FX Spread Betting: Swiss Franc Tumbles as SNB Introduces Euro Peg
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Trading 7 September 2011
Many investors may be rather bamboozled by the move yesterday and this morning in the face of such chaos in Europe.
The Swiss central bank drew a line in the sand for the Euro - Swiss Franc rate by saying it will defend the SFr 1.2000 area as the crisis over sovereign debt continued to rumble on.
We continue to see politicians’ indecisiveness fuelling volatility which threatens the very being of the project they are so keen to defend. Fear that defaults will send the crisis spiralling out of control it still palpable and a break up of the Eurozone very much a possibility, so why isn’t something being done?
For other global investors the situation also remains unsettling due to the knock on effect this will all have on the rest of the world. The chances of a second recession are greater now than they have ever been and the lack of confidence is doing its part in causing growth to take a dive.
But despite all the doom and gloom the FTSE is looking in relatively good shape. The indices spread betting markets have been trading in ranges that suggest that they might be finding a platform of support. For the FTSE, yesterday’s bounce off the 5050 area coincided with a similar bounce from the same area last week.
In the face of all that’s being thrown at the market, yesterday’s move was encouraging, but largely assisted by the good bounce from its lows by the Dow.
The 5400 area remains the crucial resistance area that the FTSE needs to get back above before we can start to be more confident that the recent sell off is over. Whilst this is only 150 points away, it seems like a mighty task to many.
This morning we’re at 5250 at the time of writing so this upside target and the major support level at 4800 seem to be restricting the index to another trading range. However, spread betting account holders should be cautious as the range is quite a wide one so volatility isn’t expected to get any lower.
Economic data releases today come in the form of industrial production from the UK and Germany and then we end the day with the US Fed’s Beige Book.
It was fun and games yesterday for the Euro as it rallied early morning as high as $1.4281 and then plummeted all the way back down within a few hours.
It went as low as $1.3973 towards the end of the day over concerns that the German economy is slowing. This morning, the Dollar has weakened ahead of the release of the Central Bank’s Beige Book survey of economic conditions.
Traders this morning appear to be happy to take on some risk as they are moving out of the safer Dollar. Currently the Euro is trending higher against the Dollar at $1.4070 and sees resistance at $1.4025 and support at $1.4100.
FX spread betting markets were all about the Swiss Franc yesterday which saw significant weakness after the Swiss National Bank decided to cap the strength in the Franc at SFr 1.2000 to the Euro.
This caused gold to plummet yesterday as investors chose to release funds and hop on the Swiss move. This could mean that risk-averse participants will have one less haven to find safety in. They showed their dismay at this by pushing the precious metal down $28 to $1873.5, after stretching to a new all time high of $1920.9 earlier in the session.
It doesn’t look like investors have calmed yet either, as at time of writing, the hedging favourite is down a further $21 to $1846.9.
Much like gold, crude oil was pushed down by a strengthening Dollar as the two have an inverse correlation.
After having enough of a beating though, the energy market decided to start drawing its power from the equity markets, which were surging ahead after bouncing off their daily lows.
This helped the black gold break into positive territory for the day despite the ongoing fears about the health of the economy. This morning Brent crude oil is up some 70¢ to $113.60.
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: Swiss Franc Tumbles as SNB Introduces Euro Peg' edited by SD, updated 07-Sep-11
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