FX Spread Betting: Euro Weakness Boosts GBP/EUR Rate
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 11 Novemeber 2011
Up down, up down as the see-saw for the equity markets continues.
The Dow managed to put in a half decent gain last night and Asian indices complimented that so European indices are just about in the black.
Once again however we had been calling the FTSE to open much higher. At one point in the early hours, our quote reached 5500 but then slowly and surely we drifted back from there. So at the time of writing the FTSE is just a little higher, at 5455, so hardly a convincing move from the buyers.
For the index the 5400 level remains the critical support area of the moment. Technical analysis of the hourly chart shows that a double bottom has formed at almost exactly the same level and so at least this is an area where some buyers are coming back in.
This isn't to say that it will hold going forward and higher prices are to come, as we've seen in the past many of the recent rallies have been very short lived.
What it probably does mean is that a break to the downside, and a close below here, could spell trouble for the bulls. Something will have to trigger this move of course and with so much uncertainty out there at the moment you could almost take your pick as to what that trigger might be.
Lots of moves on the political stages of Greece and Italy and so for now the markets seem to be giving the Eurozone another benefit of the doubt.
A heavyweight ex EU commissioner is expected to get the top spot in Italy and Greece has finally picked someone to lead after days without a Prime Minister. Hopefully this puts a little bit of clear blue water between the politicians and the markets, but more importantly today is the votes on Italian economic reform.
Of course passing austerity packages is all very well, but that doesn't do much to help growth, which is fast becoming the really worry for investors.
Throughout the last few months downgrade after downgrade has been made to European, US and even Chinese GDP with the chances of actual recessions becoming very real.
As a result, the indices markets are finding bullish spread betting account holders to be few and far between. On the whole, clients are only slightly long of European indices, the FTSE and the Dax, and slightly short of the main US indices.
The euro has managed to find a little bit of support around these levels and is at $1.3640 at the time of writing. Traders are still very wary of the single currency following the sharp sell off recently and increased volatility in the forex spread betting markets.
Clients have actually been sticking with a bearish view of the euro, which is not what they usually do when a market is trending lower as they often oppose the trend.
This time they clearly feel EUR/USD has further lower to go following the recent small bounce. Support and resistance for the pair is seen at $1.3500/1.3460 and $1.3700/50 respectively.
The recent euro weakness has given GBP/EUR a boost taking it up above €1.1700 where once again it has run out of momentum.
The little bounce in the euro has brought us back down to €1.1670 at the time of writing so will history repeat itself and bring this pair back lower again?
Gold has spent the last couple of days oscillating following its little correction. Bullish spread trading clients have been attracted into buying at these levels no doubt expecting a retest of $1800 and at the time of writing we're at $1766.
The precious metal probably needs a trigger to get back up there, rather like the trigger mentioned above that would send indices lower if it came.
As a result, all eyes will be on the progress with today's votes in Italy so see if that's the trigger that will spark the next bout of volatility.
Brent has also been clawing back some of the mild losses of recent days, which as mentioned earlier this week had broken out to the upside causing many bulls to get excited that this was the next leg higher.
For now the bulls are biding their time with Brent trading just higher at $114.10.
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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'FX Spread Betting: Euro Weakness Boosts GBP/EUR Rate' edited by SD, updated 11-Nov-11
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