Once again the FTSE made an attempt of pushing through the resistance levels and once again it failed. Sometimes thin volumes can push markets beyond these levels but the FTSE remains stubborn too compared to other indices. The German Dax and US indices marked new highs for 2009 yesterday but the FTSE can’t seem to jump the 5375-5385 hurdle just yet.
Already this morning the market has rejected 5385 after we were calling the index to open around those levels so we’re up some lose change flirting with the idea of marking a new high for 2009.
With half a day’s trading before the FTSE closes for Christmas volumes will be pitiful as very few people are at their desks. But for those who are in the office they are clearly bulls as yesterday’s price action showed support for the market after the poor US home sales number.
The rest of today’s session will most likely remain exceptionally quiet as London closes before the US opens and a couple of bits of economic data, in the shape of durable goods and initial jobless claims, might offer a bit of after hours movement. Both numbers are expected to be good with jobless claims probably being the most interesting as it should indicate the US labour market is still improving gradually.
The technicals look positive for indices on the whole as they mark new highs and if this afternoon’s US numbers are good then the FTSE might be closed before it can enjoy pushing on through resistance. If it eventually does get through this 5385 area then the next near term test will be 5420-25.
The currency markets aren’t providing much excitement either this morning but in general are negative for the dollar. In the case of cable the pair is languishing at it’s lows below 1.6000. Sterling bears might try to force the issue at some point by testing the two month low around 1.5700 but for now support is 1.5925.
Whilst volumes in currency markets will also be pitifully low today one can’t discount a move over and after the US data with anything negative most likely to prove bad for the greenback.
The dollar’s bounce of recent may just have become a little over stretched. There’s no doubt that there’s been a shift in sentiment towards USD and the recent economic data from the US has largely been in its favour, but interest rates in the US are still not going to rise for a long time to come, most likely the back end of 2010. If we see equity strength continue into the New Year then that might just keep a cap on dollar gains in early 2010.
The mild weakness in USD has been met with quite a decent bout of gold strength. The reaction seems rather excessive, but there is probably some safe haven buying ahead of the holidays. Back above $1104 now the 1080 area has provided some support and for the near term the precious metal has broken back above the upper downward trend line. The next upper target will be 1110 which has offered support in the past.
All that remains for me to say is have a Happy Christmas!