Weekly Outlook: 2014, August 24 - August 31

S&P 500 forecast for the week of August 25, 2014, Technical Analysis

The S&P 500 as you can see had a very positive week, and we actually broke out above the resistance at one point. However, we did pullback a little bit during the session on Friday, so we haven’t quite technically broken out yet. In the end though, we believe that this market should continue to be strong and that should continue to offer plenty of buying opportunities every time we pullback, and of course a break above the 2000 level which of course is a large, round, psychologically significant number.

Dow Jones 30 forecast for the week of August 25, 2014, Technical Analysis

The Dow Jones as you can see had a very positive week over the last five sessions, breaking the top of the shooting star that informed the previous week. With that, we closed just above the 17,000 level, and it now seems only a matter of time before we break out above the recent highs. Once we do that, we believe that the market is simply continues to March higher as we almost inevitably are heading to the 20,000 level. Anytime the market pulls back at this point is a potential buying opportunity as far as we can see.

EUR/USD forecast for the week of August 25, 2014, Technical Analysis

The EUR/USD pair fell during the course of the week, breaking the back of three hammers that had formed in the previous weeks. Because of this, this market looks like it’s extraordinarily weak, and it could in fact continue to go much lower. We believe that this market will more than likely continue down to the 1.30 handle, which is an area that has much more significant on a longer-term chart as it is a large, round, psychologically significant number and has proven to be supportive in the past as well as resistive. With that, we should be talking about a significant amount of order flow there, and ultimately a reason to get involved for longer-term, big-money players.

The 1.30 level could very well be the absolute bottom, but if we break down below there, things get truly ugly for the Euro. Remember, the European Central Bank needs a relatively weakened Euro in order to boost economic activity, and with that we are very bearish of the Euro in general. The marketplace should offer plenty of selling opportunities every time we bounce, but the real question is going to be whether or not the bounces will be big enough in order for the longer-term trader to take advantage of them. In our opinion, that’s probably not going to be the case. We ultimately believe that the longer-term trader will probably catch the bigger move, perhaps a bounce. But we are very cautious to get involved until we see a clear-cut signal from the longer-term perspective. At this point in time, it’s just going to be simpler and much easier to short this market on the shorter-term charts.

You also have to keep in mind that we are in the middle of summer, and as a result not all major firms are putting a lot of money into the marketplace. The real answers will be shown in September as to what the market will probably do. With that being the case, we are hesitant to get involved long-term traders standpoint, but very cognizant of what’s happening on the weekly chart as it could give us a nice long-term trade soon.

Forex - Weekly outlook: August 25 - 29

The U.S. dollar rallied to the highest level in more than 11-months on Friday, following a highly-anticipated speech from Federal Reserve Chair Janet Yellen.

The U.S. Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, hit 82.51, the highest since September 6, 2013, before ending the week at 82.38.

Speaking at the Fed's annual meeting of top central bankers and economists in Jackson Hole, Wyoming, Yellen said the U.S. economy is recovering and added the labor market is improving as well.

USD/JPY touched session highs of 104.19, the most since January 23, before ending at 103.95, up 0.1% for the day and 1.53% higher for the week.

Meanwhile, the euro slumped to a daily low of 1.3221, a level not seen since September 9, 2013, before settling at 1.3240 by late Friday, down 0.3% and 1.33% lower for the week.

European Central Bank President Mario Draghi told the Jackson Hole gathering that the central bank is ready to take more unconventional action if needed to stimulate a sluggish euro zone economy.

Elsewhere, the pound posted its seventh consecutive weekly decline against the dollar, with GBP/USD at 1.6571 late Friday. The pair, which lost 0.71% on the week, fell to 1.6562 earlier in the day, the lowest since April 4.

USD/CHF ended Friday’s session at a seven-month high of 0.9138, up 0.26% for the day and 1.24% higher on the week.

Meanwhile, the U.S. dollar was mixed against its cousins in Canada, New Zealand and Australia, with USD/CAD settling at 1.0943, up 0.04%, NZD/USD down 0.05% at 0.8402 and AUD/USD up 0.14% at 0.9316.

Tensions over the crisis in Ukraine remained in focus after NATO said it was observing an alarming increase in Russian forces near the border with Ukraine.

Ukraine declared on Friday that Russia had launched a "direct invasion" of its territory after Moscow sent a convoy of aid trucks across the border into eastern Ukraine where pro-Russian rebels are fighting government forces.

In the commodities markets, gold futures rose 0.38% on Friday to end the week at $1,281.70 a troy ounce. For the week, the precious metal lost 1.87% as market players priced in a greater risk of an earlier hike in U.S. interest rates.

Crude oil futures ended the week lower as concerns over ample global supplies and weak demand continued to weigh.

U.S. crude oil prices shed 0.33% to end at $93.65 a barrel by close of trade on Friday. New York-traded oil futures lost 3.8% on the week, the fourth consecutive weekly decline.

London-traded Brent oil futures traded at $102.29 a barrel late Friday. Brent declined 1.2% on the week, its second consecutive weekly loss.

In the week ahead, investors will be looking ahead to key U.S. data for further indications on the strength of the economy and the possible future path of monetary policy.

The U.S. will produce data on second quarter gross domestic product, as well as reports on new home sales, durable goods orders and initial jobless claims.

Monday, August 25

• In the euro zone, Germany is to publish the Ifo report on business climate for August.
• Markets in the U.K. are to remain closed in observance of the Summer Bank Holiday.
• The U.S. is to produce data on new home sales for the month of July.

Tuesday, August 26

• New Zealand is to release a report on its trade balance.
• The U.S. is to publish reports on July durable goods orders, as well as house price inflation and consumer confidence.

Wednesday, August 27

• Australia is to produce a report on completed construction work during the second quarter.
• Germany is to publish the Gfk report on consumer climate for September.

Thursday, August 28

• Australia is to publish quarterly data on private capital expenditure.
• In the euro zone, Germany is to release preliminary data on consumer price inflation as well as a report on unemployment for August.
• Meanwhile, Switzerland is to release data on the employment level.
• Later Thursday, the U.S. is to release revised data on second quarter GDP, as well as the weekly government report on initial jobless claims and data on pending home sales for July.

Friday, August 29

• New Zealand is to produce data on building consents. The Pacific nation is also slated to release private sector data on business confidence.
• Japan is to release data on consumer inflation, as well as reports on industrial production, household spending and retail sales.
• The euro zone is to release preliminary data on consumer inflation and unemployment, while Germany is to publish data on retail sales.
• The U.K. is to produce private sector data on house price inflation as well as a report on business investment.
• Switzerland is to publish its KOF economic barometer.
• Later Friday, Canada is to publish its monthly report on gross domestic product for June.
• The U.S. is to round up the week with a report on personal income and expenditure and revised data from the University of Michigan on consumer sentiment.

USD/JPY weekly outlook: August 25 - 29

The U.S. dollar ended Friday’s session at a seven-month high against the yen, after Federal Reserve Chair Janet Yellen said the central bank could raise interest rates sooner than expected if the job market continues to improve.

USD/JPY hit a daily high of 104.19 on Friday, a level not seen since January 23, before subsequently consolidating at 103.95 by close of trade, up 0.1% for the day and 1.53% higher for the week.

The pair is likely to find support at around the 103.49 level and resistance at about 104.20.

Speaking at the Fed's annual meeting of top central bankers and economists in Jackson Hole, Wyoming, on Friday, Yellen said the U.S. economy is recovering and added the labor market is improving as well.

Her remarks came after minutes of the Fed’s July meeting published Wednesday showed that some officials believe the strengthening recovery and ongoing improvement in the labor market supports a move towards tightening monetary policy.

Meanwhile, Bank of Japan Governor Haruhiko Kuroda told the Jackson Hole gathering that the central bank may have to pursue its aggressive monetary policy easing for "some time" to fully vanquish deflation.

His remarks were made on Saturday.

Meanwhile, tensions over the crisis in Ukraine remained in focus after NATO said it was observing an alarming increase in Russian forces near the border with Ukraine.

Ukraine declared on Friday that Russia had launched a "direct invasion" of its territory after Moscow sent a convoy of aid trucks across the border into eastern Ukraine where pro-Russian rebels are fighting government forces.

Elsewhere, the yen was higher against the euro, with EUR/JPY shedding 0.19% to 137.66 late Friday.

The single currency drifted lower after European Central Bank President Mario Draghi said in a speech that the central bank is ready to take more unconventional action if needed to stimulate a sluggish euro zone economy.

In the week ahead, investors will be looking ahead to key U.S. data for further indications on the strength of the economy and the possible future path of monetary policy.

The U.S. will produce data on second quarter gross domestic product, as well as reports on new home sales, durable goods orders and initial jobless claims.

Monday, August 25

• The U.S. is to produce data on new home sales for the month of July.

Tuesday, August 26

• The U.S. is to publish reports on July durable goods orders, as well as house price inflation and consumer confidence.

Thursday, August 28

• The U.S. is to release revised data on second quarter GDP, as well as the weekly government report on initial jobless claims and data on pending home sales for July.

Friday, August 29

• Japan is to release data on consumer inflation, as well as reports on industrial production, household spending and retail sales.
• The U.S. is to round up the week with a report on personal income and expenditure and revised data from the University of Michigan on consumer sentiment.

EUR/USD weekly outlook: August 25 - 29

The euro slumped to an 11-month low against the broadly stronger U.S. dollar on Friday, as investors digested comments made by Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi.

EUR/USD hit a daily low of 1.3221 on Friday, a level not seen since September 9, 2013, before subsequently consolidating at 1.3240 by close of trade, down 0.3% for the day and 1.33% lower for the week.

The pair is likely to find support at 1.3161, the low from September 9 and resistance at 1.3287, the high from August 21.

Speaking at the Fed's annual meeting of top central bankers and economists in Jackson Hole, Wyoming, Yellen said the U.S. economy is recovering and added the labor market is improving as well.

Meanwhile, European Central Bank President Mario Draghi told the Jackson Hole gathering that the central bank is ready to take more unconventional action if needed to stimulate a sluggish euro zone economy.

The comments highlighted the view that the paths of euro zone and U.S. monetary policies are diverging.

Minutes of the Fed’s July meeting published Wednesday showed that some officials believe the strengthening recovery and ongoing improvement in the labor market supports a move towards tightening monetary policy.

Meanwhile, tensions over the crisis in Ukraine remained in focus after NATO said it was observing an alarming increase in Russian forces near the border with Ukraine.

Ukraine declared on Friday that Russia had launched a "direct invasion" of its territory after Moscow sent a convoy of aid trucks across the border into eastern Ukraine where pro-Russian rebels are fighting government forces.

In the week ahead, investors will be looking ahead to key U.S. data for further indications on the strength of the economy and the possible future path of monetary policy.

The U.S. will produce data on second quarter gross domestic product, as well as reports on new home sales, durable goods orders and initial jobless claims.

Friday's preliminary reading of August euro zone inflation 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, August 25

• In the euro zone, Germany is to publish the Ifo report on business climate for August.
• The U.S. is to produce data on new home sales for the month of July.

Tuesday, August 26

• The U.S. is to publish reports on July durable goods orders, as well as house price inflation and consumer confidence.

Wednesday, August 27

• Germany is to publish the Gfk report on consumer climate for September.

Thursday, August 28

• In the euro zone, Germany is to release preliminary data on consumer price inflation as well as a report on unemployment for August.
• Later Thursday, the U.S. is to release revised data on second quarter GDP, as well as the weekly government report on initial jobless claims and data on pending home sales for July.

Friday, August 29

• The euro zone is to release preliminary data on consumer inflation and unemployment, while Germany is to publish data on retail sales.
• The U.S. is to round up the week with a report on personal income and expenditure and revised data from the University of Michigan on consumer sentiment.

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