their highest levels in over three years on Thursday. The sell-off was relatively mild and contracts managed to hold on to most of the gains made earlier in the week. So the rally which began in June continues for now. It even accelerated at the end of October once prices smashed through a band of resistance that built up in the first few months of last year.
This week WTI (which is the more technically-traded of the two contracts) broke above another strong band of resistance – this time one which held in place through May and June 2015. This saw the front-month contract top $64 while Brent briefly popped its head above $70. If WTI can continue to consolidate above $62.50/63.00 then further gains look possible, although it’s fair to say that the rally is now looking a bit long in the tooth.
Fundamentally, crude continues to get support from a number of sources. Global demand growth is expected to accelerate now in line with a forecast pick-up in GDP across the US, Europe, China and Japan. At the same time the OPEC/non-OPEC production cut continues to reduce stockpiles. However, there’s been some speculation that Russia wants to lift output as soon as global inventories hit their 5-year average, which could be as early as the second half of this year. But last week the UAE energy minister said OPEC would commit to production cut deal for all of 2018.
There had been an expectation that US shale output would rise sharply once crude prices bedded in above $55. But although US production is already at its highest level since the early seventies and is expected to top 10 million barrels per day this year, US inventories have now fallen for nine successive weeks.

Gold

Gold began last week on the back-foot as sellers rushed in to take advantage of the precious metal’s sharp rally since mid-December. But the sell-off reversed quickly following a report from Bloomberg suggesting that China was considering halting, or even reversing, its purchases of US Treasury bonds. The news led to a sharp sell-off in equities and other risk assets and a rush into safe havens such as gold and the Japanese yen. China’s State Administration of Foreign Exchange (SAFE) was quick to rubbish the Bloomberg report. SAFE insisted that its investment in US government bonds is based on market conditions and its needs, adding that it always diversifies its investment of FX reverses. These comments proved more than enough to calm equity traders. But other market participants (particularly investors in US Treasuries themselves) were more cautious and US bond yields remained elevated. Despite this, the sell-off in the dollar gathered pace through to the end of the week. On Friday the EURUSD broke above significant resistance while the Dollar Index dipped below support around 91.00. This was enough to encourage buyers to rush back in to drive gold to a four-month high above $1,330. Gold looks a touch overbought around here, although there’s some decent support around $1,310 – the 61.8% Fibonacci Retracement of the September-December sell-off. But as last week, further gains are currently dependent on continued dollar weakness. 

Any information, analysis, opinion, commentary or research-based material on this page is for information purposes only and is not, in any circumstances, intended to be an offer of, or solicitation for, a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any person acting on it does so entirely at their own risk and GKFX accepts no responsibility for any adverse trading decisions. You should seek independent advice if you do not understand the associated risks.

 

Share

Author's Other Opinion & Analysis

  • The week ahead
    By David Morrison  |  19/10/2018 12:48

    Earnings, the ECB and US GDP

  • Chinese yuan falls again
    By David Morrison  |  18/10/2018 15:08

    USDCNY highest since Jan 2017

  • The week ahead
    By David Morrison  |  16/10/2018 14:19

    What’s in store for the rest of the week

  • Gold breaks above $1,200
    By David Morrison  |  15/10/2018 15:00

    Regaining ‘safe-haven’ status?

  • Buy the dip?
    By David Morrison  |  12/10/2018 15:10

    Stocks rebound into weekend

  • Euro feeling the heat
    By David Morrison  |  09/10/2018 14:30

    Single currency busts below support

  • S&P 500 tests support
    By David Morrison  |  08/10/2018 15:02

    Investors remain cautious

  • Investors getting nervous
    By David Morrison  |  05/10/2018 14:38

    US Treasuries slump

  • Italy tempers deficit plan
    By David Morrison  |  03/10/2018 14:53

    The euro rallied today, along with European stock indices

  • EURUSD testing support
    By David Morrison  |  02/10/2018 14:20

    Single currency under pressure

  • Goodbye NAFTA, hello USMCA!
    By David Morrison  |  01/10/2018 14:30

    Canada joins US/Mexican trade deal

  • Central bank meetings in focus
    By David Morrison  |  12/09/2018 15:12

    ECB and BoE meet on Thursday

  • German DAX continues to struggle
    By David Morrison  |  11/09/2018 15:09

    Another support level broken

  • Market Round-up
    By David Morrison  |  24/08/2018 13:44

    Longest-ever US bull market

  • Longest ever US bull market?
    By David Morrison  |  22/08/2018 15:01

    US equities remain in favour

  • Focus on Jackson Hole
    By David Morrison  |  21/08/2018 14:47

    Fed Chair speaks on Friday

  • S&P 500 backs away from record highs
    By David Morrison  |  16/08/2018 15:04

    US equities not immune from emerging market contagion

  • The 'never-ending' slide in gold
    By David Morrison  |  14/08/2018 14:59

    Gold breaks below $1,200

  • S&P 500 closes in on record high
    By David Morrison  |  08/08/2018 15:11

    US equities continue to strengthen

  • EURUSD bounces off 1.1500
    By David Morrison  |  07/08/2018 14:40

    EURUSD retests support

  • Weekly Market Wrap
    By David Morrison  |  03/08/2018 14:17

    The second quarter earnings season is beginning to wind down

  • Non-Farm Payroll look-ahead
    By David Morrison  |  02/08/2018 15:11

    Payrolls expected to grow by 190,000

  • Bank of England rate decision
    By David Morrison  |  01/08/2018 13:43

    Rate hike expected

  • Fed meeting look-ahead
    By David Morrison  |  31/07/2018 15:00

    Fed expected to keep rates unchanged

  • Weekly Market Wrap
    By David Morrison  |  27/07/2018 13:37

    This article looks ahead to next week’s earnings, central bank meetings and data releases

  • A pause in gold’s decline
    By David Morrison  |  25/07/2018 14:58

    Overall trend still negative

  • S&P 500 holding above 2,800
    By David Morrison  |  24/07/2018 14:53

    Retest of highs in prospect?

  • Crude steadies after slump
    By David Morrison  |  12/07/2018 14:00

    Trade fears trigger selling cascade

  • Gold threatens to break December lows
    By David Morrison  |  11/07/2018 14:27

    Gold under pressure

  • US S&P 500 retests resistance
    By David Morrison  |  10/07/2018 14:44

    Investors shrug off tariff concerns

  • Weekly look-ahead
    By David Morrison  |  06/07/2018 14:24

    Weekly Market Wrap

  • FOMC minutes and Non-Farm Payroll look-ahead
    By David Morrison  |  05/07/2018 13:07

    US employment update this Friday

  • Crude pulls back from multi-year highs
    By David Morrison  |  04/07/2018 15:06

    Saudi Arabia prepared to raise output

  • Investors relaxed over impending tariffs
    By David Morrison  |  03/07/2018 14:19

    Dollar slips and stock indices rally

  • S&P 500 retests support
    By David Morrison  |  02/07/2018 15:22

    Equity markets under pressure

  • No respite for Sterling
    By David Morrison  |  28/06/2018 15:32

    Pound under pressure

  • EU Summit and the single currency
    By David Morrison  |  27/06/2018 15:23

    Euro under pressure

  • Investors react to fears of trade tariff escalation
    By David Morrison  |  26/06/2018 15:32

    Monday saw significant selling across global equity markets

  • Weekly Market Wrap
    By David Morrison  |  15/06/2018 15:22

    There was a broad-based sell-off across risk assets on Friday

  • Traders turn to the ECB
    By David Morrison  |  14/06/2018 07:31

    Expectations have risen that the ECB will talk of ending QE

  • Federal Reserve set to raise rates
    By David Morrison  |  12/06/2018 14:55

    The Fed concludes its two-day FOMC meeting on Wednesday

  • Weekly market wrap
    By David Morrison  |  08/06/2018 15:22

    Next week sees central bank meetings for the US, Euro zone and Japan

  • WTI breaks below trend-line
    By David Morrison  |  05/06/2018 15:30

    Both Brent and WTI crude have sold off sharply

  • Weekly market wrap
    By David Morrison  |  01/06/2018 14:29

    Friday’s Non-Farm Payroll number was much stronger than expected

  • Non-Farm Payroll look-ahead
    By David Morrison  |  31/05/2018 15:42

    This Friday sees the release of US Non-Farm Payrolls for May

  • Weekly look-ahead
    By David Morrison  |  25/05/2018 15:10

    It’s a holiday-shortened week with Bank Holidays on Monday for both the UK and US

  • EURUSD update
    By David Morrison  |  23/05/2018 15:20

    The EURUSD currency pair took another lurch lower today

  • Weekly Market Wrap
    By David Morrison  |  18/05/2018 15:26

    Traders are keeping a close eye on oil prices, the dollar and US Treasury bonds

  • Gold under pressure
    By David Morrison  |  16/05/2018 13:58

    Gold had shown remarkable resilience over the past few weeks

  • Weekly Market Wrap
    By David Morrison  |  11/05/2018 15:04

    Equities rallied last week

  • Bank of England rate decision
    By David Morrison  |  09/05/2018 14:59

    A look at Thursday's MPC rate decision

  • Weekly Market Wrap
    By David Morrison  |  04/05/2018 15:21

    Friday brought the release of the latest US Non-Farm Payroll report

  • Dollar break-out
    By David Morrison  |  02/05/2018 08:12

    Early last week the dollar broke out of several trading ranges

  • Weekly market wrap
    By David Morrison  |  27/04/2018 15:13

    The yield on the benchmark 10-year Treasury note broke above the significant 3.0% level

  • Crude weaker, but still near highs
    By David Morrison  |  25/04/2018 15:32

    Oil fell yesterday following comments from French President Emmanuel Macron

  • US dollar breaks out
    By David Morrison  |  24/04/2018 15:55

    Yesterday evening the Dollar Index broke above 90.00

  • Weekly market wrap
    By David Morrison  |  20/04/2018 15:06

    Earnings continue to get a boost on...

  • Another look at the EURUSD
    By David Morrison  |  18/04/2018 15:06

    Trump accuses China and Russia of “playing the currency devaluation game”.

  • S&P 500 update
    By David Morrison  |  17/04/2018 15:53

    The US stock market steadied last week

  • Weekly market wrap
    By David Morrison  |  13/04/2018 15:19

    The first quarter earnings season got underway last week

  • EURUSD update
    By David Morrison  |  11/04/2018 08:14

    Still range-bound near highs

  • Weekly market wrap
    By David Morrison  |  06/04/2018 15:29

    US payrolls disappoint

  • Non-Farm Payroll look-ahead
    By David Morrison  |  05/04/2018 13:48

    Tomorrow sees the latest update for arguably the most important, and potentially market-moving, global data release – US Non-Farm Payrolls.

  • S&P 500 update
    By David Morrison  |  04/04/2018 14:31

    S&P 500 breaks below 200-day moving average

  • Weekly market wrap
    By David Morrison  |  29/03/2018 13:38

    This Easter holiday couldn’t really come at a worse time

  • S&P 500 - update
    By David Morrison  |  27/03/2018 13:47

    The S&P since February's sell-off

  • Weekly look-ahead
    By David Morrison  |  23/03/2018 16:59

    Holiday-shortened week

  • NASDAQ leads sell-off
    By David Morrison  |  22/03/2018 15:53

    Markets lead lower by tech sell-off

  • Fed meeting in focus
    By David Morrison  |  21/03/2018 10:50

    Investors on edge ahead of Fed decision

  • Weekly Outlook
    By David Morrison  |  16/03/2018 15:41

    Fed meeting in focus

  • S&P 500 - the technical picture
    By David Morrison  |  14/03/2018 16:34

    This week has seen the US majors pull back from their best levels

  • Weekly look-ahead
    By David Morrison  |  09/03/2018 16:16

    The headline payroll number smashed above the high end of expectations

  • Non-Farm Payroll look-ahead
    By David Morrison  |  08/03/2018 14:30

    All eyes on wage growth

  • ECB and BOJ meetings in focus
    By David Morrison  |  07/03/2018 17:24

    Investors experienced a shock last month

  • Weekly Outlook
    By David Morrison  |  05/03/2018 10:15

    This is a big week for financial markets

  • Euro bounces, but political uncertainty remains
    By David Morrison  |  02/03/2018 11:01

    The euro rallied sharply overnight

  • Weekly look-ahead
    By David Morrison  |  23/02/2018 16:58

    US stock index futures were pushing higher ahead of Friday’s US open.

  • FOMC minutes and the German DAX
    By David Morrison  |  22/02/2018 14:33

    Investors were initially wrong-footed by minutes from a Federal Reserve meeting.

  • FOMC minutes in focus
    By David Morrison  |  21/02/2018 11:47

    All eyes are on the release of minutes from the Fed’s January FOMC meeting

  • Situation remains unresolved
    By David Morrison  |  20/02/2018 13:09

    The stock market correction may have further to go

  • Weekly Outlook
    By David Morrison  |  16/02/2018 16:02

    Global stock indices fought back last week

  • Out of the woods? Perhaps not
    By David Morrison  |  15/02/2018 13:37

    Yesterday brought the latest update on US inflation

  • Inflation and the S&P 500
    By David Morrison  |  12/02/2018 16:30

    This article will focus on the S&P 500

  • Weekly Outlook
    By David Morrison  |  09/02/2018 16:35

    Friday was a roller-coaster session to round off a tumultuous week.

  • What now?
    By David Morrison  |  08/02/2018 15:54

    The current sell-off in global equities has been a long time coming.

  • Traders focus on volatility
    By David Morrison  |  06/02/2018 16:55

    Yesterday the Dow posted its biggest ever one-day loss in points terms

  • Rising yields lift troubled dollar
    By David Morrison  |  05/02/2018 16:17

    The US dollar stages a modest recovery.

  • Weekly look-ahead
    By David Morrison  |  02/02/2018 16:12

    Equity sell-off resumes while dollar rallies

  • Time for a correction?
    By David Morrison  |  31/01/2018 16:22

    Equities retreat as yields push higher

  • Crude prices dip
    By David Morrison  |  29/01/2018 15:57

    Oil slides as dollar rallies

  • Weekly look-ahead
    By David Morrison  |  26/01/2018 15:16

    What's in store for key markets

  • Dollar hits fresh 3-year lows
    By David Morrison  |  24/01/2018 16:38

    US dollar plunges ahead of Trump's Davos speech

  • Wall Street hits fresh highs
    By David Morrison  |  23/01/2018 15:46

    The three-day US government shutdown ended on Monday

  • Market Round-up
    By David Morrison  |  22/01/2018 16:53

    Monday marked day three of the US government shutdown.

  • Weekly look-ahead
    By David Morrison  |  19/01/2018 16:30

    The last couple of weeks have seen a number of significant technical breakouts

  • S&P 500 – Weekly Chart
    By David Morrison  |  18/01/2018 15:24

    Putting price action into context

  • Crude pulls back from three-year highs
    By David Morrison  |  17/01/2018 16:32

    On Monday WTI and Brent hit their highest levels since early December 2014

  • Gold, the dollar, bond yields and inflation
    By David Morrison  |  16/01/2018 15:00

    But in line with conventional wisdom the dollar’s sell-off triggered a sharp rally in gold.

  • Gold traders eyeing the dollar
    By David Morrison  |  11/01/2018 15:48

    This article considers the recent price action on gold

  • Chinese news rattles markets
    By David Morrison  |  10/01/2018 15:33

    Chinese officials recommend “slowing or halting”

  • Could stocks rally further?
    By David Morrison  |  08/01/2018 17:00

    Most European stock indices ended Monday’s session in positive territory, playing catch-up after Wall Street’s sharp rally last week.

  • Weekly look-ahead
    By David Morrison  |  05/01/2018 15:55

    We rounded off this week with the final Non-Farm Payroll report of 2017. Headline payrolls rose 148,000 which was well below the 190,000 increase expected.

  • Dow smashes through 25,000
    By David Morrison  |  04/01/2018 16:07

    Yesterday the US majors ended at fresh all-time highs and this helped to lift Asian Pacific indices overnight.

  • US indices hit fresh record highs
    By David Morrison  |  03/01/2018 16:08

    US stock indices made another strong upside move yesterday which took both the S&P 500 and NASDAQ Composite up to fresh record highs. The buying has continued throughout today’s session

  • Mixed start to New Year
    By David Morrison  |  02/01/2018 16:56

    The first trading day of 2018 brought a mixed session as far as global stock indices were concerned.

  • New Year round-up
    By David Morrison  |  29/12/2017 15:22

    As 2017 draws to a close, here’s a quick round-up of how a few key markets look going into next year.

  • What's Next for Crude Oil?
    By David Morrison  |  19/12/2017 14:42

    This article will focus on price action in the front month WTI contract rather than Brent. WTI tends to provide better technical signals than Brent – not always, but often enough to give a cleaner overall picture.

  • Equities soar on US tax reform hopes
    By David Morrison  |  18/12/2017 16:10

    US and European stock indices soared on Monday as investors priced in an increasing probability that President Trump will deliver on his promise of tax reform before year-end.

  • Weekly Outlook
    By David Morrison  |  15/12/2017 14:26

    Here’s a brief heads-up for the week beginning 18th December

  • Central Bank monetary policy meetings
    By David Morrison  |  14/12/2017 15:48

    Here’s a quick rundown of the highlights from this week’s monetary policy meetings from the European Central Bank, Bank of England and US Federal Reserve

  • Look-ahead to the Federal Reserve meeting
    By David Morrison  |  13/12/2017 08:49

    Crucially, this week’s Fed meeting also brings an update to the FOMC’s Summary of Economic Projections.

  • Cboe launches Bitcoin futures
    By David Morrison  |  11/12/2017 16:26

    Listing Bitcoin futures on mainstream exchanges should ultimately help to boost the digital currency’s legitimacy and lead to more widespread acceptance.

  • Non-Farm Payroll look-ahead: 6 things you should know
    By David Morrison  |  08/12/2017 09:55

    So, here’s what to look for: the consensus expectation is for the headline Non-Farm Payrolls to rise 200,000 in November.

  • EURUSD – key events to consider
    By David Morrison  |  06/12/2017 17:07

    The dollar got a boost this week on the increased likelihood of an agreement on US tax reform being reached before the year-end.

Show More Articles

Sentiment

Open a Demo Account Open A Live Account

Losses can exceed deposits

RISK WARNING

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.

If such information is acted upon by you then this should be solely at your discretion and GKFX will not be held accountable in any way.

  • ForexF
  • IndicesI
  • CommoditiesC
        Back

        Login to Market Insight Account

        Your Market Insight account gives you access to the tools that we offer our customers including our
        Technical Studies & Sentiment for your accounts.

        Forgot Password?

        Don't you have a Market Insight account? With a few easy steps you can easily register to Market Insight

        Create a Market Insight's Account

        Your Market Insight account gives you access to the tools that we offer our customers including our Technical Studies & Sentiment for your accounts.

        register_ty

        Thank you!

        Welcome to Market Insight family!

        You have succesfully completed the registration.
        We will send you an e-mail to give you some
        instructions and our Terms and Conditions!
        Our account representatives will be contacting you as
        soon as possible. If you have any further questions
        please do not hesitate to mail us via info@marketinsight.com