Weekly Outlook: 2014, March 30 - April 6

NASDAQ forecast for the week of March 31, 2014, Technical Analysis

The NASDAQ fell during the bulk of the week, breaking the 4250 level to the downside which of course triggered the cell position that traders could have had based upon the shooting star from last week. However, we had suggested previously that this market has plenty of support below, and as a result we are now looking at the market for support near the 4000 level, and perhaps even the 4100 level. Right now, we are on the sidelines but simply waiting for that supportive candle in order to start going long.

S&P 500 forecast for the week of March 31, 2014, Technical Analysis

The S&P 500 as you can see fell during a large portion of the week, but found enough support at the 1840 level to turn things back around. Nonetheless, we are essentially consolidating at elevated levels, and a move above the 1880 level would more than likely signal that the market is ready to head to the 2000 handle. We think that it will eventually happen, but we could get a little bit of a pullback in the meantime. We see the 1780 level as a bit of a “floor” in this market, so as long as we stay above there we are “buy only.”

Silver forecast for the week of March 31, 2014, Technical Analysis

Silver markets fell during the bulk of the week over the last by sessions, but as you can see on the daily chart, there are signs of support coming into the marketplace. $19 is a very obvious support level as well, so we simply think that regardless, we don’t have enough room to start shorting the market now from a longer-term perspective. Quite frankly, we would love to see some type of supportive candle down here because we think we have more room to the upside than the downside.

Natural Gas forecast for the week of March 31, 2014, Technical Analysis

The natural gas markets rose during the course of the last week, testing the $4.50 level. We even went as high as just under the $4.60 level, but as you can see could not hang onto the gains all the way up in that area. Although this candle is very positive, we have to wonder whether or not there’s any real strength of this move higher, simply because the Friday candle was in fact a shooting star. With that, we are only buyers above the $4.60 handle, and until then will remain skeptical.

Gold forecast for the week of March 31, 2014, Technical Analysis

Gold markets fell during the week, but have found a bit of support towards the end of the session on Friday. With that being the case, although this market looks bearish, it would not surprise us if the shorter-term charts lead the way here. After all, the $1280 level should be relatively supportive based upon daily charts, so we are bit hesitant to sell here. If we do break down below the $1280 level however, we can fully see how the market could find its way down to the $1200 level given enough time.

Big Move Ahead as Euro’s Fate Depends on Outcome of ECB Meeting

Fundamental Forecast for Euro: Neutral

- The Euro’s vulnerability was on full display this week.
- Shifting fundamental momentum sees the Euro losing key support to the Australian and US Dollars.

The European Central Bank’s dovish rhetoric show hit the road this week as policymakers continued the pushback against the perceived hawkish nature of the March policy meeting. Several different policymakers commented on the fragmented state of Euro-Zone credit, the impact of the elevated Euro exchange rate on inflation, and the prospect of additional non-standard easing in the months ahead. The timing couldn’t be more calculated with the central bank set to gather once again this coming Thursday.

It’s been made clear in the past two weeks, however, that ECB policymakers are viewing the actions taken at the March meeting as far too hawkish. There has been considerable pushback from ECB officials everywhere, including from ECB President Mario Draghi and Bundesbank President Jens Weidmann. The fact that two of the more patient, monetarily conservative members have softened their tone is a strong indication that the ECB feels it may have made an errant signal to the market.

We’ve long argued that the ECB would withstand the calls for further easing as crisis conditions remained absent and economic data steadily improved. This has been the case, which is why the ECB has done little but for a meager 25-bps rate cut in November. Sovereign yields remain at or near multi-year lows across the continent – Germany, Italy, Spain, Portugal – but now there are signs that funding pressures may be building. Excess liquidity in the Euro-Zone has dropped to €104B, the lowest level since before the first LTRO in December 2011, which has started to put more pressure on interbank lending rates.

A look at EONIA shows conditions have tightened further the past week. The interbank rate settled at 0.174% on Friday, just above the 20-day average EONIA rate at 0.170%; up from 0.157% one-month early (February 28), and up from 0.155% three-months earlier (December 27). We point to the ECB’s Asset Quality Review (AQR) as a source of apprehension – there is little logic to taking on more risk amid the first ECB-led stress tests.

The difference between where we stand today from say, the eve of the ECB’s March meeting, is that the economic data climate has worsened noticeably, undercutting the one true source of stability for ECB policy. There were surprisingly low inflation readings out of two of the Euro-Zone’s largest economies at the end of the week (Germany and Spain), and it is very possible that the flash Euro-Zone inflation report on Monday shows yearly inflation down to a +0.5% y/y or +0.6% y/y pace, either of which would be a post-2008 crisis low.

The Citi Economic Surprise Index fell to a fresh 2014 low this week, hitting -7.4 on Wednesday and settling at -3.8 on Friday, its lowest weekly closing level since November 1, 2013 (-3.8) – the ECB cut its main refinancing rate just six days later at its November policy meeting. The sudden downswing in growth momentum, alongside the soft inflation environment, has elevated the likelihood of further dovish action by the ECB this week. The time for ECB action may be nearing, but with speculation building that something might happen – EUR long contracts were reduced by -25.6% this week, per the CFTC’s COT report – a lack of a concerted policy response could just as easily send the Euro back towards its yearly highs.

Forex - Weekly outlook: March 31 - April 4

The dollar rose to two-week highs against the yen on Friday, as indications that China’s government is prepared to do more to shore up the cooling economy bolstered risk appetite.

Market sentiment was boosted after China's premier Li Keqiang said the country has policies in place to counter economic volatility. The remarks eased concerns over recent signs of a slowdown in the world’s second-largest economy.

Data on Friday showing that U.S. consumer spending rose 0.3% last month after a downwardly revised gain of 0.2% in January also lifted the dollar higher against the yen.

USD/JPY rose 0.64% to end Friday’s session at 102.83, the highest since March 12. For the week, the pair gained 0.57%.

The euro edged up from one-month lows against the dollar following the comments, with EUR/USD inching up 0.07% to settle at 1.3752, recovering from lows of 1.3702. The pair ended the week down 0.61%.

The euro remained under pressure after European Central Bank officials indicated earlier in the week that they are considering fresh policy options to stave off the risk of deflation in the region.
ECB governing council member and Bundesbank head Jens Weidmann said Tuesday that a negative deposit rate could be an appropriate way to address the impact of strong gains in the euro.

The same day ECB President Mario Draghi that the central bank stood ready to act if inflation slipped lower than the ECB expected.

Data on Friday showing that the annual rate of inflation in Spain slipped 0.2% in March fuelled concerns that deflation could threaten the economic recovery in the euro area. A separate report showed that the annual rate of inflation in Germany slowed in March.

The dollar was lower against the pound on Friday, with GBP/USD up 0.185 to 1.6640 at the close of trade.

Sterling remained supported after a report on Friday showed that U.K. fourth quarter growth was left unrevised at 0.7% for the final three months of 2013. Another report showed that the U.K. current account deficit came in at a larger-than-expected 22.4 billion pounds in the fourth quarter.

Elsewhere, the Australian dollar rose to a four-month high of 0.9295 against the greenback on Friday, before trimming back gains slightly to settle at 0.9247. AUD/USD ended the week with gains of 1.33%.

The Aussie was boosted as recent reports indicated that the economy is picking up, while hopes for fresh stimulus measures from China also supported the Australian’s dollar’s gains. Meanwhile, NZD/USD edged down 0.18% to 0.8654 at the close on Friday, after hitting two-and-a-half year highs of 0.8696 earlier in the session. The pair ended the week with gains of 1.31%.

In the week ahead, investors will be looking to Friday’s U.S. nonfarm payrolls report for March for further indications on the strength of the labor market, while Monday’s euro zone inflation report will also be in focus, ahead of the ECB policy meeting and press conference on Thursday.

Monday, March 31

• Japan is to release preliminary data on industrial production.
• New Zealand is to produce private sector data on business confidence, while Australia is to publish data on private sector credit.
• Switzerland is to publish its KOF economic barometer.
• The U.K. is to release data on net lending to individuals.
• The euro zone is to produce preliminary data on consumer price inflation, which accounts for the majority of overall inflation.
• Canada is to publish the monthly report on gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth.

Tuesday, April 1

• Japan is to publish its Tankan manufacturing and non-manufacturing index, as well as data on average cash earnings.
• China is to release data on manufacturing activity.
• The Reserve Bank of Australia is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision.
• The euro zone is to release data on the unemployment rate. Germany is release data on the change in the number of people unemployed, while Spain and Italy are to release reports on manufacturing activity.
• Switzerland is to release its SVME manufacturing index.
• The U.K. is to release data on manufacturing activity.
• Later Tuesday, the Institute of Supply Management is to publish a report on U.S. manufacturing growth.

Wednesday, April 2

• Australia is to produce data on building approvals, a leading indicator of future construction activity.
• The U.K. is to produce private sector data on house price inflation, as well as official data on construction activity.
• In the euro zone, Spain is release data on the change in the number of people unemployed.
• The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. The U.S. is also to release data on factory orders.

Thursday, April 3

• Australia is to release data on retail sales and the trade balance, the difference in value between imports and exports.
• China is to produce data on service sector activity.
• The euro zone is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. Spain and Italy are to publish data on service sector activity.
• The U.K. is also to release data on service sector growth, while the Bank of England is to announce its benchmark interest rate.
• Later in the day, the European Central Bank is to announce its benchmark interest rate. The announcement is to be followed by a press conference with President Mario Draghi.
• Both the U.S. and Canada are to publish data on the trade balance, and the U.S. is also to publish the weekly report on initial jobless claims. Meanwhile, the ISM is to publish a report service sector activity.

Friday, April 4

• Germany is to publish data on factory orders.
• Canada is to publish data on the change in the number of people employed and the unemployment rate. The nation is also to publish its Ivey PMI
• The U.S. is to round up the week with the closely watched government data on nonfarm payrolls and the unemployment rate.

USD/CHF weekly outlook: March 31 - April 4

The U.S. dollar ended the week higher against the Swiss franc on Friday in part due to heightened expectations that the Federal Reserve could start to tighten monetary policy in the early part of next year.

USD/CHF hit 0.8899, the highest since February 27, before trimming gains to end Friday’s session at 0.8866. For the week, the pair gained 0.68%.

The pair was likely to find support at 0.8839, Thursday’s low and resistance at 0.8925.

Demand for the dollar continued to be underpinned by expectations that the Federal Reserve could start to hike interest rates as soon as April 2015.

Market sentiment was boosted by indications that China’s government is prepared to do more to shore up the cooling economy. China's premier Li Keqiang said Friday his country has policies in place to counter economic volatility. The remarks eased concerns over recent signs of a slowdown in the world’s second-largest economy.

Data on Friday showing that U.S. consumer spending rose 0.3% last month after a downwardly revised gain of 0.2% in January also supported the dollar.

A separate report showed that the University of Michigan’s consumer sentiment index slipped to 80 in March, down from 81.6 the month before. It was higher than the preliminary March reading of 79.9 but below forecasts of 80.5.

In the week ahead, investors will be looking to Friday’s U.S. nonfarm payrolls report for March for further indications on the strength of the labor market. Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.

Monday, March 31

• Switzerland is to publish its KOF economic barometer.

Tuesday, April 1

• Switzerland is to release its SVME manufacturing index.
• Later Tuesday, the Institute of Supply Management is to publish a report on U.S. manufacturing growth.

Wednesday, April 2

• The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. The U.S. is also to release data on factory orders.

Thursday, April 3

• The U.S. is to publish data on the trade balance, as well as the weekly report on initial jobless claims. Meanwhile, the ISM is to publish a report service sector activity.

Friday, April 4

• The U.S. is to round up the week with the closely watched government data on nonfarm payrolls and the unemployment rate.

USD/JPY weekly outlook: March 31 - April 4

The yen fell to two-week lows against the dollar on Friday after comments by China’s premiere indicating that the country is ready to make moves to stimulate its economy dampened safe haven demand for the Japanese currency.

USD/JPY rose 0.64% to end Friday’s session at 102.83, the highest since March 12. For the week, the pair gained 0.57%.

The pair is likely to find support at 102.02, Friday’s low and resistance at 103.41, the high of March 11.

Risk appetite was boosted after China's premier Li Keqiang said the country has policies in place to counter economic volatility. The remarks eased concerns over recent signs of a slowdown in the world’s second-largest economy.

Data on Friday showing that U.S. consumer spending rose 0.3% last month after a downwardly revised gain of 0.2% in January also lifted the dollar higher against the yen.

A separate report showed that the University of Michigan’s consumer sentiment index slipped to 80 in March, down from 81.6 the month before. It was higher than the preliminary March reading of 79.9 but below forecasts of 80.5.

Earlier Friday, reports showed that the annual rate of consumer inflation in Japan rose 1.3% in February, indicating that the Bank of Japan’s stimulus program aimed at combatting deflation is working.

However, another report showed that household spending fell 2.5% in February, against expectations for a 0.1% increase.

Elsewhere, the euro was also higher against the yen on Friday, with EUR/JPY advancing 0.71% to 141.40, up from an almost one-month trough of 139.95.

The euro’s gains looked likely to be held in check after European Central Bank officials indicated earlier in the week that they are considering fresh policy options to stave off the risk of deflation in the region.

Data on Friday showing that the annual rate of inflation in Spain slipped 0.2% in March fuelled concerns that deflation could threaten the economic recovery in the euro area. A separate report showed that the annual rate of inflation in Germany slowed in March.

In the week ahead, investors will be looking to Friday’s U.S. nonfarm payrolls report for March for further indications on the strength of the labor market. Japan is to release data on industrial production.

Monday, March 31

• Japan is to release preliminary data on industrial production.

Tuesday, April 1

• Japan is to publish its Tankan manufacturing and non-manufacturing index, as well as data on average cash earnings.
• The Institute of Supply Management is to publish a report on U.S. manufacturing growth.

Wednesday, April 2

• The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. The U.S. is also to release data on factory orders.

Thursday, April 3

• The U.S. is to publish data on the trade balance, as well as the weekly report on initial jobless claims. Meanwhile, the ISM is to publish a report service sector activity.

Friday, April 4

• The U.S. is to round up the week with the closely watched government data on nonfarm payrolls and the unemployment rate.

USD/CAD weekly outlook: March 31 - April 4

The U.S. dollar moved higher against the Canadian dollar on Friday, paring some of its weekly loss after data showed that U.S. consumer spending increased in February.

USD/CAD was last up 0.25% to 1.1059 after falling to lows of 1.0999 earlier in the session, the weakest since March 7. For the week, the pair ended down 1.23%.

The pair is likely to find support at 1.0999 and resistance at 1.1105, Thursday’s high.

Data on Friday showing that U.S. consumer spending rose 0.3% last month after a downwardly revised gain of 0.2% in January helped the greenback off lows against Canada’s dollar.

A separate report showed that the University of Michigan’s consumer sentiment index slipped to 80 in March, down from 81.6 the month before. It was higher than the preliminary March reading of 79.9 but below forecasts of 80.5.

The loonie, as the Canadian dollar is also known, strengthened against the greenback earlier in the week as the loonie tracked strong gains in the commodity linked Australian and New Zealand dollars.

The currency lacked strong drivers in any direction, with no major economic data releases in Canada on Thursday or Friday.

In the week ahead, investors will be looking to Friday’s U.S. nonfarm payrolls report for March for further indications on the strength of the labor market, while Monday’s Canadian GDP report will also be in focus.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, March 31

• Canada is to publish the monthly report on gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth.

Tuesday, April 1

• The Institute of Supply Management is to publish a report on U.S. manufacturing growth.

Wednesday, April 2

• The U.S. is to release the ADP report on private sector job creation, which leads the government’s nonfarm payrolls report by two days. The U.S. is also to release data on factory orders.

Thursday, April 3

• Both the U.S. and Canada are to publish data on the trade balance, and the U.S. is also to publish the weekly report on initial jobless claims. Meanwhile, the ISM is to publish a report service sector activity.

Friday, April 4

• Canada is to publish data on the change in the number of people employed and the unemployment rate. The nation is also to publish its Ivey PMI
• The U.S. is to round up the week with the closely watched government data on nonfarm payrolls and the unemployment rate.