Markets are consolidating ahead of some major risk events throughout the next seven days. The ECB monetary policy is highly likely to be an historic event which could drive the outlook for the euro in the coming months. We also see US growth on the agenda, but we will also see what sort of vision Donald Trump has for the FOMC as he identifies the next Fed chair. We look at how the outlook for forex, equities and commodities are impacted.

1. Weekly Outlook
Tuesday 24th October by Richard Perry, Market Analyst
Forex and CFDs are high risk leveraged products that can result in losses greater than your initial deposit and you should
therefore only speculate with money you can afford to lose. FX and CFD trading are not suitable for everyone. Please
ensure you fully understand the risks involved, seeking independent advice if necessary prior to entering into such
transactions. You should first carefully consider your investment objectives, level of experience, and risk appetite and only
invest funds you are prepared to lose entirely. For our full risk warning, please go to the end of this report.
WHEN: Thursday 26th October at 1245BST
LAST: 0.0% refi, -0.4% dep, €60bn APP
FORECAST: 0.0% refi, -0.4% dep, €30bn APP
Impact: The ECB announcement is expected to lay out
changes to monetary policy for the coming months. No
change to the main refinancing rate or the negative
deposit rate are anticipated however the current asset
purchase programme runs out in at the end of 2017
and is likely to be extended. The details of this
extension will be the volatility factor. A taper from the
current €60bn to €30bn is expected and an extension
until perhaps September 2018. If the ECB tapers less
or does not include an end date it would be dovish.
Moves on Bund yields and the euro will be watched
Key Economic Events
Date Time Country Indicator Consensus Last
Tue 24th Oct 1445BST US Flash PMIs (Manufacturing / Services) 53.6 / 55.6 53.0 / 55.1
Wed 25th Oct 0130BST Australia CPI (YoY) +2.0% +1.9%
Wed 25th Oct 0930BST UK Q3 GDP (Prelim QoQ / YoY) +0.3% / +1.4% +0.3% / +1.7%
Wed 25th Oct 1330BST US Durable Goods Orders (ex-transport) +0.5% +0.2%
Wed 25th Oct 1500BST Canada Bank of Canada monetary policy +1.0% +1.0%
Wed 25th Oct 1500BST US New Home Sales 556,000 560,000
Wed 25th Oct 1530BST US EIA crude oil inventories -5.7m
Thu 26th Oct 1245BST Eurozone ECB monetary policy (1330BST press conf) -0.4% -0.4%
Fri 27th Oct 1330BST US Q3 GDP (Advance annualised) +2.6% +3.1%
Fri 27th Oct 1500BST US Michigan Sentiment (revised) 100.9 101.1
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1N.B. Please note all times are British Summer Time BST (GMT+1), data source Reuters
Macro Commentary
Having started the year around $1.05, the euro is now over 12 big figures higher against the US dollar,
strengthening just under 12% in 2017. This has come as the prospects for the Eurozone economic activity have
improved significantly (avoiding an almost annual Greek crisis seems to have helped) with inflation expectations
also having improved. With rhetoric from the ECB having become significantly less dovish in recent months markets
have been speculating over whether the Governing Council would start to significantly step away from its ultra loose
monetary policy. The ECB policy normalisation would come in a series of steps: End the Asset Purchase
Programme (APP, i.e. quantitative easing), end the negative rates policy (with the deposit rate currently at -0.4%),
raise the main refinancing rate from zero and then begin to reduce the balance sheet. We are edging closer to step
one of normalisation. The current APP of €60bn per month ends at the end of this year, however, is expected to be
extended. At the ECB meeting this week, markets are expected to hear that this extension will be tapered to €30bn
per month. How long for is the key. The middle of 2018 would be considered hawkish, with September being a
consensus (€270bn over 9 months). The euro be pressured if the ECB cuts the APP by less than expected to
€40bn per month and does not specify an end date. With the dovish Mario Draghi at the helm this is a risk.
Must Watch for: ECB monetary policy
German Bund Yield
The German 2 year Shatz is in the process of turning around,
but the -0.57 2017 high is a significant barrier

2. Weekly Outlook
Tuesday 24th October by Richard Perry, Market Analyst
Foreign Exchange
Moves on the euro and the dollar will be key in forex this week. The ECB monetary policy meeting will be key
for the euro and consensus expects the APP to be cut to €30bn ending in September 2018. However the euro
is selling off in front of the meeting suggesting the market is possibly preparing for a disappointment. Would this
mean a mild strengthening on hitting consensus? The key support for EUR/USD remains in place at $1.1660
but would come under pressure on a dovish ECB. $1.1880 has become a near term barrier but a hawkish lean
from the ECB would likely send the euro above $1.2000 again with $1.2092 being the high dating back to
January 2015. The US dollar remains a key currency to watch. Focus is on the progress of Trump’s tax plans
which has given the dollar a boost moving into this week. However, also look for the identity of the next Fed
chair to be a market mover. Trump is due to announce his decision for the next Fed chair before he goes on his
11 day trip to Asia on 3rd November. The betting suggests that Jerome Powell (centrist) is still the front runner,
with John Taylor (leans slightly hawkish) another possibility. The UK government stance on Brexit and the
amount of the divorce bill is also key for sterling. This is the gateway for the start of trade negotiations,
seemingly key for avoiding a unwarranted “no deal” and a softer form of Brexit. Despite the dollar strength, it
still seems that Brexit has the power to be the real market mover of Cable.
WATCH FOR: The ECB being key for EUR, first reading of GDP for UK and US impacting GBP and USD
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2
FX Outlook
USD/JPY
Watch for: The move to three month highs re-
opens key range resistance at 114.50
Outlook: The May/July highs around 114.50
have provided the ceiling for a trading range
above 107.50 in the past seven months. A near
term breakout above 113.45 has subsequently
re-opened the 114.50 range highs which could
be tested if dollar strength continues this week.
Near term momentum is positioned positively for
the test, but could the bulls drive a decisive
breakout? It would take significant effort but
there is upside potential on the RSI and
Stochastics. The subsequent resistance at
115.60 would then need to be negotiated. The
higher lows around 111.50 are now an
increasingly important medium term floor too.
EUR/USD
Watch for: The support at $1.1660 remains key
in front of the ECB
Outlook: The market has been increasingly
running a consolidation in the past few weeks as
traders look ahead to the ECB on Thursday and
key US factors such as Trump’s tax reform and
the announcement of the next Fed chair.
Technically there is the prospect that a dovish
ECB could drive a move below $1.1660 that
would complete a 12 week head and shoulders
top pattern. This would then open for over 400
pips of further downside. The alternative is a
hawkish ECB which would rally the euro sharply
and drive EUR/USD above $1.2000 again.
Momentum indicators have a slight negative bias
but little to suggest decisive market positioning.

3. Weekly Outlook
Tuesday 24th October by Richard Perry, Market Analyst
Equity Markets
US markets are storming higher. Corrections are being bought into and the move is accelerating now. Donald
Trump is proposing cutting corporation tax from 35% to “no more than 20%” and this would be a real boon for
corporate America. This is clearly a key driving factor as earnings season has been relatively underwhelming so
far. FactSet expected earnings for Q3 to ultimately improve from 2.8% from before the announcements began
to 6% by the end of reporting season. However, the numbers last week have dragged the blended earnings
(reported and non reported expectations) back to just +1.7%. Tax reform is clearly a big driver of the market
and should therefore be watched closely for progress in the coming weeks. All time high ground on the Dow
Jones Industrial Average was certainly helped by the abnormally large impact of a high priced IBM (due to the
intricacies of calculating the Dow), whilst the move to all-time highs on the S&P 500 have been equally strong
but more broad based. This is reflected in the fact that European markets are still stalling and seem unable to
generate bullish traction in the last few weeks. The technical signals are increasingly flash warning signals on
the DAX which is pushing through the psychological 13,000 level like a bicycle riding through treacle. Despite
this though the market is holding above 12,900 support and whilst this remains the case the bulls will be
reasonably well positioned still. The FTSE 100 has stumbled in the past couple of weeks with 7565 and is
failing to test the 7599 all time high. Brexit progress is a driver of sterling and the negative correlation play
between FTSE 100 and sterling remains an issue.
WATCH FOR: Progress on Trump Tax reform to drive Wall Street, earnings season also key
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3
DAX Xetra
Watch for: A breakout of the consolidation
between 12,910/13,095
Outlook: The European markets have run
themselves to a standstill, and the DAX is no
different. The market has now spent the past few
weeks consolidating sideways in a 185 tick band
around 13,000. The concern is that momentum
indicators are looking increasingly corrective and
the prospect of a near term decline is growing.
The bulls need to breakout above last week’s
high of 13,095 to re-energize their push into
further all-time highs. The support at 12,900 is
preventing a top pattern formation. The ECB will
be key for the market moves.
FTSE 100
Watch for: The bulls have lost momentum and
the market is increasingly consolidating.
Outlook: Consolidation continues on FTSE 100
as an 80 tick trading band of the past two weeks
takes hold. This is coming as the momentum
indicators of the really tail off with the MACD
lines crossing lower and Stochastics also giving
a corrective signal. The bulls will though still be
relatively content above the 7450 support and if
support continues to build then a retest of the all-
time high at 7599 cannot be ruled out. It is
notable that the bulls have been unable to
sustain traction in a rally for several months now
and the shaping corrective technicals do not
bode especially well once more. Resistance at
7565.
Index Outlook

4. Weekly Outlook
Tuesday 24th October by Richard Perry, Market Analyst
Other Assets: Commodities & Bonds
The rejuvenated strength of the dollar is a big drag on gold. Coming with the improved prospects of Trump’s tax
reform, Treasury yields are climbing and this is negative for precious metals. This is pulling gold back towards
the early October low of $1260 and could mean further downside and means a test of the band $1240/$1260
could be seen. This move has also meant that the previous technical buy signals have been aborted however
the bulls have in their favour the fact that the gold market has been posting higher key lows with a trend of lows
coming in around $1250 this week. Oil remains supported and the market is looking at the reduction in Iraqi
exports as a positive factor. Oil exports from southern Iraq have fallen by 110,000 per day adding to the supply
issues in Northern Iraq. This is helping to underpin Brent Crude above $55.
Treasury yields have been pushing higher once more in the wake of the Senate passing the budget which
improves the prospects for Trump’s tax reform. However there yield curve continues to flatten on a longer term
basis. The identity of the next Fed chair could have an impact on this though. The shorter end of the curve
would be further boosted (thus flattening the curve) in the event of a more hawkish John Taylor becoming Fed
chair, whilst Jerome Taylor is more Yellen-esque and this would pull back the shorter end. The longer end
continues to be driven by inflation/growth expectations and therefore GDP on Friday will be watched.
WATCH FOR: US GDP impacting on yields and across commodities. Tax reform progress is also key.
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4
Gold
Watch for: A test of the $250/$1260 support
could be seen this week if selling pressure grows
Outlook: The long term trend of higher lows that
has supported gold throughout 2017 comes in
around $1250 this week. There is a band of
support between $1250/$1260 which is
subsequently taking on increased importance for
the medium term basis. Interestingly also the
144 day moving average which has historically
been a strong gauge for gold comes in at $1270
too. Near term momentum remains corrective
and the sellers are selling into strength under the
long term pivot $1300/$1310 but the market is
increasingly approaching a key crossroads.
Markets Outlook
Brent Crude oil
Watch for: Continue to buy into weakness
above $54.70
Outlook: Brent Crude continues to be supported
above the key $54.70 breakout and corrections
are being bought into. The next move for the
bulls will be to generate lasting support above
$57.45 with the flanked support of the four
month uptrend. Technical momentum indicators
remain supportive with the RSI consistently
finding lows around 50 and the MACD lines
above neutral. This all points towards a
continuation of buying into weakness. The bulls
will be eyeing the resistance at $58.55 with a
push above opening the key multi-month high at
$59.50.

5. Weekly Outlook
Tuesday 24th October by Richard Perry, Market Analyst
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5
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