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Market Brief – Monday 1st February 2016

This market brief is an overview of the week ahead and some of the events we see as being important to the markets.
Please be aware that our views may change throughout the course of the week, and we do not publish updates of such changes.
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INDICES

AUSTRALASIA

ASX – 5052 ( +69 or +1.38% )

A volatile week saw the ASX continiously grind higher, before finally breaking out of our 4997 level.

VOLATILITY ALERT: RBA Cash rate on Tuesday, followed by Policy statement and Retail Sales on Friday.

For a continued move higher we would like to see 4997 hold on our way to test 5090. Should the ASX break 5090 convincingly, we may see the market continue to rally with a quick move to 5161 before a pause. Above this we will again be watching for a fast move to 5237.

If we fail to hold 4997, then we could see a move back down to 4952. A break below 4952 could see a move into 4890, and further downside momentum likely to result in a retest of 4863. A break below 4862 could see the ASX move hard and fast down to 4782.

 

EUROPE

DAX – 9819 ( -1 or -0.01% )

The DAX was flat for the week and so our levels remain the same.

NOTE: The DAX is now lagging other major indices. Could we be gearing up for a big 400 point day??? Members will be the first to know in the MEMBER PORTAL.

For a sustained move to the upside we would like to see 9620 hold as support and a strong break above 9882. A break above this level may result in a quick move to 10015 before a short break. Further breaks higher could result in a larger move into 10161. Should we smash through 10161 we could really rocket to 10491.

On the downside we are watching 9620 and a break below could extend this to 9566. If momentum continues to be strong on the downside, we could see the DAX move all the way back down to 9386 and 9322. A break below 9322 could also result in a sharp move lower to 9084.

 

US

SP500 – 1937 ( +32 or +1.68% )

The S&P ended an otherwise flat week with a strong rally. We spoke about a potential snap back move weeks ago- and we saw this last Friday.

VOLATILITY ALERT: Friday we have Non-Farm Payrolls.

For a sustained move higher we would first like to see 1915 as support. Should the S&P hold above 1915,  we will be looking for a higher into 1958 before a pause. A break of 1958 would like result in a move to 1969, and a strong break of 1969 could see a fast move to 1990.

Should the S&P fail at 1915, we will be looking for a move back down to 1902. If downside momentum remains strong, a strong break through 1902 could see a fast move back down to 1875.

 

FOREX

AUD/USD – 0.7083 ( +79 or +1.13% )

Our level of 0.7113 called this market perfectly last week. This week RBA meets for the first time in 2016 and it will be interesting to hear what they have to say since they last meet in December. We will be discussing what this may mean in the LIVE CHAT ROOM.   

VOLATILITY ALERT: RBA interest rate and statement on Tuesday, Retail Sales on Friday.

For a move higher we would first like to see the AUD hold 0.7014, followed by a strong break back above 0.7113. A break above could see us test 0.7197, and if the move up remains strong we will look for 0.7229 – 0.7236 before a pause.

If the AUD breaks back below 0.7014, we may likely see a move back down into 0.6997. A strong break below 0.6997 could see us move back down into 0.6958 and 0.6934. Should the move to the downside remain very strong we will look for a retest of 0.6830.

 

EUR/USD – 1.0829 ( +33 or +0.31% )

We again came within a few points of 1.0977 before the EURO reversed sharply on Friday. We will eventually break out of this tight range and when we do the move could be explosive so BE PREPARED.

For a sustained move higher we would now like to see a strong break and close above 1.0977. Above this we have 1.1033 and a break of this level will likely see a retest of 1.1050. Should we see a breakout move to the upside, we will be watching for a bigger move to 1.1117. If the upside momentum strong we may see a fast move into 1.1248.

If we cannot break above 1.0977, we will likely see continued chop back and forth between 1.0977 – 1.0804. A strong bar break below 1.0804 could see a fast move down into 1.0727 – 1.0701 before a pause. Further breaks below 1.0701 would allow for a move to 1.0635 and potentially a retest of 1.0521.

 

GBP/USD – 1.4243 ( -22 or -0.15% )

We are seeing some very interesting behaviour in the GBP. Our posts in the MEMBER PORTAL are currently calling this market and we will be discussing this again this week.

VOLATILITY ALERT: BoE interest rate on Thursday.

The GBP was also flat for the week so our levels remain the same. For a continued move higher we would like to see the GBP hold above 1.4223, followed by a strong bar break and close higher through 1.4382. If the move continues higher we could see a move into 1.4469, and should momentum remain strong to the upside we will be watching for a rally into 1.4635.

On the downside a strong break and close below 1.4223 could send the pound lower to 1.4194 before a pause. If there is no stopping this move down we could see a very sharp move into 1.40396.

 

USD/JPY – 121.12 ( +245 or +2.06% )

Is anyone surprised by the BoJ’s announcement last Friday?? The SNB did this in 2015 and we warned clients- a precedent has been set for other central banks to do the same in future. Last week the BoJ voted in favour of negative interest rates (-0.1%), and the USD/JPY skyrocketed unsurprisingly to our level of 121.69.

VOLATILITY ALERT: Kuroda speaking on Wednesday.

NOTE: Last week’s events are a a fundamental shift for the USD/JPY and could be the beginning of a longer term move to the upside. Caution should be observed this week.

For this move to the upside to continue, we would like to see a break higher through 121.69 before reaching 122.25. Should the USD/JPY continue on a rampage 123.57 is not out of the picture.

On the downside, a break below 120.62 would likely result in a move to 120.36. Should the move continue lower we could see 120.01 before a pause. If the $/JPY cannot hold 120.01 we could see a strong move down to 119.20 before a full fade of the BoJ move into 118.84.

 

COMMODITIES

GOLD – 1118 ( +21 or +1.91% )

In the midst of all the uncertainty over the past few weeks, traders are looking for safe haven plays and GOLD has been ticking higher. Last week we said “look for GOLD to hold 1096… which could result in a move into 1118 and 1126 before a pause”, and we were not disappointed.

This week we will again look for GOLD to break and close strongly above 1126, on its way to a potential move into 1139 and 1146.

If we do not see a strong bar break and close above 1126 we will again be watching for any breaks below 1106. If momentum is strong to the downside, a break and close below 1106 could result in a move to 1096, followed by a sharp move down to 1086.

 

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