US Retail Sales watched as tier one data could be the catalyst for some key breaks today

Market Overview

With a lack of any significant economic data yesterday, the markets were fairly quiet. However it may have just been the calm before the storm as there is a significant amount of tier one economic data in the coming days with which markets could react off. There is also the ramping up of earnings season to consider in the US. Wall Street closed yesterday slightly lower with the S&P 500 down 0.5%. Some of the big guns start to report earnings today, with the first of the big banks, JP Morgan and Wells Fargo due to announce, whilst tech giant Intel is also due. In Asian trading, once again the numbers were fairly mixed with the Japanese Nikkei 225 flat, whilst the Hong Kong Hang Seng dropped back after 8 consecutive positive sessions. The European markets have also opened slightly weaker.

In forex trading, there was a slight move against the dollar yesterday afternoon, whilst today is a touch more mixed. The euro remains under corrective pressure, but the Japanese yen continues its strength in the wake of hawkish comments from a government advisor close to Prime Minister Abe. Gold and silver came under dome corrective pressure yesterday and this has continued today.

There are some key economic releases for traders to really focus on today, kicking off with UK CPI at 0930BST. The expectation is for the number to again stay flat at zero, but any dip back into deflation would put pressure on sterling. There is also the US Producer Price Index at 1330BST which is expected to continue to decline, back to -0.8%. The US Retail Sales will be the key data of the day though at 1330BST. The data has disappointed for the past three months but March’s number should be clean of weather related issues that could mitigate the weaker data. This will have an impact across the dollar pairs.

Chart of the Day – AUD/USD

Once again after a strongly bearish candlestick yesterday, the Aussie stands on the brink of a major breakdown. The support at $0.7530 is under pressure and again a breach would leave the Aussie at its lowest level since May 2009 to open the next support at $0.7450. Technical indicators remain in bearish configuration with the Stochastics turning lower again and the RSI continually failing around the 50/60 level (indicative of bearish momentum). The intraday hourly chart shows that the resistance band $0.7620/$0.7635 has caught the overnight bounce and rallies continue to be sold into with a succession of lower highs in the past few days. We have also seen the hourly momentum take on a more bearish configuration in the past 36 trading hours. Further weakness looks due. The Aussie dollar has a big tendency to use historic pivot levels as key near term turning points, with the first at $0.7680 whilst the major level is at $0.7740.

EUR/USD

Selling pressure has been on the euro in recent sessions, with six completed negative days in a row now as the price falls back towards a test of the key low at $1.0456. Momentum indicators are now rather bearish with MACD lines showing a negative crossover, and Stochastics also configured negatively. Perhaps the optimists would look at the intraday hourly chart and the fact that the euro has just started to trade above the upper trendline of the downtrend channel. However, for now this could just be due to a slight lull in the downside pressure rather than any real recovery. There is still continued sequence of lower highs with the latest at $1.0615 and then at $1.0682. I am still expecting a test of the lows, and with US Retail Sales due this afternoon, any strong outlook for the data could drive this test. Below $1.0456 the next real area of interest is at parity.

GBP/USD

After having spent much of the last few days pulling fairly predictably lower, perhaps yesterday’s rally was a touch surprising. However, there has been little real damage done to the outlook and the bears remain in control. However, having left a low at $1.4563, it does mean that there is a slightly positive almost hammer candlestick now on the daily chart which is a touch confusing. If this candle were to be validated by a positive close today then there could be something in a potential rally, or at least aa near term bounce. However, there is a sense that the overhead resistance in place around $1.4700/$1.4735 is holding back a rally and this needs to be overcome first before the bulls can really think about any real upside traction. The intraday hourly momentum indicators are showing signs of fatigue from yesterday’s move and are struggling to continue the move. Today could be rather volatile with firstly UK CPI and then US Retail Sales, both key data for their respective currencies and this could make it an interesting day. I am still of the opinion that rallies on Cable are a chance to sell.

USD/JPY

Once again when it look as though there were signs of a decisive move about to be seen on Dollar/Yen we see a sharp reversal of sentiment and the outlook is changed once more. A sharp intraday decline has resulted in a bearish outside day. (This has come as a key advisor to Prime Minister Abe suggested that the yen should be trading around 105 and that monetary measures were working.) This move is being back up by a further slide today and both Stochastics and RSI momentum indicators are now falling away once more. This just ties into what I have been saying on Dollar/Yen in recent weeks is that you cannot have positions on for any sustained length of time as any profits will be eroded by the lack of any trend. It is a range play and as such there will be frequent rallies and reversals. The intraday chart still shows the importance of the pivot level at 119.40 and this is still a near term barometer. A breach would re-open 118.30. The hourly RSI is approaching 30 once more, so perhaps support is once more not far from formation. There is now key resistance in place at 120.84.

Gold

I still see gold as a near/medium term range play and nothing of the price action that I have seen over the past few days has done anything to dispel that belief. The key support is at $1178, but the higher low coming in at $1191 is also supportive (although it is under pressure today); whilst on the upside the key overhead barrier is at $1224, and immediate resistance now around $1212. There is a fairly mixed outlook for the daily moving averages which are giving us very little in terms of direction. Although I have spoken about the 21 day ma providing support, the 55 and 89 day moving averages are arguably both a basis of resistance too, with all of them now converging. However, despite the daily momentum indicators also positioned as neutral, the price has been beginning to slide in the past 18 hours and this is putting pressure on the initial support at $1191. A confirmed breach would begin to turn the outlook more corrective within the range, but I would still be wary as these moves never seem to be especially clean on gold of late. For now the range remains intact.

WTI Oil

The slight deterioration in the daily chart momentum indicators (Stochastics and MACD) remain as the nagging doubt I have that is preventing me form being more positive than perhaps I should be. Despite forming support again around $50 the near term bullish outlook just lost its way into the afternoon yesterday and leaves a slightly corrective daily candlestick. Despite this though, the support at $50 is backed up further by the support of a further key reaction low around $47. The hourly chart shows a consolidation of an improved momentum, with the price trying to form support above the hourly moving averages. This suggests that the bulls are again preparing for a test of the $54.24 key resistance. However, yesterday’s peak leaves us with resistance now at $53.00 which needs to be negotiated first. The longer the support is formed above $50 the more positive the outlook will be, but I continue to see this as a medium term consolidation range that is struggling to breakout.