Alpari UK
Experienced member
- Messages
- 1,502
- Likes
- 5
UK Opening Call from Alpari UK on 17 June 2013
Geo-political developments takes centre stage for G8 summit
Today’s UK opening call provides an update on:
• G8 meeting commences with focus upon global economy
• Iranian election brings hope, yet Syrian anxiety dominates energy market
• US manufacturing index expected to show improvement
A fairly mixed start to the week today, with markets largely focusing upon the ability of key global indices to recover losses seen over the past week. Overnight trade within Japan has seen an almost 300 point gain in the Nikkei 225, driving expectations of a strong European session higher. However, given the current volatility and unpredictive nature of the markets, the European futures currently point to a mixed bag for indices.
Today marks the commencement of a two-day meeting of the 8 most industrialised nations in the form of the G8 summit. Coming at a time of great volatility and increasing uncertainty, there is likely to be a significant focus upon the global economic outlook. From a Japanese perspective, these talks have been productive in garnering support for the ongoing monetary measures being employed. However, given the apparent deterioration in the markets over the past month, it is now as likely that discussions regarding Japanese and US monetary easing measures become more dovish by nature. More generally, the recent market turmoil will certainly increase the emphasis upon the role of central banks in smoothing volatility and guiding the global economy into more stable waters.
The meeting, taking in place in Northern Ireland, is a chance for leaders to highlight key topics of international precedence. However, for each respective nation, there is an element of showmanship for their domestic audience to ensure the perception is that key strategic issues are highlighted. In the UK, there has been much made of the crackdown of tax havens and tax avoidance. The existence of low tax areas being utilised by multinational corporations as strategic headquarters has brought about an increasing feeling that the biggest companies are not paying their fair share. The utilisation of transfer pricing creates a situation whereby services performed within one nation is subsequently resulting in a disproportionately smaller amount of tax being paid. Given the UK's position as a key global center for business, the ability to fully appropriate the relevant tax for multinational corporations will bring about a significant boost to the economy.
Another key topic on the agenda of the G8 comes in the form of an increasingly complex and global conflict in Syria. US declaration of involvement brought about the highest crude prices in approximately nine months on Friday. Russian insistence upon continued backing of the Assad regime has turned a domestic struggle for regime into an international proxy war between the west (US & Europe) and the east (Russia & Iran). The subsequent geopolitical risk for the region has served to increase market anxiety higher, as seen in recent energy prices.
However, one key development in the region came over the weekend, as the Iranian presidential election came to a conclusion with the overwhelming victory for perceived reformist Hassan Rouhani. The importance of Rouhani's victory centers around his willingness to provide the country with a shift in emphasis towards a more 'normalised' existence without much of the current embargoes and sanctions that cripple the outcast nation. In order to achieve this, Rouhani would promote increased engagement with Western powers. However, Israel PM Benjamin Netenyahu has since gone on record to warn against a loosening of current international pressure given the fact that it is the 'supreme leader' Ali Khamenei who dictates policy with regards to Iranian nuclear policies. Subsequently, there is the possibility that Iran may witness an increasingly public power struggle between these two key actors.
In the markets, we are looking forward towards the release of the US empire state manufacturing index figure, due out at 1.30pm GMT. Playing second fiddle to the Philly Fed manufacturing index, this figure provides an outlook for 200 manufacturers in New York state. The market expectation is for a push back into a positive outlook, with the May figure of -1.4 expected to rise to 0.4. However, this has increasingly disappointed forecasters over recent months and subsequently there is a high likeliness that we could see a consecutive negative reading.
European markets are expected to open mixed today, with the FTSE100 up 10 points, while the CAC is expected to open -6 points and the DAX approximately flat at +0.2 points.
EURUSD
Friday saw a substantial push to the downside, back through support at 1.334, signaling the potential for a new bearish phasing to thing trend. However, in much the same way as Thursday, much of these losses were made up in the US session bringing a slightly improved picture for the pair. The Friday close exactly on the 61.8 Fibonacci highlights it as key support and provided an unclear picture of where this pair in expected to go today. This morning has seen a move below support, currently trading around 1.332, bringing about a possibility of further downside momentum over the coming week. The stochastic and CCI indicators both point to an overbought and thus some form of consolidation would make sense. However, given the experiences of Thursday and Friday, the current candle must close below support to increase the view that there is further downside to come. Such a move would bring a target level of around 1.311-1.305. This encompasses the 100 and 200 moving averages, along with the 38.2 retracement of the February -April downtrend and 50.0 retracement of the recent May – June uptrend.
The weekly confirms this downward bias with both stochastic and CCI indicators pointing to an overbought market. However, this also provides a long term target of 1.38 to establish a higher high to this 12 month trend.
GBPUSD
A similar story in cable, where Friday’s inability to close below support brings about a key day of trading today in determining the future movements of this pair. Current price action remains around support and a close above this level would be bullish for the pair. However, given indicators point to an overbought market, there is a high likeliness that the price could fall back towards 1.53 levels.
Taking a look at the weekly chart, there is clear resistance at 1.57 given the inability to close above it on Friday. However, today we will be looking to see if this can subsequently turn into support or if we are due a correction to the downside. Near upside target comes at the extension of 1.579, followed by a longer term target of 1.624.
USDJPY
A fairly torrid time for the dollar yen over the past three weeks. losing approximately 10% of value over that period. Clear support has been found at the 38.2 Fibonacci retracement around 93.6, sparking some buying this morning. The ability of the pair to close above the 95.0 handle will be crucial given this represents a previous low for the pair. The stochastic and CCI indicators point to an oversold market, thus increasingly the likeliness of a move back to the upside. However, as has been the case in EURUSD and GBPUSD, it is the potential resurgence of the US dollar which will be key to whether all three can regain some of the ground of weeks gone by. Upside target would come around 97.4, representing the 23.6 retracement level.
Geo-political developments takes centre stage for G8 summit
Today’s UK opening call provides an update on:
• G8 meeting commences with focus upon global economy
• Iranian election brings hope, yet Syrian anxiety dominates energy market
• US manufacturing index expected to show improvement
A fairly mixed start to the week today, with markets largely focusing upon the ability of key global indices to recover losses seen over the past week. Overnight trade within Japan has seen an almost 300 point gain in the Nikkei 225, driving expectations of a strong European session higher. However, given the current volatility and unpredictive nature of the markets, the European futures currently point to a mixed bag for indices.
Today marks the commencement of a two-day meeting of the 8 most industrialised nations in the form of the G8 summit. Coming at a time of great volatility and increasing uncertainty, there is likely to be a significant focus upon the global economic outlook. From a Japanese perspective, these talks have been productive in garnering support for the ongoing monetary measures being employed. However, given the apparent deterioration in the markets over the past month, it is now as likely that discussions regarding Japanese and US monetary easing measures become more dovish by nature. More generally, the recent market turmoil will certainly increase the emphasis upon the role of central banks in smoothing volatility and guiding the global economy into more stable waters.
The meeting, taking in place in Northern Ireland, is a chance for leaders to highlight key topics of international precedence. However, for each respective nation, there is an element of showmanship for their domestic audience to ensure the perception is that key strategic issues are highlighted. In the UK, there has been much made of the crackdown of tax havens and tax avoidance. The existence of low tax areas being utilised by multinational corporations as strategic headquarters has brought about an increasing feeling that the biggest companies are not paying their fair share. The utilisation of transfer pricing creates a situation whereby services performed within one nation is subsequently resulting in a disproportionately smaller amount of tax being paid. Given the UK's position as a key global center for business, the ability to fully appropriate the relevant tax for multinational corporations will bring about a significant boost to the economy.
Another key topic on the agenda of the G8 comes in the form of an increasingly complex and global conflict in Syria. US declaration of involvement brought about the highest crude prices in approximately nine months on Friday. Russian insistence upon continued backing of the Assad regime has turned a domestic struggle for regime into an international proxy war between the west (US & Europe) and the east (Russia & Iran). The subsequent geopolitical risk for the region has served to increase market anxiety higher, as seen in recent energy prices.
However, one key development in the region came over the weekend, as the Iranian presidential election came to a conclusion with the overwhelming victory for perceived reformist Hassan Rouhani. The importance of Rouhani's victory centers around his willingness to provide the country with a shift in emphasis towards a more 'normalised' existence without much of the current embargoes and sanctions that cripple the outcast nation. In order to achieve this, Rouhani would promote increased engagement with Western powers. However, Israel PM Benjamin Netenyahu has since gone on record to warn against a loosening of current international pressure given the fact that it is the 'supreme leader' Ali Khamenei who dictates policy with regards to Iranian nuclear policies. Subsequently, there is the possibility that Iran may witness an increasingly public power struggle between these two key actors.
In the markets, we are looking forward towards the release of the US empire state manufacturing index figure, due out at 1.30pm GMT. Playing second fiddle to the Philly Fed manufacturing index, this figure provides an outlook for 200 manufacturers in New York state. The market expectation is for a push back into a positive outlook, with the May figure of -1.4 expected to rise to 0.4. However, this has increasingly disappointed forecasters over recent months and subsequently there is a high likeliness that we could see a consecutive negative reading.
European markets are expected to open mixed today, with the FTSE100 up 10 points, while the CAC is expected to open -6 points and the DAX approximately flat at +0.2 points.
EURUSD
Friday saw a substantial push to the downside, back through support at 1.334, signaling the potential for a new bearish phasing to thing trend. However, in much the same way as Thursday, much of these losses were made up in the US session bringing a slightly improved picture for the pair. The Friday close exactly on the 61.8 Fibonacci highlights it as key support and provided an unclear picture of where this pair in expected to go today. This morning has seen a move below support, currently trading around 1.332, bringing about a possibility of further downside momentum over the coming week. The stochastic and CCI indicators both point to an overbought and thus some form of consolidation would make sense. However, given the experiences of Thursday and Friday, the current candle must close below support to increase the view that there is further downside to come. Such a move would bring a target level of around 1.311-1.305. This encompasses the 100 and 200 moving averages, along with the 38.2 retracement of the February -April downtrend and 50.0 retracement of the recent May – June uptrend.
The weekly confirms this downward bias with both stochastic and CCI indicators pointing to an overbought market. However, this also provides a long term target of 1.38 to establish a higher high to this 12 month trend.
GBPUSD
A similar story in cable, where Friday’s inability to close below support brings about a key day of trading today in determining the future movements of this pair. Current price action remains around support and a close above this level would be bullish for the pair. However, given indicators point to an overbought market, there is a high likeliness that the price could fall back towards 1.53 levels.
Taking a look at the weekly chart, there is clear resistance at 1.57 given the inability to close above it on Friday. However, today we will be looking to see if this can subsequently turn into support or if we are due a correction to the downside. Near upside target comes at the extension of 1.579, followed by a longer term target of 1.624.
USDJPY
A fairly torrid time for the dollar yen over the past three weeks. losing approximately 10% of value over that period. Clear support has been found at the 38.2 Fibonacci retracement around 93.6, sparking some buying this morning. The ability of the pair to close above the 95.0 handle will be crucial given this represents a previous low for the pair. The stochastic and CCI indicators point to an oversold market, thus increasingly the likeliness of a move back to the upside. However, as has been the case in EURUSD and GBPUSD, it is the potential resurgence of the US dollar which will be key to whether all three can regain some of the ground of weeks gone by. Upside target would come around 97.4, representing the 23.6 retracement level.