This market brief is an overview of the week ahead and some of the events we see as being important to the markets.
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NOTE: Last week we saw the people of the UK vote to leave the EU. The result? Extremely large sell-offs across most financial markets, with the exception being traditional safe-havens such as Gold and Bonds. We will understand the impact of these moves further this week, however we remind you to be cautious of quick snap-backs as governments and central banks are ready to intervene.
INDICES AUSTRALASIA ASX – 5127 ( -40 or -0.77% ) After rallying all week last week, the Brexit decision resulted in a 300pt sell-off to the downside. For a continued move to the upside we would like to see this market hold above 5090. If we can hold above this level we will look for a move back up to 5161. A strong break and close above this level could see the ASX trade back up to 5238. If momentum remains strong, we will look for a move to 5294 and 5373. If we fail to hold above 5090, we will look for a move back down to 5052. A break below this could result in a move back down to 4997, and further breaks to the downside could see the ASX head to 4890 if this market continues to sell off. If momentum remains very strong we could see a strong move down to 4890.
EUROPE DAX – 9438 ( -252 or -2.6% ) Like the ASX- the DAX really got going last week. Early Friday morning the DAX was up >8% for the week, before a 1300pt collapse on Friday saw it finish down -2.6%!!! For those unaware- this was the largest one day point decline in the DAX’s history. VOLATILITY ALERT: German Prelim CPI on Wednesday, German Retail Sales, EU CPI Flash Estimates and Monetary Policy Minutes on Thursday. We will be discussing this market this week in the LIVE CHAT ROOM . For a continued move to the upside we would like to see 9386 hold as support followed by a close above 9560. A close above this level could see a move into 9620, if momentum remains strong a break and close above 9620 may result in a move back up to 9822. On the downside we are watching for a break below 9322, which may then result in a retest of 9254. A break and close below 9254 could see a move down to 9135 followed by 9092. If momentum remains strong we could see a quick move down to 9016, and should the selling really gain strength we will be watching for sharp moves down to 8890 and 8681.
US SP500 – 2026 ( -41 or -1.98% ) The S&P has broken many key technical levels and we will be watching this market closely this week as a global equities leader. We will be discussing this market in more depth in the MEMBER PORTAL . VOLATILITY ALERT: Quarterly GDP on Tuesday, Personal Spending, Pending Home Sales & Bank Stress Results on Wednesday, Chicago PMI on Thursday, ISM Manufacturing PMI on Friday. For a move higher we would like to see a the S&P hold 2019. Should this occur we could see a move back up into the important 2040 level. A strong break and close above 2040 could result in a move into 2054, and if momentum remains strong we will look for final moves to 2066 and 2079 before a pause. If we do not see a strong break and close above 2040, we will look for a move back down to 2002. A strong break and close below this level may likely see 1990 and 1986; and further breaks to the downside could see the S&P back down to 1968-1972. Should the downside momentum we will not rule out a move back down to 1948.
FOREX AUD/USD – 0.7465 ( +73 or +0.99% ) Despite BREXIT, the Aussie Dollar was one of the few markets that managed to finish the week in positive territory. For a move higher we would like to see the AUD hold above 0.7447, followed by a break and close above 0.7489. A strong break and close above this level could then see a quick move to 0.7561 before a pause; and if momentum remains strong we will look for a full fade move into 0.7617. If we cannot hold above 0.7447, we will look for a move back down to 0.7364. A strong break below this level may result in a move back down into 0.7282 before another potential pause. Any subsequent breaks of this level however may result in a very fast move down to 0.7229.
EUR/USD – 1.1091 ( -141 or -1.26% ) This week we have Spanish elections which could see the EURO gap on Monday morning, followed by some initial volatility early on. It will be interesting to see how this market reacts to last week’s Brexit vote, as the EURO is now in a precarious position. VOLATILITY ALERT: Spanish Elections on Sunday, EU CPI Flash Estimates on Thursday. For a sustained move higher we would like to see the EURO hold above 1.1064, followed by strong breaks above 1.1117 and 1.1163; on its way to retesting 1.1201. A break above 1.1201 may result in a retest of 1.1248, and if momentum remains strong we could see fast moves into 1.1347 and 1.1385 before a pause. If the EURO cannot hold 1.1064 we will watch for a move back down to 1.1033 – 1.1026 before a pause. A strong break and close below this level may see the EURO move back down to 1.0977. If momentum remains very strong we could see a sharp move down to 1.0897.
GBP/USD – 1.3659 ( -692 or -4.82% ) Last week we mentioned a move to 1.3725 cannot be ruled out. We saw that level before absolutely smashing through it! Cable found a low at 1.3227 before closing some 500 points higher. This was a 1700 point move and we warned that BREXIT was a BIG DEAL. NOTE: With the PM’s resignation and the BoE saying they are prepared to provide liquidity, we expect this week to be another volatile week. We will be covering this market exclusively in our MEMBER PORTAL and LIVE CHAT ROOM again this week. VOLATILITY ALERT: Current Account on Thursday, Manufacturing PMI on Friday. For a move to the upside we would like to see this market break above 1.3725 and retest 1.3853. A strong close above these levels could see the GBP head quickly to 1.3937, and finally 1.4006 before a pause. If momentum remains very strong we will look for moves into 1.4041, 1.4194 and 1.4223. If we cannot break above 1.3725, we will look for a move back down to 1.3518. A break below this level could see a quick leg down into 1.3393. Should we break this level we will look for a retest of the low at 1.3227. A break of this level could see the GBP/USD move sharply lower into 1.3035.
USD/JPY – 102.19 ( -192 or -1.84% ) The USD/JPY continues to be sold off and we are now wondering: What will it take for Kuroda to step in? Is this the week we see another YENtervention..? VOLATILITY ALERT: Retail Sales on Wednesday, Core CPI on Friday. For a continued move to the upside we would like to see this market hold above 101.12, followed by a break and close above 102.29. Should this occur we will look for moves into 103.21 and 103.99. A strong break above 103.99 could see a move to 104.97, and if momentum remains strong we cannot rule out a sharp move higher to 106.30. If however the USD/JPY cannot hold above 101.12, we will look for a move down to 100.76 – 100.61. A strong break below these level could see the USD/JPY trade quickly down to 99.90 before a pause. Should we continue to trade lower and see continued downside pressure on the USD/JPY- a sharp move to 98.22 is possible.
COMMODITIES GOLD – 1315 ( +17 or +1.31% ) As we eluded to last week, markets looked to Gold as a safe-haven amidst the BREXIT vote. For a continued move higher we would like to see GOLD hold above 1309, followed by a strong break and close above 1322. Should this occur we could see a move to retest 1337, and a break of this level could see a strong move back up into 1355. If Gold cannot hold above 1309, we will look for a move back down to 1303. A strong break and close below this level we could see Gold trade down to 1297, and if momentum to the downside remains strong we will watch for another move down to 1276 before the end of the week.
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