Monday’s video – A big market call….
Charlie looks out to the coming months ahead and discusses a controversial market observation….
Hi this is Charlie with Monday’s market commentary. I’m going to go straight into the commentary today because I’ve got some interesting observations to run through.
What I’ve got here is the STOXX 50 because this may have some implications with regards to currency. The STOXX 50 has been having a good run over the last few months and if we go to the FTSE 100 that’s doing rather well.
The DAX in Frankfurt is doing really well, it’s had a bit of a pullback in the last week or so but it’s overall in a nice trend.
You put into context the trends that are happening in the European stock indices that we have European quantitative easing which is bringing money managers and funds, wanting to gain more exposure to European stocks.
If they want more exposure into European stocks then they have to go via Euros therefore they’ll be naturally buying Euros as they come into the stock market.
What we’ve seen essentially is that the Euro made its low in the middle of March and we are now six weeks on from there and we haven’t made any new lows, yet the sentiment in the market is still for the Euro to carry on making new lows.
Maybe it will and I’m pretty sure it will make new lows as well. What I’m interested in at the moment is what it might be doing over the next couple of months. The potential is still there for the Euro to hold up.
We’ve got a lot of news out this week on the short-term basis. Anything will happen, the Euro will go up on a short-term basis but what I’m looking for is over the next couple of months if we’re still going to see European equities buying then we could see more buying coming through on the Euro versus the Dollar.
I see the potential for the Euro to get as high as 1.12 to 1.14. Obviously I don’t see that happening any time soon. That potential with all the bearishness against the Euro that the market is just a bit one-sided and we might actually see some more Euro rallying.
I’ll be wrong if we break this April low. If we do that, all bets are off and we’re pretty much on a path down to parity. Fundamentally it makes sense that we are going to go there but I just see the potential that we might see the Euro get up to 1.12, maximum 1.14.
Just bear that in mind, it’s just had a half decent bounce in the last couple of weeks so it wouldn’t surprise me to see it weaken off.
FOMC is going to be key this week on Wednesday; it depends on how hawkish the FED are because that could send the EUR-USD plummeting. If they’re fairly neutral then we could see some further rallying.
Over the next couple of days we could see some consolidation, which I think would be good.
If we look at the GPB-USD, remember we’ve got the elections coming up, I wasn’t expecting the Pound to rally as much as it has.
I was bullish on the Pound but we have elections coming up in two weeks but it’s certainly done very well. For the Pound, I’m looking at potential to 1.53 to 1.54 but it’s had a good run and could be due a pullback over the coming days and it may end up getting a bit choppy as we get closer to the election.
I just thought I’d throw that out there, that the potential is there for more upside on the EUR-USD. The first sign will be if we go down below last week’s lows in the 1.0650 zone. It could just come down to there and come back up again but we’d have to watch the price action at that point.
I’m not talking instantly; over the next couple of months or so it will have to contain itself around its moving average so it will need to consolidate and we’ll see if it can bounce in the coming periods.
Ultimately yes, fundamentally yes, the Euro should want to come down further against the Dollar and the Dollar at some point will gain that strength.
If we do get up into that zone, that’s when I will be looking to sell. That will be on a positional basis that will be based on a multi-month outlook.
I’ll leave that with you, watch the FOMC on Wednesday, there’s plenty of news out this week to move these markets around.
Stay safe out there and I’ll be back on Friday for live trading.