Early attempts higher yesterday on the back of the Asian rally eventually came to nothing as the weight of ongoing problems in Europe and the US continue to worry investors.

The FTSE remains stuck in the range that has dominated since the turn of the year (5500-5550) and frankly, with no data out today, it does not exactly look likely to make a break in either direction in this session either.

Constrained trading ranges after a rally have tending to be a presage of a small drop over the last five or six months and our clients appear to be of this opinion with considerable selling in the indices this morning and quite a bit of lightening on the equity book as well (as mentioned last week). While it is difficult to totally agree with such sentiment it is also fair to say that equity holders have had a ‘jolly good run’ over the last eight months and no-one is going to blame investors for locking in a bit of profit at these levels.

As mentioned there are no major releases today from the UK or the US and trading statements are few and far between as well from the corporate sector. The markets might be forgiven for seeming to be a bit tired and with trading ranges continuing to dominate thinking there is precious little incentive to get involved until support or resistance levels are threatened.

The FTSE is pretty much unchanged on the open at around 5535 and support at 5525 and 5495 will be the target buying areas for the bulls. On the up side 5550 and the high yesterday (a rather neat 5600) will focus the sellers attention. All the indices remain above the pre year end ranges so the bulls should still be the most optimistic but a break and close below 5500 in the FTSE, 1030 in the S&P or 10580 for the Dow would concentrate minds somewhat!

With the Chinese economy doing so well last month (and presumably this month as well) the pressure for a floating Yuan is likely to increase. This underpins the movement in Gold over the weekend as a stronger Yuan ipso facto translates into a weaker Dollar, Euro or Pound. While this does not make the Yellow Metal in Global terms any more valuable it does obviously have an effect on its price in these currencies. Those who like to take the ultra long view seem to be gambling on Gold benefiting from this possibility. The resistance mentioned in yesterday’s morning comment at 1161 proved to be the high of the day in the afternoon. I am beginning to feel as though the world is reading these musings! This leaves the ‘gap’ opened on Sunday evening down at 1140 to go for on the downside and (of course) the 1161 resistance still forming a target for the bulls to the up. With the world economy beginning to pick up the case for higher rates is getting stronger and while the attraction for gold is self evident it remains to be seen whether it can hold good in the blow torch of higher rates.

Oil made for the 84  buck level in early action yesterday but with the poor weather looking like petering out across Europe and the US we might see some weakness coming through (especially in the back months). Nigeria could prove to be a problem as the old ruler seems to be on his way out and the Middle East seems as unstable as ever so we cannot completely rule out supply problems but it must be noted that (with inventories still reasonably strong) much of this fear appears to be in the prices already. As with yesterday’s comment support remains at 82 dollars and we are perilously close to this now at 82.20 in February Nymex. For the Bulls the support is obviously a buying level but for the much battered Bears its proximity gives them some hope for redemption.

Currency markets continue to wing backwards and forwards and it does appear to this commentator that if you took virtually any position in one of the major crosses and waited long enough the market will eventually come back into your favour. Cable is just oscillating around the 1.6100 level occasionally reaching 1.58 and just as occasionally pushing up to the 1.64/65 region. The Euro is slightly more interesting having come down from north of 1.50 but 1.4250 to 1.4550 seems the limit of its ambitions just for the time being. At some point in the future the addition of the Yuan to the floating currencies will give a massive boost to the currency exchanges which sorely needs a new cross after the demise of all the European currencies back in 2000.