Markets continue to grind higher on really nothing very much.  The numbers out yesterday indicated that the UK avoided a recession purely due to the extra state spending which, as the state is about to stop not just the stimulus monies but also cut underlying costs, does not exactly bode well for future growth.  Of course the UK does have to sever the umbilical cord or state support at some point, and now is probably as good a time as any, but that does not mean that we are going to like it much.

Trade numbers are also going in the wrong direction which rather ruins the arguments in favour of a weaker currency (I have never liked that argument anyway as countries merely import inflation which slowly wipes out any perceived currency gain).  Overall the idea that the UK will be able to ‘export’ its way out of trouble is looking more and fanciful by the day.  Not only this but the ‘invisibles’ side of the trade balance is being slowly whittled away by politicians and regulators (egged on by the press) with the banking/financial sector continuing to be pilloried ad nauseam.  There have been no really big rats jumping ship yet but there has definitely been a slow drip, drip of funds moving out of Mifid’s grasp.  While many ignorant people will say good riddance the fact is that their income is earned mainly from overseas and spent in the UK (and taxed here).  The fact that these people earn ridiculous sums for pushing money around is academic.  I, for one, would rather they earned it here than in Switzerland.

The FTSE is trading at 5200 up 30 points overnight after the US markets took us higher late in the session.  We are now getting used to early session sell offs in the FTSE as traders try to pick ‘top’ on the open only for the markets to turn around by mid morning and then to press higher through the day.

As mentioned before there is solid volume resistance all the way up to 5300 which may cap too exuberant an enthusiasm today but dealers should beware trading too heavily on the short side as the momentum is (for the moment) very definitely with the bulls.  The prospect of permanent low interest rates might well be the long term trigger to higher prices but there is many a slip…

Currency markets are once again turning Euro unfriendly as the poor US data begins to fade in the memory.  More and more commentators are calling for a split of some sort in the Euro-zone but their cries will almost certainly fall on deaf ears.  The long term prospect for the currency must remain doubtful (as markets hate uncertainty) but we will always have rallies within the general down trend.  The Euro Dollar cross is now at 1.2530 and there is some solid support just below here at 1.2520/25 and then at 1.2475.  Below here we would be back in the crucial 1.2350/1.2450 range.  On the upside 1.2555 now turns into resistance and then 1.2600 and 1.2700.

Cable is holding ground around the 1.5000 level and there is a certain comfort in the price!  1.50 is almost the Goldilocks level ‘not too high, not too low’ and we do seem to be irresistibly attracted to it.

Oil remains beneath 75 dollars this morning which is slightly surprising given the rallies in the equity markets and dealers might be nervous as to the longer term direction if we remain sub 75 for too long.  76.30 is also building as a critical technical level and we will really need to get above here soon to maintain any bullish momentum.  The downside is equally problematic with any prices sub $72 attracting buyers. Traders will be eying both these levels but it must be admitted that either directions looks equally likely or unlikely.

Gold remains stuck between 1196 and 1212/14 with further support at 1186.  Not much to go on in this range but we are just about reaching our time limit on pull backs from the past year or so.  Normally we are managing to start moving higher again if we pause for this length of time over a particular area (bear moves have tended to be short sharp and painful).  If the momentum downwards can be regained (by breaching 1186) we can expect another vicious downside correction but it must be said that the longer we remain at or around 1200 the greater the probability that the bulls will regain their strength for another shift higher.