It looks like were set for a little bit of profit taking today after four days of gains on the trot. The FTSE 100 in particular has been very strong and is just below the highs it set in January. Unsurprisingly clients have sold at these levels expecting a retreat from resistance levels seen around 5500.
Politics are grabbing the headlines as the build up to the election gets underway with the announcement of a three way debate. The pomp and show of such debates will only serve to provide more media frenzies. Those floating voters who bother to turn on their televisions to watch the three leaders go head to head will most likely get more confused by being more exposed to a “third” option. It’s difficult to see how anyone but the Liberal Democrats will benefit from such debates and it’s no surprise to see the inane grin on David Cameron’s little brother’s face.
There’s plenty of economic data to get our teeth into today with German retail sales already having disappointed, then their PMI services numbers are later this morning. At lunch we have the preview to Friday’s NFP in the form of the ADP employment figure which is due to post a tiny decline. Later on is the Fed’s Beige book.
Back to the markets and currencies continue to grab the headlines, but for now the rot seems to have stopped for cable and the euro.
EUR/USD formed an impressive “hammer” candlestick on the hourly chart yesterday morning and recovered nicely from then onwards. It was yet another indication that bears might be running out of steam for now with good support around and just below the 1.3500 level. The real test will once again be if such a bounce can be sustained as in the past month rebounds in EUR/USD have been swiftly slapped down by euro bears.
On the daily chart there certainly seems to be a few hammer formations forming as well, so this could be the level that really does find support and see a bear squeeze. Certainly the news flow is a little more PIG friendly and investors are anticipating a firm fist from the Greek authorities in addressing their fiscal problems.
Clients have been expecting a bounce for some time now opposing the move most of the way down and more long positions have been taken out.
Whilst the euro seems to have found a floor for now, that’s more than can be said for poor old sterling that is completely out of favour. As long as the polls indicate a hung parliament then cable will remain under pressure.
Gold took on the resistance around 1125.0 and smashed through it convincingly. The tumultuous moves from currency markets have benefited gold in recent days as investors are attracted by its “safe haven” attribute. Whilst the dollar has make substantial ground against sterling and the euro, which should translate to gold weakness, investors have been happy to stick some cash into gold in the belief that it’s safer than have it denominated in any other currency than dollars.
The days ahead could prove a real test for gold as there are some important meetings for Greece with Angela Merkel on Friday. Yesterday’s move was quite a bullish one and the next key resistance sits at 1140 and then 1163.
Crude is having another go at $80 and struggling once again to break through and test the January high of just below $84. Continued strength in equity markets might assist oil and push the market to test January’s high, but before then bulls will have 80.75 and then 81.50 to content with.
Oil inventories this afternoon will doubtless provide the usual volatility.