A bright start once again for the equity markets as the FTSE looks set to mark a new high for the year. Early calls are for the index to test resistance around 5650 and it looks like the bulls are pushing the market higher into Friday’s triple witching. Clients continue to sell in these areas expecting the market to pull back, but the new flow has hardly been negative in recent days. The major test will be the 5670 to 5700 area, but for now we’re still unable to breach to new ground that marked the FTSE’s high back in 2008 just before Lehman went under. The early strength also comes when a few stocks are going ex-dividend.
The FOMC minutes gave a boost to bulls as they provided no surprises and reiterated the magic “extended period” words. There was a mild acknowledgment that the job situation is improving, but at some point the Fed will have to let the market know that they will be raising rates at some point, most likely at the end of this year.
The interest rate focus now shifts to the UK this morning as we get the BOE minutes. Similar to the FOMC last night little is expected in the way of a change to their decision making. An acknowledgment to the improving economic data is likely and that the recent snow merely caused a dip in many figures. On top of this they will reiterate that they expect inflation to remain contained by the substantial spare capacity in the economy.
At the same time the UK unemployment and average earnings numbers are released, with claimant counts expected to show a small rise.
Just when cable looked to have given up the ghost, sterling staged a remarkable recovery back up to the 1.52 level. Firmly above there this morning bulls will be looking at 1.53 as the next target.
The euro also benefited from the deal making in Europe and EUR/USD tested last week’s high around the 1.38 level. EUR/USD was also supported by some bad news on German business sentiment, but was much better than expected. It couldn’t hold onto gains beyond there as 1.38 is heavy resistance that the pair has barely breached since the beginning for February, but this morning we’re knocking on the 1.38 door. The single currency has found good support around the 1.3450 and above area, putting a stop to the freefall that we experienced at the beginning of the year.
The dollar weakness meant gold strength and the precious metal broke out of the recent downward trend it had formed ever since reaching 1140 at the beginning of March. The break above 1119.0 has opened up the chance for bulls to have another look at 1130.0 which they’re doing this morning and their next target will be 1140.0, where there should be greater resistance. At the moment on the hourly chart the RSI is indicating we’re in over bought territory so there will need to be a concerted effort from the gold bulls to maintain the yesterday’s and today’s strength.
The crude price needless to say also benefited from dollar weakness and headed back above the $80 and this morning we’re back above $82 again. The OPEC group of countries meeting in Vienna today will discuss production, but without any pick up in demand and supply levels continuing to increase there are not expected to be any surprises announced. Weekly inventory numbers out this afternoon will also no doubt provide us with the usual volatility that we’ve come to expect when the figures are released. Any building in supply will most likely put pressure on the bulls to sustain yesterday’s gains and we could head back below $80 again in the blink of an eye.