Shares Spread Betting Strength Encourages US Dollar Weakness
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 27 September 2011
The moves of the last few days show just how difficult trading conditions are at the moment.
Just when you think that the world is coming to an end, a view which you wouldn’t have been chastised for having last week, a sudden shift in confidence can turn things on a sixpence.
The strength we’re seeing today is susceptible to an equally sudden change, especially if politicians dither following last weekend, a point that for many marked a turning point in the Eurozone crisis.
From a technical analysis point of view, the FTSE has yet to close below the psychological 5000 level and remains quite well supported, particularly when compared to its European counterparts.
Back towards 5200 at the time of writing, the strength from the Dow last night has followed through to the European session. The most important thing that last weekend’s meeting of the G20 and IMF can achieve is a shift in confidence for consumers and business.
If they believe that the Eurozone crisis can be contained by the coordinated action of politicians then they will spend that extra money and invest the cash that they’ve been hoarding over the past couple of years.
Only this morning we’ve seen German consumer confidence come in slightly better than expected, which has also contributed to this morning’s strength in equities. Later today the US releases their consumer confidence numbers which are expected to bounce from the diabolical drop we saw last month.
On the forex spread betting markets, it looks like it’s the return of risk appetite for now at least. Global equities are enjoying a bit of a rally which has encouraged traders to look for riskier currencies.
This has seen a drop in the safe havens like the Dollar and Yen with EUR/USD trading at $1.3517. Support is at $1.3415 and resistance at $1.3560.
The Dollar has been the one to watch in recent days and its appreciation has set alarm bells ringing.
For now though, the strength in the shares spread betting markets is translating to a bit of Dollar weakness across the board, albeit mild weakness. Cable is only a few ticks lighter and USD/JPY is just about flat.
It’s the ultimate risk currency that’s doing well this morning as the Australian Dollar lifts itself back towards $0.9900. However, this is still some way off parity where is so spectacularly dropped below last Thursday.
With uncertainty about European debt potentially threatening to push the world back into recession, investors would usually expect to see risk averse market participants piling into safety havens such as gold.
This was not the case in yesterday’s session, where it appeared the favourite asset was cash as near future liquidity issues were on the minds of traders.
After plummeting to an intraday low of $1532.0, gold settled at $1627.3 and this morning it’s trying to claw back some of the recent losses as it trades at $1623.0.
With fear of repeating myself, there is still doubt over future oil demand as the US economy’s future still looks bleak and this caused Brent crude oil to dip down to $101.65.
Nevertheless, a rebound in the equity markets and a weakening US Dollar late in the session helped crude to just pass the halfway line and close in positive territory at $104.95. At time of writing it’s still on the climb, trading at $105.29.
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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'Shares Spread Betting Strength Encourages US Dollar Weakness' edited by SD, updated 27-Sep-11
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