There’s a saying for the price activity of the markets over the last few days, but unfortunately it is not something that I can write in this column!
The bounce off the 5850 region for the FTSE is encouraging for the bulls as well as yesterday’s close back above 6000, but there’s nothing to say that the market won’t just head straight back down again as we’ve seen it do all too easily in recent days.
This morning sees the market continue its strength from yesterday putting on a few extra points to 6020 and all eyes will be on the economic data at lunchtime from the US. Until then there’s every chance we might see European markets simply drift sideways. With support at 5850 and 5800 remaining in tact the focus is back on resistance levels. 6040/50 and then 6100 are the levels to watch to the upside.
So with nothing in the way of data releases and the only real decent bit of data being the NFP, that’ll be the focal point of today (unless something kicks off causing oil to spike again). Consensus is for 185k new jobs to have been created, but we must remember what happened last month when a similar number was expected. The release came in at a dismal 36k! Despite this the market barely battered an eye lid and since then it’s put on over one and a half percent. Just wonder what might have happened if last month’s number was better than expected – would we have declined back below the 12,000 level? What we do know is that labour market information has been relatively strong in the past few weeks. The ADP private payrolls on Wednesday were better than expected (although we saw similar last month) and yesterday’s initial jobless claims were very good bringing the four week average to sub-400k. With the weather partially to blame for last month’s shock there could be a strong recovery in NFP today so don’t be too surprised if we see a number +200k.
The euro was the surprise mover of the day yesterday following the ECB rate announcement. Of course there was no change to the base rate which remained at 1% but Trichet didn’t exactly keep his cards from view by mentioning that rates might well rise as soon as next month. Maybe the Bank of England can take a leaf out of the ECB’s book and put an end to its smoke screen approach to monetary policy and actually tell the market when it’s most likely to raise rates as opposed to us all second guessing them. So it looks like the ECB is to finally put an end to its ultra low interest rates and we could see base rates in Europe as high as 1.75% before the end of the year. As a result of Trichet’s boldness EUR/USD spiked to nearly hit the 1.4000 level but its advances were halted somewhat by the major upper downward trend line around this area. This morning we’re at 1.3960 so now resistance is seen at 1.4000 and 1.4055 with support expected at 1.3855 and 1.3800.
The single currency also made big gains against sterling which was dragged back down into the 1.1600s. This morning GBP/EUR is at 1.1665.
As investors piled back into equities the tumbled out of gold which saw a reasonable retracement of over a percentage point back to the mid 1410s. This morning the precious metal is at 1415 so to this little bit of downside pressure means the focus has shifted to support areas seen around 1407 and then the 1400/1395 area. To the upside the goal for the bulls is 1439.
Crude dropped almost 2% in the session which was also the main reason for the strength in equities yesterday. This morning Brent is a buck in the black at 115.80 so near term support is seen at 113.10 and resistance around 118.00.
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