Markets continue to trade over the same old ground with the indices seemingly stuck in the post new year range.

The FTSE has fallen on the open to the support level at 5440/5450 (from which it bounced last Tuesday, Wednesday, Friday and yesterday) and not surprisingly our clients are buying in solid numbers anticipating a similar reaction. With the US away yesterday on Martin Luther King day volumes were very light but the lethargy seems to have continued into this morning with volumes on the FTSE futures being very weak indeed. My dealers are moving the market with even small hedging activity.

Five days activity on the FTSE is covered by just 80 points which tells its own story.

A break below 5440 might bring a profit taking wave so longs should be wary of being too aggressive in their outlook but this having been said it must be admitted that action in early hours does not look strong enough to create such a move.

The pound has strengthened overnight as the break through the resistance at 1.6360 mentioned yesterday created a move up to 1.6440 but the effort seems to have been quite ‘tiring’ and sellers of Sterling are currently in command taking the cross back off to 1.6390. 1.6360/1.6375 will probably now act as support to any retracement and bulls will be hoping for more from Cable if this can hold through today’s session. The median price in Cable since last May has been almost bang on 1.6400 and we have oscillated consistently around this point. It must be added that the bull moves ‘on the way up’ in the oscillations have not tended to fail at this level and have eventually made it to at least 1.6600. With Goldman Sachs (and others) estimating that the UK economy will grow faster than many others in 2011 perhaps the rumours of the death of sterling have been greatly exaggerated!?

In all the excitement of the Sterling move the euro has rather been left behind as the tensions in the EU project continue to come to the fore. It is difficult to be too negative for the Euro though on this basis as the smaller nations causing the problems are not particularly significant in the total EU GDP. The woes over the whole issue will only grow if the ECB does not play a strong-arm policy. At the moment Trichet and others are, indeed, playing hard ball and (for the fiscal security of the larger nations) we shall have to hope that they continue to do so.

Gold continues to meander around the 1130 to 1142 range with bulls getting excited every time we look higher and bears similarly entranced as the prices slip. All in all both the upside and downside look problematical but, if the growth projections from various commentators prove to be correct, Gold might once again become a side issue. In which case the current values look rather stretched.

Oil is slipping in early trade threatening the lows of yesterday but 76.50 to 77.50 has proved to be good support in times past and in the absence of actual bad news it might prove difficult to breach this in the near term.