Wall Street is expected to be largely driven by economic data next week as initial jobless claims emerge as an important barometer of U.S. economic health while corporate results take a back seat. The U.S. Labour Department releases weekly claims for unemployment benefits on Thursday. This will be a key focus for equity investors given the big disappointment this week and the fact that the four-week moving average for claims has been drifting up over the past two months. The market will also look to retail sales and inflation data for a better read on the economy, with investors viewing sales to determine the impact of oil prices on spending.
By week’s end, the Dow Jones Industrial Average closed at 12,638.74, while the S&P 500 ended at 1,340.20, posting a weekly loss of 1.7%. The Nasdaq Composite Index ended at 2,827.56, down 1.6% in a week. Precious metals also lost ground. The July silver contract dropped 27% on the week on several margin increases. Gold for June delivery recorded a weekly loss of 4.2% to close at $1,491.60 an ounce. If you are interested in trading precious metals, please refer to our weekly analysis, where both gold and silver predictions are discussed in length.
Light, sweet crude for June delivery fell $2.62, or 2.6%, to close at $97.18 a barrel on the New York Mercantile Exchange. Futures prices skidded about 15% during the week. We expect oil to sink to $90 a barrel with prices pressured by demand destruction out of the U.S. and monetary tightening in emerging markets. We predict oil will fall further as the global economy slows, the dollar continues to rebound, and the risk premium due to unrest in the Middle East eventually fades, taking prices back below $90 per barrel by year-end. That being said, volatility in oil and gold prices could spill into the stock market again this week. A drop in energy prices bodes well for stocks over the long haul, say analysts.
Today’s Important Economic Announcements (GMT)
7:00 AM GBP Halifax HPI m/m
12:15 PM CAD Housing Starts
11:00 PM GBP BRC Retail Sales Monitor y/y & RICS House Price Balance
GBP/USD
GBP/USD’s fall from 1.6744 extended further to as low as 1.6355 last week. A short term double top is at least in place and initial bias is on the downside this week for 1.6336 support first. Break will target key near term support at 1.5935. Initial resistance is at the downtrend line on 4-hour chart, now at 1.6389, and key resistance is at 1.6465, as long as these levels hold, downtrend could be expected to continue, and target would be at 1.6200 area. On the upside, above 1.6522 resistance is needed to indicate that fall from 1.6744 is finished. Otherwise, near term outlook will remain mildly bearish and we’d continue to favour deeper decline. Traders are encouraged to short the pair in the coming days.
Stop Loss: 1.6522
Take Profit: 1.6336
AUD/USD
As expected, the RBA left the cash rate at 4.75% for a 5th meeting in May. While acknowledging continued growth in global economy, policymakers stated floods in Queensland may cause a decline in real GDP in the first quarter of 2011. Concerning inflation, the central bank was aware that underlying inflation has run its course recently. In the longer term, price levels will increase further if economic conditions evolve broadly as expected. We expect the central bank will resume tightening in the second half of the year as inflation pressures heighten. The bounce from 1.0536 would possibly be correction of downtrend from 1.1011. Consolidation in a range between 1.0536 and 1.0850 would likely be seen in a couple of days.
Stop Loss: 1.0867
Take Profit: 1.0571
USD/JPY
USD/JPY dropped to as low as 79.58 last week before forming a temporary low there and recovered. Initial bias is neutral this week and some sideway trading might be seen first. But upside of recovery should be limited by 82.76 resistance and bring fall resumption. As noted before, the break of 80.50 support argue that rebound from 76.40 low is likely finished at 85.51 already. Below 79.58 will extend the fall from there to retest 76.40 low. As long as 81.50 resistance holds, downtrend could be expected to resume after consolidation, and another fall towards 78.50 area is still possible. A break of 76.40 level is now needed to revive the case that USD/JPY’s down trend has finished. Otherwise, we’ll stay cautiously bearish in the pair.
Stop Loss: 80.94
Take Profit: 80.05
Published by www.SolidityBrokers.com
