Pressure on the Dollar continues as the Market digests the unpalatable fact that the Fed may reignite its stimulus packages. Unfortunately most of the money issued over the last few years has been swallowed up by a larger Public Sector and in rebuilding of Bank balance sheets but this (from a sustainable growth point of view) is not particularly helpful and, if a renewed stimulus is on the cards, the Fed needs to find a better way to spend the dosh.
This said, evidence of a double dip in the US seems to be anomalous at best (no matter what Bernanke and Greenspan say) and as with yesterday’s comment we do get a bit of an impression that a weaker Greenback is the goal of current statements. Aside from a spike lower back in November last year (from which we recovered immediately) the Yen has reached a new closing high versus the dollar (since 1995) with the cross now closing in on 85 cents. What this is doing to Japan’s exporting business is difficult to gauge but, in the UK, car and motorbike sales are reported to be suffering from the price differentials. Governments tend to get a tad upset if they feel that there is manipulation going on and we may find that a few words are being spoken behind closed doors.
Markets appear to be consolidating around current levels with the FTSE failing yet again to make headway above 5400 but, on the other hand, showing no appetite to drift below 5340/50 either. This is making for rather tiresome trading as we spend hours in very small ranges. No doubt bulls will be hoping that this is just a pause before the market gathers its collective breathe for a push higher just as the shorts will be gathering evidence that this might be an indication that investors are losing their enthusiasm at these levels. The current price is 5350 at the bottom of yesterday’s session range and our clients are busily buying back shorts set up at the highs. This short termism is paying off as the Senior index continues to flatter to deceive but, with the slower summer months still dragging on volumes, it is difficult to get too exited in either direction.
The Dow managed to spend all of yesterday’s session above 10600 (just) but we are flirting with the level in early trade today. 10580/95 proved quite a barrier to overcome and it would be disappointing if we were to give up on it quite so easily. Traders will be watching any approach to this support as a buying opportunity but there should be a certain amount of caution just in case it fails spectacularly.
As mentioned currency markets continue to be Dollar unfriendly and any strength in the Green back just seem to find more sellers. As mentioned yesterday there are some pretty hefty resistance levels just above current prices at 1.5975/90 in Cable and 1.3260/80 for the Euro we seem to have paused for breathe for the last 24 hours but whichever of the Major currencies is currently showing signs of strength versus the Dollar seems to eventually attract the others to perform similarly. In reality any woes for the US are probably woes for Europe and the UK as well but while the whole European zone seems to be biting the bullet over deficits te US has yet to show any political stomach for cut backs (indeed the opposite seems to be the case). President Obama’s administration seems bogged down already having exhausted itself fighting over what might be considered partisan matters. The deals that needed to be done to get the heath programme through were hardly evidence of a strong leadership.
Gold has broken back above the major long term bull trend line in a move engineered in the dead hours around 12.00 last night when no major markets were open. This definitely puts a spring in the step of the Bulls (of which there are a vast number) and we are currently 10 dollars up on the day at around 1196. This puts us above the 1190/92 resistance level which now turns into support. The next target for the bulls will be 1200 (obviously) but resistance is at 1204 and more importantly at 1212/14.
Oil has run into something of a brick wall at above 82.40 and unsurprisingly sellers are coming out of the wood work. 82.50/83.00 proved something of a problem back in March as well and then once it had been broken 82.00/82.50 provided something of support in any attempts to come back down again. This will probably make for a certain reluctance in traders minds to take on new longs until a foothold above $83 can be confirmed.