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Weekly Market Outlook – 22/05/16

Weekly Market Outlook – 22/05/16

Divergent trading dominated the broad markets last week as FX, commodities, and Indices turned in mixed results across the board. The USD The USD The USD is the official currency of the United States of America. It is the largest reserve currency... More is the official currency of the United States of America. It is the largest reserve currency... More while gaining against the EUR The EUR The EUR is the official currency of the European Union. Presently 19 out of the 28 collective  nati... More is the official currency of the European Union. Presently 19 out of the 28 collective  nati... More actually lost ground to the GBP The GBP The GBP is the official currency of the United Kingdom. The GBP is a major currency and currently ra... More is the official currency of the United Kingdom. The GBP is a major currency and currently ra... More , Crude Oil finished the week up slightly while Gold traded lower, and major global stock Indices showed that they were mostly under pressure. The Dow Jones 100 finished with a negative week while the Nasdaq fought its way back almost coming in neutral but still lagging in value.

Traders were roughed up by rumors and speculation that the Federal Reserve The Federal Reserve The Federal Reserve The Federal Reserve is the Central Bank of the United States of America and sets the monetary policy When used by traders and investors monetary policy When used by traders and investors monetary policy When used by traders and investors monetary policy usually refers to Central Bank policy concerning ... More usually refers to Central Bank policy concerning ... More usually refers to Central Bank policy concerning ... More ... More is the Central Bank of the United States of America and sets the monetary policy... More is the Central Bank of the United States of America and sets the monetary policy... More will consider a June interest rate hike. There is a buzz saw of disagreement regarding what the Fed’s proper path should be and this is the Federal Reserve’s fault. This coming week European economic data will dominate on Monday and Tuesday. Flash Manufacturing PMI readings will come from Germany and France to start the week. On Tuesday the German ZEW Economic Sentiment reading will be published. The U.S. will put forth New Home Sales figures also on Tuesday. The USD is essentially trading on perceptions and the problem no one knows what is real.

Wednesday will see the German Ifo Business Climate, and from the States the Goods Trade Balance and Crude Oil Inventories reports are on the schedule. Core Durable Goods will come from the U.S. on Thursday and on Friday the Prelim GDP will be presented.

U.S. economic data has provided investors a mixed bag of results the past two weeks, depending on which data is deemed important a case can be made for a wide array of viewpoints. Fed The Federal Reserve is the Central Bank of the United States of America and sets the monetary policy... More manufacturing surveys have been negative, while housing data has been slightly better. Retail Sales showed a bit of a spark, but corporate earnings from the retail sector have been largely weak – meaning that discounting is a culprit. The Revised Consumer Sentiment reading will come this Friday too.

Wall Street was negative most of last week and sentiment continues to indicate that investors are weary about monetary policy from the Federal Reserve. Most investment institutions are holding to the notion that the Fed The Federal Reserve is the Central Bank of the United States of America and sets the monetary policy... More will not raise rates in June, but need at least one solid month of better economic activity to have justification to raise rates – meaning that financial houses are clinging to the notion that July is more likely for a rate increase if the Fed feels the need to make a move to back up what was very hawkish The term hawkish The term hawkish The term hawkish when used by investors and traders usually refers to Central Bank monetary policy a... More when used by investors and traders usually refers to Central Bank monetary policy a... More when used by investors and traders usually refers to Central Bank monetary policy a... More talk the past year – but turned out to be more about rhetoric than action.

The FX markets have felt the effect of these divergent interpretations, the EUR struggled all week against the USD as a combination of lackluster data continues to come from the European Union and dollar centric weariness that the Fed may actually increase rates within the next two months. On the other hand, the GBP which was oversold mainly on fears regarding the potential of a Brexit, has managed to climb back underscoring that many felt that Sterling The GBP is the official currency of the United Kingdom. The GBP is a major currency and currently ra... More was undervalued.  The U.K. will see the Second Estimate GDP result on Thursday and its outcome is expected to be rather lackluster. However, it is sentiment regarding the outlook of the Brexit vote that appears to be having the biggest effect on the GBP.

Crude Oil has systematically been able to sustain its higher values, but it has not been able to punch through what looks like a lot of resistance When investors and traders use the term resistance When investors and traders use the term resistance When investors and traders use the term resistance, or resistance level, they are often speaking abo... More , or resistance level, they are often speaking abo... More , or resistance level, they are often speaking abo... More around the $49-50.00 USD mark. Last week Crude Oil Inventories surprised some analysts when storage proved to be higher than estimated in the States, this put WTI Refers to West Texas Intermediate Refers to West Texas Intermediate Refers to West Texas Intermediate which is often the actual physical resource that the asset Crude O... More which is often the actual physical resource that the asset Crude O... More which is often the actual physical resource that the asset Crude O... More under pressure on Wednesday and Thursday. International supply still remains strong, production is capable, but demand is still sluggish – meaning that in the mid-term Crude Oil can be a potential opportunity for traders who do not believe the global economy is strong.

Another interesting note for FX traders who focus on the JPY The official currency of Japan is the JPY The official currency of Japan is the JPY which is also knows as the Japanese Yen The official currency of Japan is the JPY which is also knows as the Japanese Yen The official currency of Japan is the JPY which is also knows as the Japanese Yen to investors and t... More to investors and t... More to investors and t... More which is also knows as the Japanese Yen to investors and t... More is what took place this weekend at the G7 meetings in Japan. Apparently the U.S. and Japan do not see eye to eye regarding current JPY policy. The Americans believe that the Japanese are intervening in the JPY too much in order to try and make it weaker against the USD. The Japanese do not agree and are likely pointing towards Federal Reserve policy from the U.S. that can be questioned when taking into consideration the affect another interest rate hike would have on the global economy. The JPY did get weaker against the USD last week.