There are few guarantees in life. Death, taxes and it would appear, the markets love of extra monetary stimulus. Last week, the European Central Bank and the People’s Bank of China (the latter somewhat unexpectedly) gave risk appetite a boost. Mario Draghi, the ECB chief, talked of potential for further monetary easing in December (maybe an increase in QE monthly purchases above €60 billion, or extending the program beyond the September 2016 end date, or maybe also a further cut to the negative deposit rate).

1. Weekly Outlook
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26th October by Richard Perry, Market Analyst
Macro Commentary
There are few guarantees in life. Death, taxes and it would appear, the markets love of extra monetary stimulus. Last
week, the European Central Bank and the People’s Bank of China (the latter somewhat unexpectedly) gave risk appetite a
boost. Mario Draghi, the ECB chief, talked of potential for further monetary easing in December (maybe an increase in QE
monthly purchases above €60billion, or extending the program beyond the September 2016 end date, or maybe also a
further cut to the negative deposit rate). Then the PBoC cut its headline and deposit rates by 25 basis points and further
eased the reserve requirement ratio. With sentiment suitably bulled, equities soared, bond yields fell and interestingly
the US dollar hugely strengthened. However these extra easing measures by rival central banks leaves the Fed with a
quandary, especially the PBoC move. A stronger dollar is disinflationary, but so is tightening monetary policy. However
the Fed pointed towards China as a reason not to hike in September and if the easing helps settle sentiment then the
FOMC may have to tweak its the statement again. The Fed will not tighten this week, and FedWatch interest rate futures
pricing March as the likely month. Watch out for the FOMC statement on Wednesday.
WHEN: Wed 28th Oct, 1900BST
LAST: No Change
FORECAST: No Change
Impact: The talk of easing by the ECB and
subsequent rate cut by the PBOC now gives the
Fed a decision to make. The expectation is still that
the Fed will not hike this month (especially after
what it said last month alluding to China), however
the statement will make interesting reading with
regards to the “global economic and financial
developments”. There is no press conference this
meeting so the statement is the main driver of
information. There will be volatility around the
announcement, with US dollar especially volatile
with subsequent impact on commodities.
Must watch for: FOMC Monetary Policy (statement only)
Key Economic Releases
Date Time Country Indicator Consensus Last
Tue 27th Oct 14:00 US New Home Sales 0.55m 0.55m
Tue 27th Oct 09:30 UK GDP Q3 (Prelim - QoQ) +0.6% +0.7%
Tue 27th Oct 14:00 US Consumer Confidence 102.5 103.0
Wed 28th Oct 18:00 US FOMC Monetary Policy +0.25% +0.25%
Wed 28th Oct 20:00 New Zealand RBNZ Monetary Policy +2.75% +2.75%
Thu 29th Oct 12:30 US GDP Q3 (Advance - annualised) +1.7% +3.9%
Thu 29th Oct 23:30 Japan CPI (core) -0.2% -0.1%
Fri 30th Oct n/a Japan BoJ Monetary Policy No change No change
Fri 30th Oct 10:00 Eurozone CPI (flash) 0.0% -0.1%
Fri 30th Oct 12:30 US Personal Consumption Expenditure +1.3%
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1N.B. Please note all times are GMT, data source Reuters
US Treasury yield curve

2. Weekly Outlook
26th October 2015
by Richard Perry, Market Analyst
Foreign Exchange
Forex markets have been rocked by the ECB and the PBoC. A huge euro sell-off has been the main result, which has
changed the medium term outlook. The formerly positive position, building through a series of higher lows over the past
few months has now been impacted by the ECB which was even more dovish than the market had anticipated. Taken
with the strong US dollar impact of the PBoC rate cut and the double-whammy on EUR/USD has been profound. The euro
is not the only major pair that has been chastened by the US dollar rally. A corrective outlook on Dollar/Yen has been
flipped and the range high of the 121.70 August rebound resistance could come under pressure, although for now I still
see it as a range play 118.00/121.70. The reaction on Cable has been less pronounced as the Bank of England seems to
remain fairly well in lockstep with the Fed with regards to tightening. Although there has clearly been a degree of dollar
strength which has driven Cable lower near term, I still see this as part of the choppy medium term range play. It is
interesting that the Aussie is trading once more in close correlation with the gold price and has been sliding, but the
$0.7200 pivot is now important for the outlook. The Kiwi remains the best performing major (ex USD) in October.
WATCH FOR: The raft of tier one US data will keep the focus firmly on the dollar again this week, with
special focus on the FOMC, GDP and PCE. Euro traders will also focus on flash CPI. For the UK it is GDP.
EUR/USD
Watch for: The close below $1.1050 implies
the sellers are increasingly in control again
Outlook: I must have mentioned the 50 pip
pivot range on Euro/Dollar between
$1.1050/$1.1100 countless times over the
past few months, but the selling pressure on
Friday which saw a close below the $1.1050
support was a significant move. The big
range between $1.0810/$1.1465 has been in
place since April but the breakdown now
kicks the bulls into touch and suggests that
there could now be a drift back towards the
$1.0810 support. The momentum indicators
point towards continued correction too. The
pivot also now becomes resistance.
GBP/USD
Watch for: Near term correction to continue
possibly back towards $1.5100/$1.5200
Outlook: The dollar strength is dragging
Cable lower now and the immediate near
term downside target at $1.5320 is under
pressure already. However with the RSI in
decline and a sell signal confirmed on the
Stochastics the momentum is growing in the
correction. This could mean that further
weakness is seen towards the supports
within the 6 month trading range. The
support comes in at $1.5100/$1.5200. The
old near term support around $1.5410 now
becomes resistance near term with $1.5510
now key.
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FX Outlook
2

3. Weekly Outlook
26th October 2015
by Richard Perry, Market Analyst
Indices
Indices have reacted unambiguously bullishly to the actions of the ECB and the PBOC in the past few days. The dovish
press conference from Mario Draghi and then the series of rate cuts fro the PBoC has opened the floodgates of buying
for equity indices. The German DAX and French CAC have been the major beneficiaries of these policy responses with the
less volatile markets such as the FTSE 100 and S&P 500 on the coattails. The moves have now seen all these major
markets breaking out at multi-week highs with levels not seen since the middle of August. These breakouts mean that old
resistance becomes new support so on the DAX the key levels to watch for building support on a correction now comes in
at 10,512. On the FTSE 100 the support is at 6284, with the S&P supported at 2021, and the French CAC 40 with support
at 4733. The interesting factor is that earnings season for the US has hardly been stellar, with the usual trend of around
70% of companies beating earnings estimates and almost 50% beating on the revenue line. No matter though, when
there is the promise of additional monetary stimulus, who cares about earnings?
WATCH FOR: There is arguably a tier one US economic announcement on almost every day this week (if
new homes sales is considered as such), however the FOMC meeting, the first look at Q3 GDP and then the
Fed’s preferred inflation measures (PCE) will ensure the focus remains on the Fed all week. Suggestions
that the Fed will not tighten in December will be bullish for equities – remember good news is bad.
DAX Xetra
Watch for: A possibly unwinding correction
but corrections should now be bought into
Outlook: The sharp breakout above the key
resistance at 10,512 has been key as it
changes the medium term outlook to more
positive. This old resistance now becomes
supportive and although there is a gap still
open just above 10,500 any minor
corrections that serve to unwind the
immediately overbought momentum should
be seen as a chance to buy. The RSI is now at
70 and is the highest since March. The 38.2%
Fib retracement at 10,849 is a basis of
resistance too.
FTSE 100
Watch for: A close above 6488 opens the
next resistance at 6765
Outlook: The FTSE 100 is in a bullish
medium term recovery, however the rallies
on FTSE tend to always come with a caveat
attached. Not only did the FTSE seemingly
just stall around the resistance of a 5 month
downtrend, but also there was the failure to
close above the resistance of the 6453
reaction high. However, this disappointment
would be forgotten if the index can muster a
close above Friday’s reaction high at 6488.
This would then continue the recovery.
Momentum indicators need to also push on
to confirm the move. The support around
6268/6284 is growing.
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INDEX Outlook
3

4. Weekly Outlook
26th October 2015
by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
The news of the PBoC rate cut created significant volatility for gold as the price was flying around on the negative
correlation with the strength of the US dollar once again (the inverted relationship is strong once more). The breakout in
the trade weighted dollar has driven gold back lower again and this remains the key near term driver of gold. In the oil
space he strong dollar also made for weakness in oil which has been tracking lower over the past couple of weeks
(especially for WTI).
The strong hint towards an extension of the ECB’s QE program has driven the yield on the German 10 year Bund back
towards 0.5% again (and the positive correlation between the Bund yield and that of EUR/USD remains strong). This is
forcing yields lower across the German curve. Yields on bunds dated up to 6 years are negative with a remarkable fact
that the ECB is unable to purchase yields of less than the 4 year maturity due to them being less that the -0.2% limit that
is set out from its negative deposit rate. It is though noticeable that the core/periphery spread within the Eurozone is
tightening, with the spread (Spanish over German) now at its lowest since May.
WATCH FOR: Focus on US Treasuries this week with the FOMC which will also mean commodities volatility
Gold
Watch for: The bottom of the support
band $1156/$1170 could be tested
Outlook: Big volatility on Friday with a
sizeable turnaround means that the
corrective outlook continues near term. I
have been waiting for another medium
term buy signal to present itself and every
time I think it will be seen there is a
bearish reaction once more. The near
term momentum remains negative for the
slide and a test of the bottom of the
support band $1156/$1170 could now be
seen. I am still positive medium term
above $1151, whilst a closing breach of
$1136.50 would be bearish again.
Brent Crude
Watch for: The support band $46/$46.95
could come under pressure
Outlook: The technicals are pulling the
price of Brent Crude ever closer towards a
test of the key support band $46/$46.95.
With the selling pressure spanning over two
weeks the momentum indicators have taken
a turn for the worse, the Stochastics are now
very bearish near term. It is interesting
though that the RSI is not as bearish as it is
on WTI, however this all still points to a test
of the support. There would need to be a
rally above the reaction high at $50.70 to
defer the negative outlook near term.
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COMMODITIES & BONDS Outlook
4

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Weekly Outlook
26th October 2015
by Richard Perry, Market Analyst