If the US data continues like this, the Fed will find it difficult to tighten monetary policy this year, let alone in the summer. According to Fed Funds futures, the CME Group Fed Watch now suggests a 0% chance of a June rate hike. This comes just a few months after the market was seriously getting excited about an increasing probability of a summer rate hike. On Friday the probability of a rate hike by December moved below 50% (i.e. now unlikely). When the word “patient” was removed from the FOMC statement, it was taken that a rate hike could be just around the corner, providing the data supported.

1. Weekly Outlook
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only invest funds you are prepared to lose entirely. For our full risk warning, please go to the end of this report
18th May 2015 by Richard Perry, Market Analyst
Macro Commentary
If the US data continues like this, the Fed will find it difficult to tighten monetary policy this year, let alone in the
summer. According to Fed Funds futures, the CME Group Fed Watch now suggests a 0% chance of a June rate hike. This
comes just a few months after the market was seriously getting excited about an increasing probability of a summer rate
hike. On Friday the probability of a rate hike by December moved below 50% (i.e. now unlikely). When the word
“patient” was removed from the FOMC statement, it was taken that a rate hike could be just around the corner,
providing the data supported. However, data dependency works two ways, and with economic data continuing to
deteriorate the chances of a 2015 rate hike are ebbing ever further. On Friday alone, the Industrial Production data
disappointed across the board, with Capacity Utilization (one measure the Fed would look at to measure the amount of
slack in the economy) falling to a five month low. The Michigan Sentiment (a measure of consumer confidence) fell to a
six month low. This followed disappointing factory gate inflation (PPI) and retail sales last week. The US dollar will come
under further selling pressure now as the expectations that drove the dollar higher in H2 2014 are recalibrated.
WHEN: Wed, 20th May, 1900BST
LAST: n/a
FORECAST: N/A
Impact: For the meetings when Janet Yellen does
not hold a press conference and the FOMC do not
update projections, the FOMC minutes are
probably given even more attention. The FOMC
statement considered that much of the bad
economic data in recent months had been
“transitory” and it will be interested to see the
debate on the committee for this. The market did
not know really how to react on the release of the
FOMC statement there could be a more decisive
move this time as the bad data has seen no real let
up yet. Treasury yields and the dollar will be
reactive as will equities.
Must watch for: FOMC meeting minutes
Key Economic Releases
Date Time Country Indicator Consensus Last
Tue 19th May 09:30 UK CPI 0.0% 0.0%
Tue 19th May 10:00 Eurozone German ZEW Economic Sentiment 49.0 53.3
Tue 19th May 15:00 US Housing Starts (Building Permits) 1.02m (1.07m) 0.93m (1.04m)
Wed 20th May 10:00 Japan GDP (Q1 prelim QoQ) +0.4% +0.6%
Wed 20th May 09:30 UK BoE meeting minutes
Wed 20th May 19:00 US FOMC meeting minutes
Thu 21st May 15:30 China Flash Manufacturing PMI 49.4 49.2
Fri 22nd May 15:00 Japan BoJ monetary policy
Fri 22nd May 09:00 Eurozone German Ifo Business Climate 108.3 108.6
Fri 22nd May 13:30 US CPI -0.1% -0.1%
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1
US 10 year Treasury yield
N.B. Please note all times are GMT, data source Reuters

2. Weekly Outlook
18th May 2015
by Richard Perry, Market Analyst
Foreign Exchange
The dollar continues to be pulled around by the US economic data and with the data being weak the dollar has been
under pressure. Friday was a classic case in point, where the dollar had managed to claw back some lost ground through
the morning only to be hit by the disappointment of the US Industrial Production data which subsequently induced a
sharp decline. The Dollar Index (.DXY) broke its 10 month uptrend a couple of weeks ago and has re-affirmed this break
with further losses, whilst rallies are being seen as a chance to sell the dollar now. A confirmed breach of a key February
low at 93.25 on DXY would open further downside. This coincides with the resistance band $1.1450/$1.1530 on EUR/USD.
Very near term a correction on major pairs has set in, but this is likely to be seen as a chance to buy the likes of the euro,
sterling and Aussie again. There are notable exceptions though. The Kiwi is not playing the game as it remains under
pressure in the wake of comments from the RBNZ of potential loosening of policy, whilst the Japanese yen stubbornly
rangebound. Both majors have been underperforming on a relative basis.
WATCH FOR: Lots of key US data to drive (or should that be disappoint) the dollar, with housing data, flash
manufacturing, FOMC minutes and US CPI inflation throughout the week. Sterling will take a cue off UK
inflation and retail sales; whilst other than the prospect of the Bund the euro will run off the ZEW and Ifo.
EUR/USD
Watch for: Use any correction to buy for
pressure on resistance $1.1450/$1.1530
Outlook: The resistance from the February
peaks which is lending a barrier between
$1.1450/$1.1530 is just holding the euro
back from the latest upside break. A near
term correction has set in but momentum
indicators remain strong and there is little
reason to not expect further gains this week.
The technical set-up suggests that dips
should be bought into. This outlook will
continue until the key support band
$1.1065/$1.1130 has been broken. Above
$1.1530 opens $1.1675.
GBP/USD
Watch for: Correction towards $1.5550 to be
used as a chance to buy again
Outlook: A move above $1.5550 was a key
medium to longer term breakout on Cable,
completing a large base pattern that implies
upside towards $1.6420. However, there has
yet to be a serious pullback to the neckline
support. The corrective near term signals are
building up and with the RSI closing last
week around 71 the prospect of a near term
retreat towards $1.5550 support is high as
Monday has shown a slight dip taking hold. I
see this as a positive medium term
development helping to unwind overbought
momentum and renew upside potential.
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FX Outlook
2

3. Weekly Outlook
18th May 2015
by Richard Perry, Market Analyst
Indices
Equity markets continue to be thrown around by the prospects of the bond markets. The DAX Xetra has been at the
mercy of the yield on the German Bund, whilst the negative correlation between the euro and the DAX has also been
strong. These are all factors that are tied in together. The unwinding of the huge bull run on the German Bund suggests
that the “carry trade” of using borrowed euro’s to buy equities is in the process of being unwound (reversing out of
equities and buying back the euros). So keep an eye on the Bund. The subsequent volatility on the DAX in recent sessions
has been elevated by this. Wall Street has managed to be relatively well insulated from this volatility and has been able
to achieve a closing all-time high. However there is still much to do to convince for a breakout and technically the range
continues. Although there ahs been a minor reaction on a day to day basis, the sharp rise in US Treasury yields has barely
impacted on the S&P 500. The fact is that the US economic data has continued to disappoint in recent months and this
continues to push back expectations of a 2015 rate hike by the Federal Reserve, which is seen as positive for equities.
WATCH FOR: Eurozone equity markets are being dragged around by the bond markets so watch for
movements on the German Bund. A raft of US data releases such as the FOMC minutes, flash
manufacturing and US inflation will drive expectations of FOMC policy and Wall Street will run off this.
DAX Xetra
Watch for: The resistance band between
11,620/11,750 holding back any recovery
Outlook: The top pattern that completed
below the neckline at 11,620 still implies a
correction to 10,850. I still see the neckline
as providing a barrier to a recovery, whilst
the falling 21 day moving average is also
acting as the basis of resistance for the
sellers. Friday’s price action has merely
acted to strengthen these assertions.
Volatility in trading the DAX remains high.
With the medium term bears gaining control
I still expect pressure on the lows at 11,218
and 11,167 this week.
S&P 500
Watch for: Continued pressure on a range
breakout this week
Outlook: Closing all time highs on both
Thursday and Friday failed to inspire Wall
Street to push for a confirmed breakout, so
with the intraday levels showing the
resistance at 2126 remains intact, the range
continues for now. It is interesting that the
momentum indicators are not reflecting the
breakout yet, with the RSI, MACD and
Stochastics still muted. Watch for these
levels to confirm a breakout should one be
seen this week as if not then it could
question the move.
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INDEX Outlook
3

4. Weekly Outlook
18th May 2015
by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
Finally the gold price has started to react to the persistent disappointment in US economic data. The fact that Treasury
yields have spiked higher in recent weeks without any discernible improvement in the economy is not a positive and is
starting to feed through for a safe haven alternative, which is positive for gold, whilst silver has also been positive too. It
is also interesting to note that the Gold/Silver ratio is back to the support of a near 4 year uptrend channel c. 69. The
price of WTI oil has been consolidating and needs to hold above $58.30 to prevent a continued correction.
Financial markets have taken their cue from the bond markets in the past couple of weeks as yields on US Treasuries and
German Bunds have spiked higher. Rising yields (sell-off in bond prices) have put pressure on equities and the dollar
(supporting the euro). All eyes are now on whether the consolidation at the end of last week will continue. Peripheral
Eurozone yields have followed the Bund yield higher, with one notable exception. The yields on Greek sovereign debt
have been consolidating as negotiations between Greece and its international creditors as yet remain unresolved.
WATCH FOR: With key tier one economic data for the US this week focus remains on the direction of
Treasury yields. Gold is taking its cue from the desire for safe haven assets.
Gold
Watch for: A close above $1224 key
resistance implies $1270
Outlook: The gold price is now putting
increasing pressure on the resistance at
$1224 in place since mid-February. With
four completed positive sessions in a row,
the bulls are now beginning to build
confidence with the RSI now pushing
above 60 and signs of life on MACD and
Stochastics. A closing breakout above
$1224 would imply an upside target of
around $1270. Support now comes in
between $1200/$1211.
German 10 year Bund yield
Watch for: Key support at 0.520% keeps
intact the yield rally
Outlook: Since the bottom at 0.049% in mid-
April the Bund has jumped an astonishing
750 basis points at its recent rally high of
0.796%. However the resistance now seems
to be in place at around 0.8%, at least for
the near term. Technical studies such as the
RSI and Stochastics are showing a series of
bearish divergences which suggests a loss of
upside momentum. Reaction lows of 0.599%
and 0.520% become important as a breach
of the latter would confirm continued
retracement. A dip may be temporary, but
trading this week could therefore be
important for the outlook of the rally.
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COMMODITIES & BONDS Outlook
4

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Risk Warning for Financial Promotions
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Weekly Outlook
18th May 2015
by Richard Perry, Market Analyst