Spread Betting Account Holders Trade Ranges on USD/JPY Market
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 25 August 2011
Just about the quietest open we have seen for a while, albeit after opening strongly to the upside, with the first 30 minutes only managing some 10 point range on the FTSE.
The falls of late last week have now been largely reversed and we can expect more treading water as we await Mr Bernanke's statements tomorrow.
However, one of the problems is that he will be standing up at 15:00 UK time on a Friday afternoon, giving investors only a small window to react and then a very long weekend in which to worry.
We may well find that there is a great deal of book flattening going on over the next few sessions. This would be to avoid the risk that, even if he says what is expected, i.e. not much, the markets may violently hate it or just as dramatically love it. This will give the opening next week an extra frisson of terror.
In this environment the only real sensible decision for traders is to go into the weekend flat. Or maybe try to take contra positions in markets that tend to move in tandem to hedge some of the risks.
Gold was the big loser yesterday as weak longs came under increasing pressure. At one point last night we were flirting with a near 200 Dollar reversal from the highs of just two days ago.
But it must be said, before we get too excited, that this merely reverses the rally of the previous week. Gold has had a habit of rarely falling further than the previous bear move.
The only serious fracture of this tendency was in 2008 when we fell from nearly $1000 to $680, 33%, over a period of five or six months. If this does turn into a correction on this scale then we would be looking at a near $600 fall from top to bottom.
Into everyone's minds may come that little worm of doubt "is the yellow metal really worth this price" or have we all been sucked into a "tulip mania" bubble event. Obviously time will tell but for all the weakness of the last two sessions, it is still 'believe it or not' a very strong bull market trend.
Currently we are at $1738 with support at $1730/32 and $1720/24 below here bulls may possibly come under further pressure so a push below $1720 might trigger a push back to the mid $1650's. On the upside, and there is one, resistance is at $1745/47, $1768/70 and $1794/96.
The FTSE is now at 5225, weakening as I write. Support is at this level and below at 5205/10 before better support at 5170/75.
On the upside we have hammered at 5250 for two days in a row without success so it does not take a rocket scientist to see this as being a tough nut. In fact it may take an economic release to crack this level.
Above here 5280/85 and then the high 5300's, 5270/5400, which have also proved difficult to break through.
The currency markets confirmed the ranges yesterday with the USD/JPY failing once again to make headway below ¥76.50 and Sterling likewise showing the levels above $1.6480 to be particularly perilous.
The Euro remains in the pennant formation mentioned yesterday and remains near the top of it, currently trading at $1.4470. Our financial spread betting clients are selling here, presumably looking for it to fail to break out, hoping that the range will be confirmed and it will drop back.
The market that is proving most fruitful for spread betting account holders in recent weeks has been buying the Dollar versus the Yen whenever we approach ¥76.50 or lower as there appears to be a very solid support here.
With the overnight move back above ¥77.00 it has proved the right trade again. Traders should beware any close below ¥76.50 though, it has traded under here but never managed a close, as the support is generally built on the belief that the BoJ will sell Yen below here. If they do not come in then it might trigger a sell off.
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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'Spread Betting Account Holders Trade Ranges on USD/JPY Market' edited by SD, updated 25-Aug-11
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