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Market analyst predictions for April 2015

by City Index

Each month, we collate expert and analyst opinion for a short to medium-term snapshot of the financial markets. Gain valuable insight and shape your trading strategy with our monthly predictions.

Analyst Market Bias 1st target 2nd target
Ashraf Laidi GBP/JPY Bearish Y176.60 Y174.80

GBP traders will witness increasing volatility in April as the major political parties start their six-week campaigns ahead of the election. Uncertainty will be the name of the game, at the expense of the pound. Read my full article here.

Analyst Market Bias 1st target 2nd target
Joshua Raymond EUR/JPY Bearish Y127.00 Y125.50

I can find both technical and fundamental factors that convince me this pair could continue to trade to the downside. Read my full article here.

Analyst Market Bias 1st target 2nd target
James Chen EUR/USD Bearish $1.0500 $1.0200

EUR/USD spent the first half of March in a virtually unrelenting free-fall, extending its deeply entrenched bearish trend further. Read my full article here.

Analyst Market Bias 1st target 2nd target
Ken Odeluga UK 100 Bullish 7065

After the excitement of breaking the 7,000 barrier, it ought to be no surprise that the market needs a rest. Read my full article here.

Analyst Market Bias 1st target 2nd target
Kelvin Wong Japan 225 Bullish 20,080 20,440

As long as the monthly pivotal support level holds, the Japan 225 index is likely to see further potential upside movement. Read my full article here.

Analyst Market Bias 1st target 2nd target
Kara Ordway AUD/USD Bearish $0.7620 $0.7550

The biggest event risk on the calendar for this month will once again be the RBA rate decision. Read my full article here.

Ashraf Laidi – GBP likely to continue its downside move against the yen

The British pound’s sharp sell-off in March was largely a result of increasing references to deflationary risks from several Bank of England Monetary Policy Committee members. The BoE’s chief Economist Andy Haldane went on to indicate that “…a case can be made for policy easing today” if downside risks to inflation were to materialise. This shifting rhetoric signals a change in policy makers’ stance and further diminishes the probability of a rate hike this year, though Carney’s statement last week that the next rate move will be up pours some cold water on these MPC member attempts. UK inflation fell to 0% in February, hitting the lowest annual rate since comparable records began in 1989. Markets expect inflation to enter negative territory, which will leave little choice for the BoE but to remain dovish.

GBP traders will witness increasing volatility in April as the major political parties start their six-week campaign ahead of the 7th May general election. None of the parties is expected to win the minimum 326 seats required to gain an outright majority, which should lead to another coalition government led by either the Labour or Conservative Party. Uncertainty will be the name of the game at the expense of the pound.

I expect GBP to extend weakness predominantly against JPY as plunging oil prices and a falling yen from the past three years combine to reduce Japan’s importing costs and further improve export competitiveness to the benefit of the currency. These factors have led the Government to upgrade its economic assessment for the first time since July 2014. Re-emerging volatility in global equities will also likely help drag down yen crosses.

ashraf-april-gbpjpy

Joshua Raymond - EUR/JPY bearish trend to continue

I remain bearish on the euro in the medium-to-long-term for mostly fundamental factors. As I want to take a longer-term view, all I need to do is find a currency that has strong technical or fundamental factors to trade with against the euro. So for me, it’s just a process of elimination.

I’m still a long-term bear of the EUR/GBP but am scared off this pair for April for fear the UK general election could upset what I see as fairly transparent dynamics (a weak euro and strong pound). I worry that the election uncertainty could hurt the pound in the short term. So for April, I am staying clear of trading the pound.

So I move onto the EUR/JPY and for me, the continuation of its long-term bearish trend remains prudent. There are technical and fundamental factors that convince me of the yen’s strength against the euro.

On a technical front, the euro’s failure to consolidate above the Y131.50 level is an important resistance barrier that must be broken before further upside can prevail. This convinces me that more downside and a revisit of the Y127.00 major support level could be on the cards.

On a fundamental front, as my colleague Ashraf has previously said, Japan’s increasing export competitiveness will make its currency more in demand as purchasers abroad need yen to buy Japanese goods.

So this looks to me as a fairly confident trade setup. An upside break of the Y131.50 barrier, however, would change my thinking on this pair.

josh-april-eurjpy

James Chen – Euro remains technically and fundamentally weak

EUR/USD spent the first half of March in a virtually unrelenting free-fall, extending its deeply entrenched bearish trend further to the downside to hit successively lower targets at 1.1100, 1.0800, and then 1.0500.

That very sharp decline confirmed a clear continuation of the steep downtrend that has been in place for the past ten months, since the May 2014 high near 1.4000.

The original 1.0800 objective for March was hit in the first several days of the month, and the deeper 1.0500 target was quickly reached by mid-March, which established a new 12-year low for the currency pair.

After EUR/USD hit and dipped slightly below 1.0500, however, it quickly began a rebound in the middle of March that was buoyed further by the US Fed meeting on March 18, which resulted in a quick plunge in the US dollar.

That EUR/USD rebound hit a high of 1.1037 on the day of the Fed meeting before retreating modestly during subsequent trading days.

Despite March’s sharp, dollar-driven rebound in the currency pair, the euro remains technically and fundamentally weak. Furthermore, as we near the end of March, the dollar is showing signs of exhausting its recent pullback.

Going into April, if the euro continues its longstanding weakness as expected and the dollar resumes any degree of bullishness, EUR/USD should continue its recently-interrupted downtrend towards lower lows.

As of the last full trading week of March, major resistance resides at the key 1.1100 level, where the 50-day moving average is also currently situated. If EUR/USD continues to trade under this major resistance area, the currency pair should likely re-target 1.0800 and 1.0500 to the downside once again. On any breakdown below 1.0500, which would confirm a continuation of the current downtrend, the next major downside objective resides around the 1.0200 level.

james-april-eurusd

Ken Odeluga – FTSE 100 still has a spring in its step

After the excitement of breaking the 7000 barrier it ought to be no surprise that the market needs a rest.

Momentum says the market could well go lower.

Because the FTSE 100 breached 6930.2, its longest-standing all-time high, trading is likely to keep veering in the same direction as momentum, which is pointing lower.

Proven support lies between 6702-6740.

My simple studies of momentum strongly suggest that once it returns to recent bounds, the market will regain support.

That’s why the FTSE 100 is likely to recoup all recent losses in April.

A chart of two-week intervals reveals further important underlying factors, both supporting and challenging.

Even with the latter in mind, my first target for the FTSE 100 between 1st April and the end of April is no lower than 6702.

A mixture of relief that six years of cheap money may not be ending soon after all and a partial reinstatement of the world’s net short government yield position should then reflate stocks.

In the UK we’re just a few weeks away from a general election, and we’re all supposed to be bearish in the run-up.

But I think recent weeks have shown that the threat of a hung Parliament is losing its power to scare, though not entirely — the FTSE is still likely to slow as 7th May approaches.

But I still expect the index to hit at least 7065 before that date.

ken-april-ftse-100

Kelvin Wong – Nikkei 225 – Further upside potential towards 20,080/20,440

Since the bursting of the Japanese asset (property) price bubble in the early 1990s, the Japanese stock market as represented by the widely-cited benchmark Nikkei 225 has plummeted by a horrendous decline of 80% from a high of 39260 printed on January 1990 to a low of 7606 seen in April 2003.

Even in the previous major bullish trend that occurred from 2003 to 2007 for most emerging and developed markets, Japan was not able to “enjoy the fruits” and underperformed against the rest of the world.

Since the low of 6995 printed in October 2008, the Nikkei 225 has soared by an astonishing 177% to record a high of 18865 seen in February 2015. This remarkable performance is driven primarily by Abenomics.

The big question in all traders’/investors’ minds right now is can this rally be sustainable? Will it falter just like it did after the 2003 to 2007 period?

I will answer this golden question from a technical analysis perspective.

Key elements

  • The Index has just broken out of a long-term bullish bottoming formation called “Double Bottom”, in place since April 2003. The exit potential of the “Double Bottom” targets the 29610 level (see monthly chart below).
  • The long-term MACD trend indicator has managed to flash a bullish crossover after a “flattish” environment since January 2014. This observation suggests that upside momentum is still supporting the current long-term bullish trend, in place since October 2008 (see monthly chart below).
  • The lower boundary of the intermediate-term ascending channel (in brown), in place since 14 January 2015, and the upward sloping 20-day Moving Average (in red) are acting as a support at 19100 (see daily chart below).
  • The 23.6% Fibonacci retracement from 14 January 2015 low to the current 24 March 2015 high also confluences at the 19100 support.
  • The intermediate-term RSI oscillator is overbought but without any bearish divergence (see daily chart below).
  • The next resistances at 20080 and 20440 are 0.618 and 0.764 Fibonacci projection levels from 14 January 2015 low to 10 March 2015 low respectively (see daily chart below).

Key levels (1 to 3 months)

Pivot (key support): 19100

Resistance: 20080 & 20440

Next support: 18500/18100

Conclusion

Technical elements remain positive and as long as the 19100 monthly pivotal support holds, the Nikkei 225 is likely to see a further potential upside movement to target 20080 before 20440.

On the other hand, failure to hold above 19100 may damage the intermediate term bullish trend for a deeper decline towards the next support at 18500/18100 (neckline of the “Double Bottom” bullish breakout).

kelvin-april-nikkei-monthly kelvin-april-nikkei-daily

Kara Ordway – RBA decision still the biggest risk factor but Aussie Dollar could push higher

AUD loves the range bound trade on occasion, and although this week we have seen it underperform against other pairs during the Asian time-zone, its stickiness to the 0.78-0.79 area has been very clear.

The sudden reversal we saw in the US Dollar post FOMC surprised many traders. It highlighted that this might not be a one-way street for the much-bought Greenback. A considerable amount of positions were flushed out of the system, and for many traders that meant a clean slate on taking a view on AUD/USD.

The biggest event risk on the calendar for this month will once again be the RBA rate decision. With the last two meetings being such a close call, there is no doubt we will see more volatility and more speculative positioning pre-event. This aside, iron ore futures continue to fall, making it harder for the commodity currency to look like an attractive buy.

Despite this, I remain fairly neutral to bullish the Australian Dollar in the short term; as positions continue to squeeze and the technical traders play key levels. All will depend though on Glenn Stevens and the rate call. My feeling is that it will be pushed out to May, when they have a clearer picture on how the first cut is filtering through the economy, thus squeezing this move even higher.

Short-term:

Support 0.7790/ 0.7755/ 0.7671

Resistance 0.7875/ 0.7921/ 0.8005

Longer-term however, the much talked about divergence in central banks will be too big a force to mess with. For that reason, many analysts have keep end of year forecasts for the AUD/USD cross around 0.72-0.73.

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