Paul Gallacher
City Trading & Investment
Market Commentary
US equity index futures and European equity indexes gapped lower at the open following the weekend, with weak Chinese Industrial Production data providing the catalyst for initial downside. Industrial production slid from 9 to 6.9 in August compared to Aug-2013.
The downside in risk assets seems to have been contained for now, with European equity indexes and US equity index fu-tures trading within the vicinity of the highs of the session at the time of writing this repot.
Empire State Manufacturing report for September came in mixed, with a strong beat on the headline (27.54 vs. prev. 14.69). Yet, the employment sub-index saw a strong correction lower to 3.26 vs. prev. 13.64.
In the FX space, USD strength that has been a predominant force in catalyzing price dynamics over the course of last week, seems to be abating for now. It is a must to monitor USD dynamics this week in the run up to FOMC rate decision on Wednesday.
Intraday Strategy: E-mini S&P
E-mini S&P broke out of its 3-week range on Friday and gapped lower from Friday’s close following the weekend. From the tech-nical perspective, the lows of the aforementioned range will need to be confirmed / rejected as resistance - this is the premise that we will be basing our strategy for the session ahead. Empire State Manufacturing came in mixed - perhaps limited scope for further escalation higher. Industrial Production data might pose as a po-tential caveat - watch out for surprises vs. prev. data.
Make sure that if you do sell, you do so on waning upside momen-tum. Be careful with fade-type setups and with being proactive in positioning.
Intraday Strategy: EUR/USD
The EUR/USD entered a consolidation phase last week having printed the low at 1.2859 (circa 6% off the highs of the year at the 1.40 handle). The consolidation phase entailed, at times, height-ened volatility, yet the directionality of market moves in this curren-cy pair has been muted.
Taking into account the limited newsflow scheduled for today’s ses-sion we feel the most appropriate approach to the EUR/USD is a conservative one. As such we would aim to sell into waning mo-mentum at the highs of the current range.
Technical Analysis: Nasdaq and DJIA
Gradual markdown moves in the Nasdaq and DJIA throughout last week.
Technical Analysis: Bund and US 10-year T-note Futures
US and German 10-year yields on a gradual path higher. For the US, with cautiousness ahead of FOMC this Wednesday.
Technical Analysis: GBP/USD and USD/JPY
GBP/USD has been consolidating last week’s sharp round trip since the latter part of last week. USD strength abating mildly vs. JPY.
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