Not a great start to the day, especially after the Far East did it's best to take us higher after the US weakness.
Yesterday was also a real disappointment to the longs after the early moves had seemed so confident.
Today sees the UK GDP number out at 0930 and it is difficult to make much of a statement before this hits the wires. We are expecting a ‘very modest’ growth number but there is fear that even this might be too much. If we get something along the lines of the German disappointment last week then things could get a little nasty. Of course in line with all comments, these things do cut both ways in that, with the market expecting to be disenchanted, virtually any number may be taken well along the lines of “it could have been worse"!
No matter how we look at things, confidence is extremely fragile with the Dax recording its second ‘flash crash’ in two weeks. Last week it was a fat finger error with some poor dealer rumoured to have accidentally sold 1600 DAX contracts ‘at market’ instead of leaving an order to sell at a particular price. And yesterday we had a twin hit, with first ‘a rumour’ that Germany was about to be downgraded and second that the German regulators were going to extend the shorting ban. The Dax fell 200 points in a flash and in truth (while it bounced back 150 points) it seems to be struggling to recover any confidence.
No matter what happens this morning the markets will be awaiting the pearls of wisdom from Mr Bernanke this afternoon (expected to speak from 1500 London Time). Do not look for too much before then.
The FTSE is now back at 5090 having revisited yesterday's lows of around 5080 a few times already. We can see support is building here but 5100/05 and 5140/45 are holding us back on resistance. Above here dealers would be looking for 5185/95, the level that was proving a barrier earlier in the week. On the support side below 5080 there is resistance to falling all the way down to 5065 but then we would be going for the obvious target of 5000.
Currency markets are playing the range game with gusto. Yesterday we commented on the big resistance above 1.4470 to 1.4500 due to the falling pennant formation still building. We naturally fell back to the low 1.43’s as Euro debt fears surfaced. Today we are back up in the mid 1.44’s at 1.4440. Traders are watching for a break of the pennant formation (now above 1.4475). If we stagger sideways the sellers may get more confident as the day goes on.
Sterling is now some way from ‘break out’ and we are back well within the trading range that has dominated 2011 (1.5950-1.6550 approximately). Past history suggests we will drift back to test the lows now that the highs have held us back but as this comment has mentioned a few times the Pound does seem to be rather ‘too weak’ with all the information to hand that we have. Good Support is pretty much where we are at the moment at 1.6290/1.6300 and below here at 1.6260/65 and then 1.6220/25.
Gold is rallying strongly now after all the sell offs of the last two sessions. Last week if you had said ‘gold will be at 1790’ next Friday nobody would have blinked an eye. The fact that in the meantime it has been 120 dollars higher than here and 90 dollars lower might rather blind us to the fact that this was just a period of extreme volatility rather than (as some were thinking) confirmation of the end of the bull run. Personally, I do not believe in happy endings so I would not be surprised if we have another fierce sell off to hammer those buying into these falls but this is just speculation. Resistance is now at 1792/96 and then 1815/17 support is at 1778/80 and then down at 1754/56 and 1732/34.
This comment is from Capital Spreads.
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