Global investors, coming off their third week of losses, will look to home sales, GDP and handful of earnings in the coming week for clarity on whether the economy and stocks are in for a rougher ride.
Currency traders are showing more concerns about the state of European economies. Other countries also draw our attention where the recent anti-capitalist protests in Spain and Fitch Ratings cutting its credit rating on Italy. With regards to the latest earnings reports, we’re trending off the end of earnings season, and that could lead to some more volatility.
Last week, the Dow Jones Industrials Average slipped by 0.7%, the Nasdaq Composite Index gave up almost 1% and the S&P 500 Index ended the week down by 0.3%. It was the third straight week of losses for the Dow and Nasdaq. The market is in a period of reacting to economic data that we described as fragile. For example, first quarter GDP growth is expected to come in at 2%, up slightly from prior estimates of 1.8%.There’s things like the Philadelphia Fed being modestly positive, and the leading economic indicators are negative for the first time since last summer and we are not sure there’s a lot of encouragement for investors heading toward the end of June
The sterling has fallen more than 3.3% since the start of April as expectations for a rate hike from the Bank of England diminished. The central bank’s inflation report warned of strengthening inflationary pressures with Governor Mervyn King raising forecasted annual inflation to 4%-5% in coming the coming months, more than double the 2% targeted rate. Weaker than expected industrial production data this week highlighted the dilemma facing MPC members as inflation risks are skewed to the upside while growth risks remain skewed to the downside.
Today’s Important Economic Announcements (GMT)
7:00 AM EUR French Flash Manufacturing PMI
7:30 AM EUR German Flash Manufacturing PMI
8:00 AM GBP European Flash Manufacturing PMI
12:30 PM GBP MPC Member Tucker Speaks
Silver
Stabilization of prices in the commodities market is beginning to be seen as a possible bottom prior to a new wave of increases. The price of silver, which dove extremely sharply during the wave of price drops, is expected to correct at least part of the movement. This guarantees a price rise towards resistance levels of 35.80. The lower support level at 34.57 constitutes the last support level and, as a result, in the event of further price drops towards this level, it will be possible to consider a buy position for a larger portion and to increase the position. A daily closure beneath the security level of 31.50 will signal a fast exit as, in such an event, silver could continue to drop towards much lower levels. The positive mood in the financial markets that has been evident over the past few days is expected to support the price of silver and help it build a new move of increases.
Stop Loss: 34.57
Take Profit: 35.80
Gold
Presented with such stark reality at the late-April FOMC policy meeting, investors began to book profits on their Dollar-funded positions, sending all of the assets that had benefited from access to cheap capital through QE – with gold (as well as other commodities), stocks and high-yielding currencies among them – broadly lower while the greenback enjoyed a robust recovery. Needless to say, the markets do not move in straight lines, with last week producing a corrective retracement as the emerging downtrend ran into short-term bargain hunters. Looking ahead however, with only three weeks to go before the second round of QE is complete, the urgency behind the unwinding process seems sure to increase, pushing gold lower in the process. Gold is expected to fall slightly today.
Stop Loss: 1517.43
Take Profit: 1500.38
GBP/USD
The pound’s losses accelerated on Friday as yet another bout of risk aversion engulfed markets. The sterling fell as the greenback rebounded, sending the pair to a 5 ½ week low at the 1.6150 support level. The move saw the pound break below trend line support that dates back to late December 2010, and suggests the further weakness for the currency. Our contrarian Speculative Sentiment index confirms this biased, with traders remaining net long the sterling. A break below interim support at 1.6141 sees targets at the 1.6100. This extension converges with trend line support dating back to May of 2010 and should provide the sterling with stronger support. Topside resistance is eyed at 1.6250.
Stop Loss: 1.6250
Take Profit: 1.6141
Published by www.SolidityBrokers.com
