Weekly Outlook: 2014, October 19 - 26

Dollar and the Markets Contemplate Volatility and QE

Fundamental Forecast for Dollar: Bullish

• Risk trends remain the top priority this week, but the deciding factor is conviction
• The Fed’s Bullard stirred hope for a QE Taper delay, but that is unlikely and exposes ‘hope’

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Amid extreme financial market volatility swings and talk of US stimulus plans, the US Dollar finished out a second consecutive week in the red. Yet, despite the past few weeks retreat, the currency’s larger three-month bull trend is still dominating the landscape. That technical view matches the fundamental backdrop. While there have been a few headlines and updates to cool the Dollar’s exceptional climb, there hasn’t been enough of turn the tides back towards the bear’s favor. Moving forward, the anxiety of a fragile gobal investor sentiment, a reinforced path of monetary policy and a possible second wave decline for the the Greenback’s largest counterparts will all support the currency’s medium-term view.

When liquidity returns next week, the first concern for market participants will be the bearings for broader sentiment. Investor confidence passed through two stages this past week. The first half was dominated by heavy selling in capital market assets that confirmed an important break that ended the previous week. Yet through the second half, a rebound for the higher return / higher risk segment and retreate for safe havens developed. In fact, through this heavy swing in confidence, the US currency never seemed to truly find grip through its safe haven status.

There is a difference between an unfavorable move in capital markets and a motivated ‘risk unwind’. The latter speaks to conviction and a motivation that is more elemental to the financial system. After a five-and-a-half year climb from the bottom of the worst economic and financial collapse in generations, it is difficult to unmoor complacency and convince market participants to cut exposure and feed speculative shorts. Yet, the recent scope of selling riskier assets and the tremendous rise in implied (expected) volatility herald a more motivated shift is building. Against record leverage, decades low participation and a cooling economic backdrop; investors are increasingly aware of the medium-term gap between price and value.

As the motivation shifts from a modest ‘risk off’ to a more systematic deleveraging, liquidity becomes the primary concern for market participants. That leverages demand for US Treasury, money markets and the Dollar itself. It may take time to reach this intensity, but implications are acute and the structural deficiencies to our current situation large enough that it planning is important. As we await the mass’s verdict on the market’s course and potential, a few other factors should be considered while trading the Dollar. The first consideration is a recent flush of hope that the Fed could backtrack on its tightening regimen.

This past week, St. Louis Fed President James Bullard – not a voter this year and more on the hawkish side with a recent call for a 1Q 2015 rate hike – turned heads when he suggested the FOMC should consider delaying its final Taper of QE3. His suggestion is more targeted towards tepid inflation, but the market in withdrawal and desperate for support reads it as a capital market boon. Realistically though, this isn’t a popular opinion and the Yellen sounded very confident of an October 29 final move at the last meeting. Furthermore, delaying a few months a scaled down stimulus isnt’ the same as an increase for encouraging risk trends. We will see little more on this topic with the media blackout period coming ahead of the next meeting.

A final consideration for those trading the Majors: counterpart activity. This past week’s shudder in risk has clearly exposed the Euro-area’s troubles. Whether a trigger for global risk aversion or a direct counterbalance for the Dollar, this has considerable potential. We also have Chinese and UK 3Q GDP data on tap.

Japanese Yen To Extend Gains on Global Slowdown, Fed Tightening Fears

Fundamental Forecast for Japanese Yen: Bullish

• Soft Eurozone and Chinese Data, Strong US CPI to Fuel Risk Aversion
• Yen to Extend Gains as Carry Trades Unwind Amid Slump in Sentiment

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A lull in homegrown event risk will keep macro-level trends in focus for the Japanese Yen in the week ahead. The inverse correlation between the currency’s average value against its leading counterparts and the MSCI World Stock Index – a proxy for market-wide risk appetite – now stands at a hefty -0.72 (on 20-day percent change studies). That puts the Yen firmly into the “safety” side of the risk on/off asset spectrum and hints the currency stands to recover further as sentiment continues to sour.

The central concern preoccupying investors is the ability of a resurgent US economy to underpin global growth, offsetting weakness in China and the Eurozone even as the Federal Reserve prepares to wind down the QE3 stimulus program later this month. A steady stream of high-profile economic data releases will help inform this debate in the week ahead, generating volatility for underlying risk sentiment trends and with them the Japanese Yen.

In China, the third-quarter GDP figure is in the spotlight. Consensus forecasts put the year-on-year growth rate at 7.2 percent, marking the weakest reading since the post-crisis trough in the first quarter of 2009. Economic news-flow from the East Asian giant has increasingly deteriorated relative to expectations since mid-August (according to data from Citigroup). That suggests analysts are underestimating the degree of the unfolding downturn and warns that the realized GDP print may be even more dismal than forecasts imply. Turning to the Euro area, the preliminary set of October’s PMI figures is due to show the pace of manufacturing- and service-sector activity growth slowed for a third consecutive month, yielding the weakest results in 14 months. Adding insult to injury, the ECB seems resigned to complacency. Financial conditions in the region have deteriorated since mid-September even as the central bank introduced negative deposit rates and conducted its first TLTRO operation. In response, ECB officials have counter-intuitively used public speaking opportunities to play down expectations for the upcoming asset purchase program.

Finally, the US data docket is headlined by September’s CPI report. The headline year-on-year inflation rate is expected to slow to 1.6 percent, the lowest since March. However, leading survey data warns that price growth accelerated, with factory-gate prices rising at the sharpest pace yet in 2014 and service-sector output costs reaching a five-month high. That opens the door for an upside surprise, which would help rebuild 2015 Fed rate hike expectations. The prospect of tightening in one of the world’s three main growth hubs even as the other two decelerate bodes ill for risk appetite, amplifying liquidation of Yen-funded carry trades and helping the Japanese unit upward.

GBP/USD Rebound Vulnerable to Dovish BoE Minutes, Slowing 3Q U.K. GDP

Fundamental Forecast for Pound: Neutral

• Daily OBV Divergence in GBP/USD a Concern
• Video: GBPUSD Dives After UK CPI, EURUSD Awaits Clear Risk

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The British Pound may face additional headwinds in the week ahead should the fundamental developments coming out of the U.K. drag on interest rate expectations.

Indeed, Bank of England (BoE) Chief Economist Andrew Haldane warned ‘interest rates could remain lower for longer’ amid the uncertainly surrounding the economic outlook, and the central bank may look to preserve the highly accommodative policy stance for an extended period of time especially as the Euro-Zone, the U.K.’s largest trading partner, faces a growing risk of slipping back into recession.

As a result, the BoE Minutes are widely expected to show another 7-2 split, with Martin Weale and Ian McCafferty still voting against the majority, but the policy statement may highlight a more dovish tone for monetary policy as the headline reading for U.K. inflation slows to an annualized 1.2% in September to mark the lowest reading since 2009. At the same time, the 3Q Gross Domestic Product (GDP) report may undermine the BoE’s expectations for a faster recovery as the growth rate is projected to expand 0.7% after rising 0.9% during the three-months through June, and a marked slowdown in the real economy may generate fresh monthly lows in GBP/USD as market participants scale back bets of seeing higher borrowing costs in the U.K.

Nevertheless, the technical outlook highlights a more meaningful recovery for GBP/USD as the Relative Strength Index (RSI) breaks out of the bearish momentum carried over from the end of June, and we will continue to keep a close eye on the ongoing divergence in the oscillator amid the string of lower highs in price.

AUD Faces Further Swings On Market Jitters, Q3 Inflation, & China GDP

Fundamental Forecast for Australian Dollar: Neutral

• AUD/USD Swings Wildly In Intraday Trade On Investor Sentiment Shifts
• Regional Economic Data To Offer Limited Guidance Amid Steadfast RBA Bets
• Surge In Volatility and Investor Jitters May Keep Pressure On The AUD

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The Australian Dollar had another rollercoaster week against its peers as shifts in global risk sentiment swung the high-yielding currency wildly during intraday trade. Meanwhile, medium-tier regional economic data saw a lackluster response from the AUD amid well-anchored RBA policy bets.

Looking to the week ahead, Q3 CPI figures headline the Australian economic calendar. Another deviation from expectations holds the potential to catalyze knee-jerk volatility for the currency. Yet follow-through is likely to prove difficult given it would take a significant surprise to materially alter rate expectations.

Meanwhile, the RBA’s October Meeting Minutes and a speech from Governor Stevens (focused on the Australian payments system) are unlikely to offer fresh insights into policy makers’ thinking. In turn these may prove uneventful for the AUD.

Elsewhere in the region, a raft of top-tier economic data from China is on the docket. The figures from the Asian giant could do little to dent steadfast Reserve Bank bets. Yet disappointing data from the world’s second largest economy may have the potential to feed mounting concerns over global growth and fan risk-aversion, which in turn would be a negative for the Aussie.

The primary threat to the high-yielding currency remains the prospect of a continued surge in volatility, which according to some measures is at its highest since February. While many Aussie carry trades may have already been unwound short positioning in the futures markets remains well off the extremes of last year. This suggests there is plenty of room in the short trade before it begins to look ‘crowded’.

Sellers appear intent on keeping the AUD/USD capped below the 89 US cent handle, leaving the risk focused on the 0.8660 barrier for the pair. If broken on a ‘daily close’ basis it could open the next leg lower to the July 2010 low near 0.8320.

Gold Rally at Risk Amid Sticky US Inflation- $1222 Key Support

Fundamental Forecast for Gold: Neutral

• Gold Trades Around Significant Resistance Level
• Crude Oil Bounces As Bears Book Profits, Gold Awaits US Sentiment Data

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Gold prices pushed higher for a second consecutive week with the precious metal rallying 1.27% to trade at $1238 ahead of the New York close on Friday. The advance comes amid continued weakness in broader risk assets with all three major US indices down for a fourth consecutive week. Despite the risk-off environment, the key developments coming out of the U.S. economy may heavily impact gold prices next week after prices rebounded off key technical resistance mid-week.

Federal Reserve speakers have continued their Dovish rhetoric as the FOMC eyes the overwhelming disinflationary risks associated with a premature rate lift-off. Indeed, St. Louis Fed President James Bullard, who won’t be a voting member on the FOMC until 2016, undermined the bullish sentiment surrounding the U.S. dollar as the policymaker saw scope to extend the QE exit and we may see a growing number of central bank officials show a greater willingness to retain the highly accommodative policy stance for an extended period of time amid the subdued outlook for inflation.

As a result, the September consumer price index will largely be in focus next week, with consensus estimates calling for an uptick in the core reading to 1.8% y/y from a previous read of 1.7% y/y while the headline print is expected to downtick from 1.7% y/y to 1.6% y/y. With weakening energy prices, market participants may pay closer attention to the stickiness in core inflation as FOMC voting member Charles Plosser sees scope to normalize policy sooner rather than later.

From a technical standpoint, gold tested and defended a key resistance level noted in last week’s update at $1243/44. This region is defined by the 38.2% retracement off the July high, the June close low and is the confluence of two pitchfork resistance lines. Although the broader outlook for gold remains weighted to the downside, we cannot rule out continued strength into the monthly close on account of the monthly opening range break which was validated this week. Bottom line: near-term the trade remains constructive while above $1222 with only a break sub-$1206 putting the bears back in control. A breach above $1244 eyes more significant resistance at $1260/63 and $1283 where ultimately we would start looking for favorable short entries.

Nikkei forecast for the week of October 20, 2014, Technical Analysis

The Nikkei as you can see fell hard during the course of the week, breaking down below the ¥15,000 level. The ¥15,000 level was supportive, but we think that the ¥14,000 level is probably now the target. The question of course is whether or not we could get a longer-term trade to go that low. We think we can but the risk reward ratio isn’t worth it at this point for longer-term traders. With that, we will continue to monitor this market but traded from a shorter timeframe at this point.

http://youtu.be/Xyy7bpaBru4

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DAX forecast for the week of October 20, 2014, Technical Analysis

The DAX fell initially during the course of the week, but found enough support to turn things back around and form a nice-looking hammer for the week as the market now appears to have found buyers at the €8400 level. With that, we believe that a break above the top of the hammer, which is the €8900 level would be reason enough to start buying. On top of that, we have to keep in mind that the €8900 level was the bottom of recent consolidation, and if we get above that level we would reenter it. Because of that, we would love to start buying above that handle.

http://youtu.be/FpH2fmx8OJk

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NASDAQ forecast for the week of October 20, 2014, Technical Analysis

The NASDAQ fell significantly during the course of the week as stock markets in general struggled. However, the market found enough support at the vital 4100 level to turn things back around and bounce. The bounce formed a nice-looking hammer, which sits just below the 4300 level. Because of that, we feel that this market could very easily go higher, if we can clear that aforementioned 4300 level. On that move, we would head to the 4600 level next in our opinion, and we believe that the uptrend would continue going forward.

The NASDAQ does seem to have a significant amount of support starting at the 4100 level, but that also extends all the way down to the 3950 level. Because of this, we feel that the market is going to be held aloft buying the region that we just tested, so even if we pullback at this point in time we look at that as value more than anything else. In fact, it is not until we are below the 3950 level that we would consider selling this marketplace as that would signify a significant breakdown in the support system.

Going forward, we feel that the 4600 level of course will be resistive, but if we can get above there it appears that the market could go much higher. We feel that the market is probably heading to the 5000 level next given enough time, but keep in mind that it will of course be choppy and at the whims of headlines around the world. Because of this, the market looks very interesting at this point in time because the hammer is so perfect in its shape.

Looking at the trend, it is a very gentle slope that we are calling the trend, and therefore it feels to us like there is still plenty of momentum to be had as the market should continue to see buyers step in as the market is far from been overbought, and we believe that will be the way this market moves going forward.

http://youtu.be/HWISbGv8blI

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MIB forecast for the week of October 20, 2014, Technical Analysis

The MIB fell initially during the course of the week, but like all of the other European indices, found buyers below to turn things back around and form a massive looking hammer for the week. The market sits just below the 19,000 level, an area that we have been looking at as potential support. That being the case, it appears that we have broken down significantly, binds if we can break the top of the hammer we feel that it will essentially be a “false break down.” With that, we would be buyers.

http://youtu.be/4pwbC0FXJXY

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IBEX forecast for the week of October 20, 2014, Technical Analysis

The IBEX as you can see fell during the course of the sessions for the previous week. However, the €9400 level offered enough support to turn things back around and form a nice-looking hammer that is sitting just below the €10,000 level. With that, a break above the €10,300 level would be reason enough to start buying again as we should head to the €11,200 level given enough time. We think that pullbacks should continue to offer support as well, so we have absolutely no interest whatsoever in selling.

http://youtu.be/KYR5uy2w1Fo

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CAC forecast for the week of October 20, 2014, Technical Analysis

The Parisian index fell significantly during the course of the week, but found enough support at €3800 level to turn things back around and form a big hammer. This hammer of course suggests that there is plenty of buying pressure underneath, and with that we do remain hopeful that the Parisian index will continue to go higher. If we can get a break above the €4100 level, we feel that the market could very easily go to the €4500 level given enough time.

The shape of the hammer is of course perfect, and will certainly attract quite a few out there in the trading community that are looking to get in based upon value. After all, the CAC is one of the more “stable” markets in the European Union, and as a result it makes sense that we may see buyers step into this marketplace the for many of the other stock markets around the European continent.

If we pullback from here, we suspect that there are quite a few of buying orders below, probably well documented at the €4000 level, as well as the €3800 level. With that being the case, we think that pullbacks will continue to be buying opportunities on shorter-term charts as well, and therefore we are willing to buy at lower prices also, not just a break out to the upside.

If the €3800 level is broken to the downside that would of course be a very negative sign for this market, as the sellers would then take control yet again. Because of that, the market would then probably drop down to the €3600 level first, and then possibly even as low as €3000 given enough time. However, we have to assume that the massive hammer that has form for the week suggests that we will more than likely find enough buyers to turn things around again. Because of this, we are much more comfortable buying, but we want to see some type of technical signal to do so first. Until then, we will have to remain patient.

http://youtu.be/Mh-WftzC2-E

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S&P 500 forecast for the week of October 20, 2014, Technical Analysis

The S&P 500 fell hard during the course of the week, but bounce significantly off of the 1820 level. The resulting candle of course is a nice-looking hammer, and that of course is a very positive sign. If we can break above the top of the hammer, we feel that the market should then go to the 2000 level over the course of the next couple of weeks. Either way, the market looks as if it wants to go higher, and therefore we have no interest in selling this market anytime soon.

http://youtu.be/-lQlyQ35Uak

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FTSE forecast for the week of October 20, 2014, Technical Analysis

The FTSE as you can see had a very negative week during most of the trading sessions, but as you can see bounce significantly from just below the 6100 level to form a massive hammer. Because of this, it appears that the market has found a significant amount of support in order to perhaps go higher again. When you look at the charts from the longer-term perspective, we could have possibly just made a little bit of a “double bottom”, as the FTSE could bounce as high as 6900. In order to get the correct technical signal, we would have to break the top of the 6400 level to start buying.

http://youtu.be/coTAzhqfayw

Forex Weekly Outlook October 20-24

The US dollar was on the back foot against most currencies as volatility spiked and big moves provided opportunity and risk. US housing and inflation data, A rate decision in Canada and UK GDP are the lead events on our FX calendar. Here is an outlook on the major events for this week.
Weak US retail sales sent stock markets down and triggered a sell off of the dollar. The best jobless claims in 14 years and some other OK figures could not lift the greenback, especially after FOMC member Bullard suggested to continue QE on lower inflation expectations. Weakness in other regions didn’t really help the greenback. In the euro-zone, German business confidence went negative, the German government cut forecasts and yields spike in peripheral bond markets as if it were 2012. In the UK, inflation is at a 5 year low and not all unemployment figures shine. The crash in oil prices contributed to 5 year high for USD/CAD but this didn’t last too long. The kiwi enjoyed a rise in milk prices. The yen enjoyed the risk off environment. All in all, currencies made big moves.

1. US inflation data: Wednesday, 12:30. U.S. consumer prices declined for the first time in nearly 1-1/2 years in August, dropping 0.2%, following a 0.1% rise in July. Meanwhile, Core prices remained unchanged in August indicating muted inflation pressures. Economists expected CPI to remain unchanged while core CPI to rise 0.2%. If this trend continues the Fed may postpone the intended rate hike. CPI is expected to remain unchanged, while core CPI is predicted to gain 0.2%.
2. Canadian rate decision: Wednesday, 14:00. The Bank of Canada maintained the interest rate at 1% at the last BOC meeting held in September. BOC Governor Stephen Poloz said exports are gaining traction posting the biggest merchandise trade surplus in almost six years, which is a positive sign for the coming months, however business investment remains rather muted. Poloz declined to comment on whether he would raise rates before the U.S. Federal Reserve. Rat s are expected to remain at 1.0%.
3. Glenn Stevens speaks: Wednesday, 9:00. RBA Governor Glenn Stevens is scheduled to speak in Sydney Limits. He may talk about the need to cool down bank lending to the housing market. Investment finance reached double-digit rates, nearly half the flow of new approvals. Stevens talks about the need to intervene by using macro-prudential tools such as limiting the proportion of a property’s value that could be borrowed and extra stress tests on banks. Mr Stevens said the right type of risk-taking is good provided it’s clear who bears it. The economy needs an efficient allocation of savings, liquidity services provided to the community, payment services to be provided and and risk to be priced properly for those who wish to bear it.
4. US Unemployment Claims: Thursday, 12:30. The number of Americans filing initial claims for unemployment benefits plunged to a 14-year low last week, reaching 264,000 from 287,000 posted in the week before. The four-week moving average of claims, continued to improve falling 4,250 to 283,500, also the lowest level since 2000.The US economy continues to move ahead with growth rate expectations of 3% in the third quarter. A rise of 269,000 is forecasted this week.
5. UK GDP data: Friday 8:30. UK growth data in the second quarter showed the economy has emerged from six years of muted growth and returned to its pre-crisis peak. Gross domestic product (GDP) expanded by 0.8% in the second quarter following the same rise in the first quarter. On an annual basis, growth was 3.1% higher than measured in the same period last year. The upward trend in the UK economy raises expectations for a rate hike but Governor Mark Carney recently suggested it would be tied to improved data on wage growth to prevent damaging consumer spending and domestic growth. UK economy is expected to expand by 0.7% in the third quarter.
6. US New Home Sales: Friday, 14:00. US new-home sales surged in August to the highest level in more than six years, reaching an annualized pace of 504,000 from 412,000 in July. The one-month surge was the biggest since January 1992 indicating the housing recovery is gaining traction. Economists expected a much smaller figure of 432.000. Purchases increased in three of four U.S. regions, led by a 50% expansion in the West. US new-home sales is expected to reach an annual growth rate of 473,000.

Dow Jones 30 forecast for the week of October 20, 2014, Technical Analysis

The Dow Jones 30 as you can see initially fell during the course of the week, but found enough support just below the 16,000 level to form a nice-looking hammer. The hammer suggests that we are going to go higher, and on a break of the top of that hammer at the 16,600 level, we believe that the Dow Jones then heads to the 17,300 level again. This is a bullish market, and that is not changed even though we have recently tested support very seriously and violently.

http://youtu.be/-K73sRGXN0k

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US Dollar Index forecast for the week of October 20, 2014, Technical Analysis

For the second week in a row, the market in the US Dollar Index Futures contract fell, but found support at the 85 handle this time. Because of this, we have formed a hammer, and it looks like the buyers could come back in. However, we are bent concerned at this point in time because the market has moved so high so quickly. That being the case, we may see a bit of sideward action. If we do fall from here though we anticipate that the 84 handle should be supportive as well. If you are patient enough, you may get a long-term buying opportunity but we do not anticipate the same kind of momentum to the upside that we have had recently.

That being said, the US dollar remains by far the most favored currency out there in the Forex markets, and we do not see that changing. Remember, a majority of the factors in the US Dollar Index contract comes down to the EUR/USD pair. With the Euro struggling in general, it’s hard to imagine that this market will meltdown anytime soon. Because of that, we are very bullish of the US Dollar Index, but recognize that there will be pullbacks from time to time in that we have certainly been overbought for some time.

That being said, we are looking for reasons to go long of this market from a technical basis. We believe that the market recently broke out of a reasonably large consolidation area, and allows and affords this market to go as high as 90 given enough time. With that, if you are patient you should continue to realize profits in this market to the upside, and we certainly have no plans whatsoever of selling. In fact, we don’t even have a scenario at the moment where we can imagine doing so. With that, we are very bullish but recognize that patience will be needed with anything at this point in time, simply because we are made such a massive move in such a short time.

http://youtu.be/mhwmKyWqU-Y

Attachment 10287

Gold forecast for the week of October 20, 2014, Technical Analysis

The gold markets rose during the course of the week, but found the $1250 level to be resistive enough to keep the market down. The resulting candle is a bit of a shooting star, and we feel that the sellers will come back into the marketplace to push the market lower. Ultimately, we believe that the market will test the $1200 level yet, but short-term traders will probably be the one to benefit the most from this set up in the gold market. Ultimately though, if we break down below the $1200 level on a weekly candle, we feel that the market goes down to the $1000 level.

http://youtu.be/bKMJCIh_rDg

Attachment 10288

USD/JPY forecast for the week of October 20, 2014, Technical Analysis

The USD/JPY pair fell significantly during the course of the previous week, but found the 105 level to be supportive enough to turn the market back around and form a massive hammer. This hammer of course as you can see is a very positive turn of events, as the 105 level was in fact a significant point of breakout. The 105 level previously was very resistive, and the fact that we have now come back to test that area and form a hammer tells us that the market is going to go higher given enough time. This is will we believe anyway, and it appears now that we will test the 110 level given enough time as well.

On a break of the top of that hammer, we would be a buyer, just as we would buy pullbacks and show signs of support on shorter-term charts as well. Quite frankly, the reaction that we’ve seen at the 105 level tells us that the market should continue to go and find buyers in that general area as it is obviously an area of great interest by the bullish traders out there.

Once we do get above the 110 level, the market should then head to the 115 level given enough time, but we believe that the market will continue to offer buying opportunities as we pullback, and we will essentially “buy on the dips” all the way through the rest of the year, quite frankly farther than that we believe. In fact, we believe that this is the beginning of a multi-year uptrend that should continue to offer plenty of profitable opportunities as we had seen for several years before the financial meltdown.

The candle shaped is just about perfect, so we really do like the idea of buying at this point. We believe that one 10 will of course offer resistance again, but ultimately this pair will break out to the upside and should continue to go much higher. We find it very difficult to imagine breaking down below the 105 level, and we believe that there are plenty buyers below that area to keep that from being realized.

http://youtu.be/ZpoMV30z1VY

Attachment 10289

USD/CAD forecast for the week of October 20, 2014, Technical Analysis

The USD/CAD pair rose during the course of the week, but found enough resistance at the 1.14 level to turn things back around and form a shooting star. However, the previous two weeks formed hammers, so we feel that the market is essentially going to consolidate in this general vicinity. We do not anticipate any type of selling to occur, so therefore we are going to step on the sidelines in order to avoid a lot of the potential volatility and grinding type of action that we are going to see.

http://youtu.be/rulnMjBepJ4

Attachment 10290

NZD/USD forecast for the week of October 20, 2014, Technical Analysis

The NZD/USD pair went back and forth during the course of the week, testing the 0.80 level. That level offered resistance as we had anticipated, but we ended up forming a slightly positive candle for the week. If we can get above the 0.80 level, the market could go much higher. On the other hand, we appear to see in of significant resistance there that the market very well could fall from here, which is what we actually believe will happen longer term anyway. The central bank in New Zealand is trying to work the value of the Kiwi dollar down, and we do believe that ultimately this market will accomplish what the central bankers wish.

http://youtu.be/1r34qxn3WuU

Attachment 10291

GBP/USD forecast for the week of October 20, 2014, Technical Analysis

The GBP/USD pair fell initially during the course of the week, but bounce significantly enough to form a nice-looking hammer. What is also interesting about this hammer is that it sits right at the 50% Fibonacci retracement level, and with that we feel that this market should continue to go higher given enough time. We believe that this market could very easily bouncer here and head towards the highs again, which was all the way up to the 1.72 level. Selling at this point in time is not something we are interested in until we break the bottom of the hammer that formed during this week.

http://youtu.be/hspuunGUn8E

Attachment 10292

EUR/USD forecast for the week of October 20, 2014, Technical Analysis

The EUR/USD pair broke out during the course of the week, climbing above the 1.28 handle. However, we could not keep the gains from that move, and we turned back around to form a massive shooting star. That shooting star suggests that the market is going to drop down to the 1.25 level yet again, and as a result we think that ultimately this market will break down below that level and head to the 1.20 level given enough time. On the other hand, if we can break above the 1.30 level, we would be buyers.

http://youtu.be/ll2tcvB4GBw

Attachment 10293

Weekly outlook: October 20 - 24

The dollar gained ground against the euro and the yen on Friday as upbeat U.S. economic reports eased concerns over the outlook for the recovery, after a week of volatile trading, fuelled by fears over a slowdown in global growth.

USD/JPY was up 0.53% to 106.88 late Friday, while EUR/USD slid 0.38% to 1.2759.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.33% to 85.31, but still ended the week lower, its second consecutive weekly decline.

The greenback was boosted after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that housing starts rose more than expected last month, bolstering the outlook for the sector.

The data reinforced expectations that the Federal Reserve will raise interest rates in the second half of 2015.

The dollar fell against the other major currencies on Wednesday, touching a one month low against the yen and a three week trough against the euro amid a selloff sparked by fears that slower global growth would act as a drag on the U.S. economy.

Dovish comments by central bank officials on Friday also helped ease investor jitters over slowing growth in major economies.

Bank of England chief economist Andy Haldane that rates could remain lower for longer and warned that global economic conditions have worsened.

On Thursday, European Central Bank official Ewald Nowotny said the bank still has leeway for more action to address slowing inflation in the euro area and added that quantitative easing would start as soon as December.

The dollar was also higher against the Swiss franc on Friday, with USD/CHF rising 0.37% to 0.9459. The pound was little changed, with GBP/USD at 1.6092 in late trade.

In the week ahead, China and the U.K. are to release preliminary data on third quarter economic growth, while the euro zone is to release preliminary data on private sector activity.

The U.S. is to release data on consumer inflation, as well as reports on both existing and new home sales.

Monday, October 20

• Germany’s Bundesbank is to publish its monthly report.
• Canada is to release data on wholesale sales.

Tuesday, October 21

• 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.
• China is to release what will be closely watched data on third quarter gross domestic product and separate reports on industrial production and fixed asset investment.
• Switzerland is to report on the trade balance, the difference in value between imports and exports.
• The U.K. is to produce data on public sector borrowing.
• The U.S. is to release private sector data on existing home sales.

Wednesday, October 22

• Japan is to release a report on the trade balance.
• Australia is to publish data on consumer price inflation, which comprises the majority of overall inflation.
• The BoE is to release the minutes of its latest policy meeting.
• Canada is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
• The U.S. is to produce data on consumer prices.
• Later in the day, the Bank of Canada is to announce its overnight rate and publish its rate statement. The announcement is to be followed by a regularly scheduled press conference.

Thursday, October 23

• RBA Governor Glenn Stevens is to speak at an event in Sydney; his comments will be closely watched.
• New Zealand is to release data on consumer prices.
• Australia is to publish private sector data on business confidence.
• China is to release the preliminary reading of its HSBC manufacturing index.
• The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.
• The U.K. is to report on retail sales and also release private sector data on mortgage approvals and industrial order expectations.
• The U.S. is to publish its weekly report on initial jobless claims.

Friday, October 24

• New Zealand is to release data on the trade balance.
• The Gfk think tank is to release its report on German business climate.
• The U.K. is to release preliminary data on third quarter GDP growth.
• The U.S. is to round up the week with a report on new home sales.

USD/JPY weekly outlook: October 20 - 24

The dollar moved higher against the yen on Friday, as upbeat data on U.S. consumer sentiment boosted the outlook for an early rate hike by the Federal Reserve.

USD/JPY was up 0.53% to 106.88 late Friday, from 106.32 on Thursday.

The pair is likely to find support at 106.12, Friday’s low and resistance at 107.65.

The dollar strengthened broadly after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that U.S. housing starts rose more than expected in September, bolstering the outlook for the sector.

The data reinforced expectations that the Fed will raise interest rates in the second half of 2015.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.33% to 85.31, but still ended the week lower, its second consecutive weekly decline.

The dollar fell against the other major currencies on Wednesday, touching a one month low against the yen amid a selloff sparked by fears that slower global growth would act as a drag on the U.S. economy.

Germany’s government cut its forecast for economic growth for this year and next on Tuesday, after recent data pointed to weakness in exports and industrial output.

The euro area’s largest economy now expects growth of 1.2% this year down from 1.8% previously and growth of 1.3% in 2015, down from 2%.

The euro edged higher against the yen on Friday, with EUR/JPY easing up 0.15% to 136.38 in late trade, off Thursday’s 11-month lows of 134.12.

On Thursday, European Central Bank official Ewald Nowotny said the bank still has leeway for more action to address slowing inflation in the euro area and added that quantitative easing would start as soon as December.

In the week ahead, the U.S. is to release data on consumer inflation, as well as reports on both existing and new home sales, while Japan is to release trade data.

Tuesday, October 21

• The U.S. is to release private sector data on existing home sales.

Wednesday, October 22

• Japan is to release a report on the trade balance.
• The U.S. is to produce data on consumer price inflation, which comprises the majority of overall inflation.

Thursday, October 23

• The U.S. is to publish its weekly report on initial jobless claims.

Friday, October 24

• The U.S. is to round up the week with a report on new home sales.

USD/CAD weekly outlook: October 20 - 24

The U.S. dollar posted modest gains against the Canadian dollar on Friday after data showed that U.S. consumer sentiment improved unexpectedly this month, while Canadian consumer prices were in line with the central bank’s target.

USD/CAD was up 0.17% to 1.1274 in late trade, not far from session highs of 1.1284.

The pair is likely to find support at around the 1.12 level and resistance at about 1.1312.

The greenback was boosted after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that U.S. housing starts rose more than expected in September, bolstering the outlook for the sector.

The data reinforced expectations that the Federal Reserve will raise interest rates in the second half of 2015.

The Canadian dollar had a subdued reaction after official data showed that the country’s consumer price index rose 2.0% year-over-year in September after rising 2.1% in August.

The data indicated that the Bank of Canada will stick to its neutral stance on interest rates at its upcoming policy meeting on Wednesday.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.33% to 85.31 late Friday, but still ended the week lower, its second consecutive weekly decline.

The greenback rose to five year peaks against its Canadian cousin on Wednesday as fears that slower global growth would act as a drag on the U.S. economy fuelled a broad-based selloff in riskier assets.

In the coming week, Investors will be looking ahead to Wednesday’s rate statement by the BoC, with the bank expected to leave rates on hold at 1.0%. Canada is also to release data on retail sales.

The U.S. is to release data on consumer inflation, as well as reports on both existing and new home sales.

Monday, October 20

• Canada is to release data on wholesale sales.

Tuesday, October 21

• The U.S. is to release private sector data on existing home sales.

Wednesday, October 22

• Canada is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.
• The U.S. is to produce data on consumer prices.
• Later in the day, the BoC is to announce its overnight rate and publish its rate statement. The announcement is to be followed by a regularly scheduled press conference.

Thursday, October 23

• The U.S. is to publish its weekly report on initial jobless claims.

Friday, October 24

• The U.S. is to round up the week with a report on new home sales.

AUD/USD weekly outlook: October 20 - 24

The Australian dollar edged lower against its U.S. counterpart on Friday, as upbeat U.S. economic data eased concerns over the strength of the recovery.

AUD/USD hit a daily low of 0.8734 on Friday, before subsequently consolidating at 0.8744 by close of trade, down 0.14% for the day but still 0.66% higher for the week.

The pair is likely to find support at 0.8684, the low from October 16, and resistance at 0.8827, the high from October 16.

The greenback was boosted after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that U.S. housing starts rose more than expected in September, bolstering the outlook for the sector.

The data reinforced expectations that the Federal Reserve will raise interest rates in the second half of 2015.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.33% to 85.31 late Friday, but still ended the week lower, its second consecutive weekly decline.

Data from the Commodities Futures Trading Commission released Friday showed that speculators added to their bearish bets on the Australian dollar in the week ending October 14.

Net shorts totaled 30,271 contracts, compared to net shorts of 26,486 in the preceding week.

In the week ahead, investors will be awaiting U.S. data on consumer price inflation and new home sales for fresh signals on the strength of the economic recovery.

Market players are also looking ahead to a raft of Chinese economic data later this week, including reports on third quarter gross domestic product, as well as data on industrial production and retail sales.

Tuesday, October 21

• 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.
• China is to release what will be closely watched data on third quarter gross domestic product and separate reports on industrial production and fixed asset investment.
• The U.S. is to release private sector data on existing home sales.

Wednesday, October 22

• Australia is to publish data on consumer price inflation, which comprises the majority of overall inflation.
• The U.S. is to produce data on consumer prices.

Thursday, October 23

• RBA Governor Glenn Stevens is to speak at an event in Sydney; his comments will be closely watched.
• China is to release the preliminary reading of its HSBC manufacturing index.
• The U.S. is to publish its weekly report on initial jobless claims.

Friday, October 24

• The U.S. is to round up the week with a report on new home sales.

NZD/USD weekly outlook: October 20 - 24

The New Zealand dollar declined against its U.S. counterpart on Friday, as upbeat U.S. economic data boosted demand for the greenback.

NZD/USD hit a daily low of 0.7877 on Friday, before subsequently consolidating at 0.7917 by close of trade on Friday, down 0.45% for the day but still 1.3% higher for the week.

The pair is likely to find support at 0.7805, the low from October 15, and resistance at 0.7996, the high from October 16.

The greenback was boosted after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that U.S. housing starts rose more than expected in September, bolstering the outlook for the sector.

The data reinforced expectations that the Federal Reserve will raise interest rates in the second half of 2015.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.33% to 85.31 late Friday, but still ended the week lower, its second consecutive weekly decline.

Data from the Commodities Futures Trading Commission released Friday showed that speculators turned bearish on the New Zealand dollar in the week ending October 14.

Net shorts totaled 2,384 contracts, compared to net shorts of 100 in the preceding week.

In the week ahead, investors will be awaiting U.S. data on consumer price inflation and new home sales for fresh signals on the strength of the economic recovery.

Market players are also looking ahead to a raft of Chinese economic data later this week, including reports on third quarter gross domestic product, as well as data on industrial production and retail sales.

Tuesday, October 21

• China is to release what will be closely watched data on third quarter gross domestic product and separate reports on industrial production and fixed asset investment.
• The U.S. is to release private sector data on existing home sales.

Wednesday, October 22

• The U.S. is to produce data on consumer prices, which comprises the majority of overall inflation.

Thursday, October 23

• New Zealand is to release data on consumer prices.
• China is to release the preliminary reading of its HSBC manufacturing index.
• The U.S. is to publish its weekly report on initial jobless claims.

Friday, October 24

• New Zealand is to release data on the trade balance.
• The U.S. is to round up the week with a report on new home sales.

GBP/USD weekly outlook: October 20 - 24

The pound was little changed against the dollar late Friday after data showed that U.S. consumer sentiment rose unexpectedly in October and following dovish remarks by a bank of England official earlier in the day.

GBP/USD was trading at 1.6092 late Friday, off session highs of 1.6125.

Cable is likely to find support at around 1.5940 and resistance at the 1.6180 level.

The dollar was boosted after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that housing starts rose more than expected last month, bolstering the outlook for the sector.

The data reinforced expectations that the Federal Reserve will raise interest rates in the second half of 2015.

The US Dollar Index, which tracks the performance of the greenback against a basket of six major currencies, was up 0.33% to 85.31, but still ended the week lower, its second consecutive weekly decline.

Earlier Friday, BoE Chief Economist Andy Haldane said that rates could remain lower for longer and warned that economic conditions have worsened.

Haldane pointed to slowing global growth, heightened geopolitical and financial risks and the subdued inflation outlook due to slow U.K. wage growth and falling commodity prices worldwide.

Sterling slumped to 11-month lows against the dollar earlier in the week after data showed that the annual rate of U.K. inflation slowed to 1.2% in September, down from 1.5% in August.

The data added to the view that the BoE is likely to keep rates on hold at record lows for longer.

Elsewhere, sterling was higher against the euro on Friday, with EUR/GBP down 0.41% to 0.7928.

In the week ahead, the U.S. is to release data on consumer inflation, as well as reports on both existing and new home sales. The BoE is to publish it latest meeting minutes, while Friday’s first look at third quarter growth will be highly anticipated.

Tuesday, October 21

• The U.K. is to produce data on public sector borrowing.
• The U.S. is to release private sector data on existing home sales.

Wednesday, October 22

• The BoE is to release the minutes of its latest policy meeting.
• The U.S. is to produce data on consumer price inflation, which accounts for the majority of overall inflation.

Thursday, October 23

• The U.K. is to report on retail sales and also release private sector data on mortgage approvals and industrial order expectations.
• The U.S. is to publish its weekly report on initial jobless claims.

Friday, October 24

• The U.K. is to release preliminary data on third quarter economic growth.
• The U.S. is to round up the week with a report on new home sales.

EUR/USD weekly outlook: October 20 - 24

The euro fell against the dollar on Friday as the greenback was boosted by data showing that U.S. consumer sentiment unexpectedly improved this month.

EUR/USD was down 0.38% to 1.2759 in late trade, not far from session lows of 1.2745.

The pair is likely to find support at around 1.2625 and resistance at 1.2843, Thursday’s high.

The greenback was boosted after a report showed that the University of Michigan’s consumer sentiment index unexpectedly rose to 86.4 in October, the most since July 2007.

Another report showed that housing starts rose more than expected last month, bolstering the outlook for the sector.

The data reinforced expectations that the Federal Reserve will raise interest rates in the second half of 2015.

The dollar fell against the other major currencies on Wednesday, touching a three-week trough against the euro amid a selloff sparked by fears that slower global growth would act as a drag on the U.S. economy.

Germany’s government cut its forecast for economic growth for this year and next on Tuesday, after recent data pointed to weakness in exports and industrial output.

The euro area’s largest economy now expects growth of 1.2% this year down from 1.8% previously and growth of 1.3% in 2015, down from 2%.

On Thursday, European Central Bank official Ewald Nowotny said the bank still has leeway for more action to address slowing inflation in the euro area, but added that the euro zone economy did not need emergency measures.

In recent months the ECB has cut interest rates to record lows, extended new four-year loans to banks and announced a plan to purchase asset-backed securities, a form of quantitative easing, in a bid to shore up the ailing euro area economy.

Elsewhere, the single currency edged higher against the yen on Friday, with EUR/JPY easing up 0.15% to 136.38 in late trade, off Thursday’s 11-month lows of 134.12.

In the week ahead, the euro zone is to release preliminary data on private sector activity. The U.S. is to release data on consumer inflation, as well as reports on both existing and new home sales.

Monday, October 20

• Germany’s Bundesbank is to publish its monthly report.

Tuesday, October 21

• The U.S. is to release private sector data on existing home sales.

Wednesday, October 22

• The U.S. is to produce data on consumer price inflation, which accounts for the majority of overall inflation.

Thursday, October 23

• The euro zone is to publish preliminary data on private sector activity, while Germany and France are to also to publish data on private sector growth.
• The U.S. is to publish its weekly report on initial jobless claims.

Friday, October 24

• The Gfk think tank is to release its report on German business climate.
• The U.S. is to round up the week with a report on new home sales.

Keep an economic schedule close by that rundowns the indicators and when they are expected to be released. Likewise, watch out for the future; regularly markets will move fully expecting a specific indicator or report due to be released sometime soon. Be educated about the economic indicators that are catching most of the the market's consideration at some random time. Such indicators are impetuses at the biggest cost and volume developments. For instance, when the U.S. dollar is feeble, swelling is frequently one of the most-watched indicators.