Forex Spread Betting: Japanese Currency Intervention Weakens Yen
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 31 October 2011
The FTSE spread trading market seems to have given up the ghost on trying to record its second best monthly gain on record as the euphoria from last week’s EU summit rubs off.
European leaders and officials have been going cap in hand to Asia hoping that they will write us a blank cheque and we’ll give them a big IOU in return. However, for some reason, the likes of China and Japan seem reluctant to show their support.
Hmm, I wonder why when you see the damage that the crisis has done to confidence so far, causing the threat of a double dip recession in Europe to become more real than ever. On top of this of course, investors in Greek debt have had their investments chopped in half.
Without any details of how the EFSF will be leveraged to one trillion euros, investors have been left having to wave their fingers in the air as to how a crucial part of the plan will be achieved.
Details should be forthcoming at the end of this week at the G20 meeting on Thursday and Friday, yet another photograph opportunity, but as we’ve seen all too often before these summits are usually thin in this area.
Selling in metals has led to selling pressure on mining stocks today which saw big gains last week.
They are very much on the back foot today and it’s the defensives that are making ground.
As October comes to an end it will be remembered once more for it volatility, but this time for the tremendous gains in the indices spread betting markets.
With November and the end of 2011 around the corner, bulls who have missed out on much of this bounce so far will be asking whether it’s worth buying at these levels. This will be the case even if November and December are historically very bullish months for stock markets.
The rally has taken the daily chart back to the 200 day moving average which is where we’ve seen this halt in the buying.
If we are indeed in a bear market then often we see bounces take us to test this level before giving up and heading back down again.
Considering the speed with which we’ve seen the indices get back to these levels it’s hard to think that we could test the lows around 4800 again this year. However, markets tend to fall quicker than they rise so it can’t be ruled out.
Major news on the forex spread betting markets this morning, with Japan intervening to make their currency weaker and therefore encourage trade.
The yen fell nearly 4% early doors this morning to ¥79.529 per dollar and in turn, created a hike in Japanese exporters.
We could see a trigger here in other Asian countries in order to protect their own exports, so forex traders should watch closely here. USD/JPY is currently trading at ¥78.741 and we could see the potential to move higher throughout the day based on fundamental news.
Friday’s session saw gold close not far from flat, as investors booked the profits from a five day rally which took the yellow brick from a low of $1611.0 to the highs $1750.0.
There were several factors involved in the tug of war for gold. The higher US dollar put downwards pressure on the commodity, making it look more expensive to bargain hunters, whilst uncertainty over the European rescue package provided support as, in the long term, it is likely to spur higher inflation.
So after a day of toing and froing, the two opposites discarded each other to mean gold closed at $1743.2, just short of $2 off the open. However, at time of writing, with a second bout of profit banking, gold is down to $1714.6.
The excitement born form the grand unveiling of the European bailout plan was certainly short-lived.
Pessimism was back on the table on Friday as market participants realised that there were still a lot of unanswered questions and a potential lack of resource to fulfil the plan and stop the possible slump.
As a result of this, the US dollar benefited from some buying, which helped to push crude oil prices down. This downward pressure hasn’t stopped and at the time of writing, Brent is trading at $109.26.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'Forex Spread Betting: Japanese Currency Intervention Weakens Yen' edited by SD, updated 31-Oct-11
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