Weekly Outlook: 2014, April 13 - 20

Gold forecast for the week of April 14, 2014, Technical Analysis

The gold markets rose during the course of the week, as you can see on the chart. Having said that, we broke the top of the hammer from the previous session, and we now believe that this market will continue to go higher. Perhaps this could be the beginning of a build up momentum to the upside as the markets did not reach the bottom of the larger consolidation this last time. By breaking the top of the hammer, this suggests that the buyers are starting to come back into play. Because of this, we believe that the momentum will build, and that we will more than likely bust through the $1400 level.

This area leads to the $1500 level as far as I can tell, and as a result we believe that this market will continue to grind higher. That of course is the key phrase there: grind. That being the case, you will have to have the wherewithal to hang onto the trade, but ultimately it does look in fact like we are trying to form some type of bottoming pattern overall. You have a lot of different ways to play goal of course, you could do it with physical metals for that matter. That of course takes all of the leverage out of the position, but you also have the ability to trade gold via the CFD markets.

Ultimately, the $1500 level is probably the real target, and we would fully expect to see this market reach that level given enough time. Of course being positive, it will be a little bit more difficult to hang onto the trade simply because so much in the market has been negative. However, we think that the market will ultimately turn things back around as we are in a longer-term uptrend, regardless what this particular chart looks like. It was just a couple years ago that we were well below $1000 an ounce. That being the case, we believe that the market will ultimately continue higher, especially considering that the US dollar looks a little bit on the soft side these days.

USD/JPY forecast for the week of April 14, 2014, Technical Analysis

The USD/JPY pair fell hard enough during the week to break down below the bottom of the shooting star and test the 101.50 level. That is the bottom of the reason consolidation area that we’ve been stuck in, so quite frankly we don’t really see much in this chart at the moment. We don’t think any things change, and quite frankly feel that the market is simply biding its time if you will, in order to go higher. After all, when markets go higher, they will often pull back slightly in order to go higher after building momentum.

The uptrend line that strong on the chart shows that we are certainly still bullish, and as a result we feel that the market will continue to find buyers every time we dip. With that being said, we would like to see some type of supportive candle, even if it’s only on the four hour chart in order to continue to go higher in the uptrend. We feel that the market should continue to go to the 103 level again and again, eventually breaking higher to the 105 level.

The 105 level will continue to be resistive, but we feel that the market should find enough momentum to eventually break out above that area, which of course would be very bullish turn of events. We believe that the uptrend is the real deal, and that the interest-rate differential should continue to drive the markets higher given enough time. Ultimately, we think that this is the beginning of a longer-term buy-and-hold type of phase for the USD/JPY, something that we have seen over and over again through the decades. Granted, we always many should dip a little bit lower but it would not surprise us at all to see an uptrend form that last for 3 to 5 years, which is common for this pair as it tends to do well in “risk on” type of marketplaces as the Japanese yen it tends to be considered a safety currency. As long as the Bank of Japan continues to try and devalue the Yen, we’re still bullish.

USD/CAD forecast for the week of April 14, 2014, Technical Analysis

The USD/CAD pair initially fell during the week, but found enough support to bounce and form a nice-looking hammer this hammer of course is a very bullish sign, and the fact that it is focused on the 1.09 area leads us to believe that the market should continue to go higher given enough time. That being the case, we are bullish of the USD/CAD pair given enough time, as the bullish momentum should continue based upon not only the hammer, but the fact that the hammer formed exactly where did leads us to believe that we are going to continue to consolidate in a market that has been very bullish to begin with. Typically, and these situations consolidation in some been continuation.

The recent action in this marketplace suggests to us that perhaps a rest was needed, and as a result we should continue to go higher, probably testing the 1.12 level which is the top of this rectangle. With that, if we break above the 1.12 level, this market should head to the 1.15 level given enough time. At the end of the day, we believe that the Canadian dollar is in trouble overall, and this hammer of course only suggests the same thing. After all, the Bank of Canada recently suggested that Ray cuts warrant necessarily out of the question, which is the complete opposite with going on in the Federal Reserve. The Federal Reserve is trying to cut back on quantitative easing which of course is bullish for the US dollar.

It is not until we break down below this hammer that we would consider selling, but at the end of the day we believe that the support comes back into play at the 1.07 level, which extends all the way down to the 1.06 handle. With that, we would only be short-term bearish, and then start looking for the supportive candle in order to go higher as we would still be in an uptrend at that point as well. One thing to keep in mind though, you can draw an uptrend line that would touch the bottom of this hammer.

NZD/USD forecast for the week of April 14, 2014, Technical Analysis

The NZD/USD pair fell after initially rising during the week. However, you can see that we have broken out to the upside at least momentarily, and as a result we feel that the market will continue to go higher, probably aiming for the 0.90 handle given enough time. We do believe that the bullishness is warranted, and in fact will continue to go on as the market continues to build more of a “risk on” type of attitude. With that, we are bullish of the New Zealand dollar, and pullback should represent buying opportunities.

GBP/USD forecast for the week of April 14, 2014, Technical Analysis

The GBP/USD pair broke higher during the week, but as you can see pulled back to the 1.68 handle. That to us is the area that we need to get above in order to start buying again, as we feel that the market will go to the 1.70 handle without too many issues. However, we also recognize that the 1.65 level is supportive, and as a result we should find a supportive candles down there to start buying as well. We are bullish of the British pound in general.

EUR/USD forecast for the week of April 14, 2014, Technical Analysis

The EUR/USD pair rose during the week, breaking above the 1.38 level handily. However, we need to get above the 1.3950 level, and for that matter the 1.40 level in order to feel comfortable enough to start buying and holding onto the position. If we do that though, it would break above a downtrend line from the monthly timeframe, which of course would be a massive bullish sign in a market that has been actually in a downtrend since the financial crisis began. Granted, we’ve had long moves up and down, but if you look at the monthly charts, you will see that we are in fact in a downtrend.

Weekly outlook: April 14 -18

The dollar edged higher against a basket of major currencies on Friday as a global selloff sent equities markets lower, but gains looked likely to be temporary amid expectations that U.S. interest rates are likely to remain on hold for some time.

USD/JPY ended Friday’s session at 101.61, after weakening to 101.31 earlier in the trading day, the lowest since March 19. For the week, the pair lost 1.41%.

Demand for the yen continued to be underpinned after the Bank of Japan indicated earlier in the week that it was unlikely to implement further stimulus measures in the short term.

The dollar was almost unchanged against the euro at the close of trade, with EUR/USD trading at 1.3884, after touching session highs of 1.3905 earlier. The pair ended the week 1.04% higher, the largest weekly gain since September.

The greenback briefly found support after data on Friday showed that U.S. producer prices rose 0.5% in March, the largest increase in nine months and ahead of expectations for a 0.1% increase.

However, the dollar remained under pressure after the minutes of the Federal Reserve’s March meeting indicated that an interest rate increase is unlikely to be warranted for some time.

The Fed’s March meeting minutes, released on Wednesday, showed that policymakers discussed whether to keep interest rates at record lows until inflation moves higher, and did not elaborate on a possible timeframe for when rates could start to rise.

Last month the U.S. central bank reduced the monthly pace of asset purchases by $10 billion, to $55 billion, and repeated it is likely to continue paring the program in “further measured steps.”

The dollar gained ground against the pound on Friday, with GBP/USD falling 0.32% to 1.6729 at the close. The drop in sterling came after data showed that U.K. construction output fell in February as heavy rain, which led to flooding in parts of the country, delayed work.

The dollar was also higher against the commodity linked Australian and Canadian dollars. AUD/USD slipped 0.18% to 0.9398 on Friday, paring back the week’s gains to 1.42%, while USD/CAD advanced 0.41% to 1.0978.

In the week ahead, market watchers will be focusing on speeches by Fed Chair Janet Yellen, as well as reports on U.S. retail sales and housing starts. Data on first quarter Chinese economic growth and a rate decision by the Bank of Canada will also be closely watched.

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

Monday, April 14

• The euro zone is to release data on industrial production.
• The U.S. is to produce data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

Tuesday, April 15

• The Reserve Bank of Australia is to publish the minutes of its latest policy meeting, which contain valuable insights into economic conditions from the bank’s perspective.
• Switzerland is to release data on producer price inflation.
• The U.K. is to release data on consumer price inflation, which accounts for the majority of overall inflation.
• The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
• Canada is to publish data on manufacturing sales. At the same time, the U.S. is to produce data on consumer inflation. Later Tuesday, Fed Chair Janet Yellen is to speak; her comments will be closely watched.

Wednesday, April 16

• New Zealand is to release a report on consumer inflation.
• China is to publish data on first quarter gross domestic product, the broadest indicator of economic activity and the leading indicator of economic growth. The nation is also to release data on industrial production.
• Bank of Japan Governor Haruhiko Kuroda is to speak at an event in Tokyo; his comments will be closely watched.
• The U.K. is to release official data on the change in the number of people unemployed and the unemployment rate, as well as data on average earnings and public sector borrowing.
• The ZEW Institute is to publish a report on economic expectations in Switzerland, a leading indicator of economic health.
• The euro zone is to release revised data on inflation.
• The U.S. is to produce reports on housing starts, building permits and industrial production.
• The Bank of Canada is to announce its benchmark interest rate and publish its monetary policy statement, which outlines economic conditions and the factors affecting the bank’s decision. The announcement is to be followed by a press conference.
• Later Wednesday, Fed Chair Janet Yellen is to speak at an event in New York.

Thursday, April 17

• Australia is to release private sector data on business confidence, as well as official data on new vehicle sales.
• The euro zone is to publish data on the current account, while Germany is to produce data on producer price inflation.
• Canada is to publish data on consumer inflation.
• The U.S. is to publish data on initial jobless claims and a report on manufacturing activity in the Philadelphia region.

Friday, April 18

• Markets in Europe and the U.S. will be closed for the Good Friday holiday.

USD/JPY weekly outlook: April 14 -18

The yen ended the week broadly higher against the dollar after the Bank of Japan refrained from implementing fresh stimulus measures at its latest policy meeting, while dovish Federal Reserve minutes weighed on the dollar.

USD/JPY ended Friday’s session at 101.61, after weakening to 101.31 earlier in the trading day, the lowest since March 19. For the week, the pair lost 1.41%.

The pair is likely to find support at 101.20 and resistance at 102.12, Thursday’s high.

The greenback briefly found support after data on Friday showed that U.S. producer prices rose 0.5% in March, the largest increase in nine months and ahead of expectations for a 0.1% increase.

Demand for the yen continued to be underpinned after Bank of Japan Governor Haruhiko Kuroda said Tuesday the economy can weather a sales tax increase without further monetary policy measures to offset it.

Earlier Tuesday, the BoJ voted to keep its policy target of increasing the monetary base unchanged at an annual pace of 60 trillion to 70 trillion at the end of its two-day policy meeting.

Kuroda said economic growth and inflation were likely to continue to pick up in the coming months despite a sales tax increase in April.

The dollar came under heavy session pressure after the minutes of the Federal Reserve’s March meeting indicated that an interest rate increase is unlikely to be warranted for some time.

The Fed’s March meeting minutes, released on Wednesday, showed that policymakers discussed whether to keep interest rates at record lows until inflation moves higher, and did not elaborate on a possible timeframe for when rates could start to rise.

Last month the U.S. central bank reduced the monthly pace of asset purchases by $10 billion, to $55 billion, and repeated it is likely to continue paring the program in “further measured steps.”

Fed Chair Janet Yellen had indicated that the bank could begin to raise interest rates about six months after its bond-buying program winds up, which is expected to happen this fall.

In the week ahead, market watchers will be focusing on speeches by Fed Chair Janet Yellen and BoJ Governor Haruhiko Kuroda, as well as reports on U.S. retail sales and housing starts.

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

Monday, April 14

• The U.S. is to produce data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

Tuesday, April 15

• Fed Chair Janet Yellen is to speak; her comments will be closely watched.

Wednesday, April 16

• BoJ Governor Haruhiko Kuroda is to speak at an event in Tokyo; his comments will be closely watched.
• The U.S. is to produce reports on housing starts, building permits and industrial production.
• Later Wednesday, Fed Chair Janet Yellen is to speak at an event in New York.

Thursday, April 17

• The U.S. is to publish data on initial jobless claims and a report on manufacturing activity in the Philadelphia region.

Friday, April 18

• U.S. markets will be closed for the Good Friday holiday.

EUR/USD weekly outlook: April 14 -18

The dollar ended the week close to three-week lows against the euro on Friday as dovish Federal Reserve minutes tempered expectations that U.S. interest rates would rise sooner than had been anticipated.

EUR/USD ended Friday’s session at 1.3884, after touching session highs of 1.3905 earlier. The pair ended the week with gains of 1.04%, the largest weekly increase since September.

The pair is likely to find support at 1.3835, Thursday’s low and resistance at 1.3900.

The euro eased back from session highs against the dollar on Friday after data showed that U.S. producer prices rose 0.5% in March, the largest increase in nine months and ahead of expectations for a 0.1% increase.

A separate report showed that the University of Michigan’s U.S. consumer sentiment index rose to 82.6 this month, its highest level since July.

But the greenback remained under pressure after the minutes of the Fed’s March meeting indicated that an interest rate increase is unlikely to be warranted for some time.

The Fed’s March meeting minutes, released on Wednesday, showed that policymakers discussed whether to keep interest rates at record lows until inflation moves higher, and did not elaborate on a possible timeframe for when rates could start to rise.

Last month the U.S. central bank reduced the monthly pace of asset purchases by $10 billion, to $55 billion, and repeated it is likely to continue paring the program in “further measured steps.”

In mid-March Fed Chair Janet Yellen had indicated that interest rates could start to rise around six months after the end of the Fed’s bond purchasing program, suggesting a rate hike could occur in the early part of 2015.

The single currency continued to remain supported after comments by European Central Bank officials earlier in the week tempered expectations for quantitative easing.

ECB governing council member Yves Mersch said Monday there is no immediate risk of deflation in the euro zone and therefore no urgent need to implement large-scale bond purchases.

Separately, Bundesbank president Jens Weidmann said that monetary policy cannot solve the financial crisis, and urged euro zone political leaders to keep reforming their economies.

In the week ahead, market watchers will be focusing on speeches by Fed Chair Janet Yellen, as well as reports on U.S. retail sales and housing starts. Meanwhile, Germany is to release its ZEW economic sentiment index.

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

Monday, April 14

• The euro zone is to release data on industrial production.
• The U.S. is to produce data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

Tuesday, April 15

• The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
• Later Tuesday, Fed Chair Janet Yellen is to speak.

Wednesday, April 16

• The euro zone is to release revised data on consumer price inflation.
• The U.S. is to produce reports on housing starts, building permits and industrial production.
• Later Wednesday, Fed Chair Janet Yellen is to speak at an event in New York.

Thursday, April 17

• The euro zone is to publish data on the current account, while Germany is to produce data on producer price inflation.
• The U.S. is to publish data on initial jobless claims and a report on manufacturing activity in the Philadelphia region.

Friday, April 18

• Markets in Europe and the U.S. will be closed for the Good Friday holiday.

EUR/USD trading forecast for Monday

During Friday’s trading session EUR/USD traded within the range of 1.3863-1.3905 and closed at 1.3885.

Fundamental view

Industrial production in the euro zone probably rose 0.2% in February from the previous month, according to the median analyst’ estimate. In January, industrial output unexpectedly declined 0.1%. Industrial production is an indicator of the business cycle that shows the activity and development in the industry as a whole, by measuring the change in volume for a certain period of time. Information on industrial production is raised through special studies for EU members, which are called Prodcom. They cover between 5000 and 6000 products. The index measures the percentage change from the previous month.

A larger than expected increase in the industrial output would heighten the appeal of the euro. The official report is due out at 09:00 GMT on Monday.

Meanwhile, retail sales in the United States probably increased 0.8% in March on a monthly basis, according to the median forecast by experts. In February sales rose 0.3%. The report on retail sales reflects the dollar value of merchandise sold within the retail trade by taking a sampling of companies, operating in the sector of selling physical end products to consumers. The retail sales report encompasses both fixed point-of-sale businesses and non-store retailers, such as mail catalogs and vending machines. US Census Bureau, which is a part of the Department of Commerce surveys about 5 000 companies of all sizes, from huge retailers such as Wal-Mart to independent small family firms.

US core retail sales (retail sales ex autos) probably rose 0.5% in March compared to a month ago, following a 0.3% increase in February. This indicator removes large ticket prices and historical seasonality of automobile sales.

The retail sales index is considered as a coincident indicator, thus, it reflects the current state of the economy. It is also considered a pre-inflationary indicator, which investors can use in order to reassess the probability of an interest rate hike or cut by the Federal Reserve Bank. In addition, this indicator provides key information regarding consumer spending trends. Consumer expenditures, on the other hand, account for almost two-thirds of nation’s total Gross Domestic Product. Therefore, a larger than expected increase in sales would heighten the appeal of US dollar. The official report is due out at 12:30 GMT on Monday.