This week could be very important in deciding the direction of a number of markets over the coming months. With a number of central bank rate decisions, important data and significant markets approaching important technical break-out zones we should have some fun.
Currencies. All eyes are on the ECB and accordingly the Euro/$. Will they or won't they cut? I have no idea and frankly I don't care. We are in a range of roughly 1.2350 to 1.2600. There are very large stop losses below and a break through here, regardless of what the ECB do, will be significant. In fact it would be more significant if it broke with no rate cut as short term traders would be positioned the wrong way. Remember that data or rate cuts are not of the prime importance but rather how the market reacts to it. A trend will either emerge or extend when the market shrugs off news that ought to go counter to that trend.
Equities. As we have said all year we prefer the Nikkei. It has broken the important 11200 resistance zone and whilst above 10900/11000 is set to test 12000. The S&P needs to break 1159 and then 1177 which is quite possible if the SOXX stays above it's trendline support of 487/490.
Gold. This looks soft and price action would suggest that whilst the Euro/$ stays below 1.26/1.27 this will remain weak. I believe that a break higher for the dollar, through 1.2330, will see another shake-out, possibly to $470.
No doubt all the traders at Deutsche Bank will be busy working on their CV's after rumours that the mighty HSBC are thinking of taking them over; well the ones without the guaranteed 3 year packages will.HSBC don't quite have the same attitude to investment banking as Deutsche, or perhaps I should say investment banker salaries when they account for over 50% of expenses.
Harry
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