Another slow start to the week and with little UK or US data out today it appears this may remain the state of affairs for yet another day.
The FTSE is now back over the 5200 mark and at the time of writing seems to be happy around the 5220 level. Again, with very few data announcements out today it might be like watching paint dry with the expectation that the FTSE may remain fairly range bound today. Despite this, many of our clients appear to be bullish across the board in a wide variety of equities as they try to pick up a bargain. Caution may be the word of the day as unless we see some momentum there is a chance we may see a continuation of the falls. 5255/65 remains the next resistance level with support around 5195. Like the FTSE, the Dow continues to sit and wait with it currently hovering around 10250 but neither going through it or dropping down below 10210.
Currency markets saw the euro continue to devalue against the US dollar on Friday following suggestions from a European Central Bank official that the monetary policy should stay loose until 2011. In addition, the French government cutting its next year growth forecast put extra pressure on the common currency which finished on Friday with 102 points loss at 1.2705. Currently EUR/USD sits just below 1.2700 having tried to lift above 1.2725 earlier in the day. Whilst the EUR has weakened, both the GBP and JPY are largely unchanged over the past week. GBP/ USD sits at 1.5542 and USD/JPY at 85.38. USD/JPY is stuck in a bit of a stalemate situation as currency traders are not yet ready to push the yen to new highs and the Bank of Japan not quite ready to intervene despite its rhetoric. Japan’s trade surplus is an advantage for yen but a strong currency does not bode well for exports. In the end something’s got to give and the break could be violent especially if this period of what’s beginning to look like a sideways trend will stay with us for a while.
Gold stopped for a breather last Friday having lost $4.38 to finish at $1227.10 as finally a stronger US dollar took its toll (ironically both gold and the US dollar have gone up in the past few weeks). This morning we have seen a slight drop off after gold went above 1230 earlier. Currently we are at 1226.2. Short and long term trends appear bullish, with the medium term trend seemingly sideways. Silver took a big hit on Friday as a gloomy economic outlook was impossible to ignore for the white metal’s performance. The 30 cent decline on Friday was enough to push the price below all the moving averages. The short term trend continues to be sideways, ‘saved’ by silver’s status of safe harbour along with gold. Silver is now at 17.98 with support at 17.82 (Friday’s low).