Markets have taken things in their stride throughout this week and have put in some decent gains.
We were expecting slightly more volatility in last night’s action which was dominated by Obama’s speech to Congress, however the reaction from the Dow was somewhat muted. But it was Bernanke, as usual, who market participants were more focused on and his speech can be summed up in just a few words – not good enough. Investors were hoping for more hints that stimulus is coming but they didn’t get it so that’s feeding through to European markets this morning.
Obama also failed to set off any fireworks with his bigger than expected plan to tackle the dire unemployment situation in the US. Businesses have been crying out to breaks and reforms to regulation as opposed to bigger government so that they can get hiring again. Unfortunately, not much of what Obama said addresses these issues, so what so many people had got their hopes up about ended up being a bit of a damp squib.
The FTSE is at just about break even this morning after having been called to open below the 5300 mark, so there are more buyers out there than expected. At the time of writing the FTSE is at 5340, with the major resistance level at 5400 remaining the big hurdle for the bulls. As long as the near term support of 5300-5280 can hold then we might even see a test of near term resistance at 5375, before a test of the all important 5400/25 area.
There is no real economic data to speak of today, so things might remain range bound ahead of the weekend. We did have some Chinese data in the early hours which showed inflation has declined, and this is the first indication that their tightening is having the desired effect. In turn it could mean an end to their tightening cycle which is what the bulls have been hoping to see for a while.
The euro, which rather like the equity markets has been pretty resilient in recent days, finally dipped below the 1.4000 and ended its session there. The ECB’s statement which was more bearish than simply dovish wasn’t received well by holders of the euro and so the single currency suffered as a result. No further interest rate hikes from the ECB can be expected any time soon, and we may even see a cut next year if things don’t perk up on the growth side. This morning EUR/USD is at 1.3910 with support and resistance levels at 1.3875/15 and 1.4020/4110 respectively.
Cable managed to get itself back above the 1.6000 level yesterday but this morning it hasn’t been able to hold on, dipping back below to 1.5965. Sterling didn’t do too badly out of the BOE meeting as the very slim chance of further QE did not materialise. Support and resistance levels for cable are seen at 1.5915/5875 and 1.6075/6140 respectively.
The moves in sterling and the euro gave another boost to GBP/EUR which took it back towards 1.1500. At 1.1483 this morning all eyes are on the 200 day moving average, which in the past month has proved very stubborn resistance. A break above 1.1500 could open the wave for 1.1600.
Many FX traders’ eyes have been on the Swissy and how the SNB’s comments earlier in the week have affected the trend for the traditional safe haven. So far their comments have caused a continued flow of cash out of the Swiss franc and EUR/CHF appreciated further to over 1.2100 even though the euro weakened against other currencies. This morning EUR/CHF is at 1.2115 so francs bears will be looking for a test of 1.2250 and around 1.2400, where the 200 day moving average currently sits.
Gold attempted to gain more of the lost ground from Wednesday rallying back above 1850 and is continuing in that fashion this morning with the yellow metal at 1876 this morning. The double top formed on the daily chart looks dangerously like not materialising as the metal is racing higher again and not far off testing its all time highs once again. It would seem that any sort of correction at the moment simply provides the bulls with yet another buying opportunity.