London looks set for quiet start
By Michael Hewson (Senior Market Analyst at CMC Markets UK)
A quiet start to the trading week is expected today with the calendar fairly light on the data front as London markets wake up from an Olympic closing ceremony hangover.
The lull is expected to be short lived, in a week fairly full of some important economic data from both sides of the Atlantic, while Italian and Spanish bond yields appear to be starting to edge higher again with the post ECB, Draghi effect starting to taper off.
With concerns about Greece’s finances never too far from the forefront of market attention the beleaguered country will be hoping to tide itself over for a little longer in the absence of further European money with some more T-bill sales tomorrow.
The hope is it won’t have to pay through the nose for the privilege, especially given that patience throughout Europe is wearing increasingly thin with continued missed targets.
Weekend reports from some German leaders suggest that any further deviation from the troika program could well see Germany veto any further disbursements of aid, even if other countries sign off on them.
We also find out to what extent the woes in Europe have had on the GDP numbers for Q2 of Europe?s two biggest economies France and Germany with expectations of stagnant growth for both with a contraction to broader European GDP numbers for Q2.
Hot on the heels of last week’s growth and inflation downgrades from the Bank of England we get the latest UK inflation numbers for July and the bank will be hoping that the recent strong rebound in oil prices hasn’t fed through into the latest figures. The latest MPC minutes are also likely to be fairly illuminating with regard to whether there was any pressure to increase the amount of QE from the previous increase announced in July.
In the US the latest retail sales numbers for July are due this week and the hope is that the consumer will return after three consecutive months of declines in sales as consumers continue to remain cautious.
EURUSD ? we still remain unable to break above the 55 day MA and resistance in the 1.2430/40 area and appear to be heading back towards 1.2220 trend line support from the 1.2045 lows. A break here has the potential to retarget the 1.2150 area, as well as the 1.2045 lows.
We remain mindful of the bullish weekly candle from two weeks ago which still suggests we could be gearing the market up for a euro rally, but any break below here targets 1.1880.
The key level on a monthly close remains the 200 month MA at 1.2060, the July lows.
GBPUSD ? cable remains stuck between the 200 day MA at 1.5730 and resistance between 1.5740/80 and the trend line support from the 1.5270 lows at 1.5480. Above 1.5780 and we could see a move to 1.5910.
A break below the trend line support at 1.5480 suggests a move back to 1.5270.
Only a close below 1.5240 signals a risk of a return to the July 2010 lows at 1.4950.
EURGBP ? the single currency looks set to break below the trend line support at 0.7835 which could well see the 0.7755 lows come back into play.
On the upside interim resistance at 0.7880 now needs to break to retarget the 55 day MA which remains strong resistance at 0.7960, along with trend line resistance at the same level from the February highs at 0.8505.
USDJPY ? dull, dull, dull the US dollar remains becalmed between support below 78.00, and resistance above 79.30, despite the fact that Japanese GDP for the most recent quarter came in below expectations. The Japanese economy grew at 0.3% for Q2, half market expectations of 0.6%.
The cloud support at 77.30 and the May lows at 77.60 remaining a key level. As long as this holds the downside, the risk of a rebound remains quite high.
A move above the 79.30 level brings the 80.00 level back into play and then by definition the main resistance at the top of the weekly cloud at 80.45.
Equity market calls
FTSE100 is expected to open unchanged at 5,847
DAX is expected to open 6 points higher at 6,951
CAC40 is expected to open 4 points higher at 3,440
FTSEMib is expected to open 40 points higher at 14,589