Spread Trading 25 Oct 10
Spread Trading 25 Oct 2010
There have been some interesting moves after the G20 decided not to ‘competitively devalue’.
Which presumably means that we will all sit back and watch the USA ‘un-competitively’ devalue their currency.
Pressure has also been applied to China to ‘do something’ about the Yuan without, of course, actually doing anything.
All in all it was a pretty standard G20/G7/G10 communiqué. We are all left with the background impression that we would also have liked to fly to South Korea, first class, for a photo shoot and a swift return to the hotel mini bar and then off to a ten course banquet.
Markets this morning are up but not by much. The impression is that we are only higher today on the lower weekend Dollar which has plummeted to new 15 year lows versus the Yen.
Poor old Japan is virtually the only truly floating major currency in the East and this is causing almost unbelievable pressure which appears to have little to do with reality and everything to do with the fact that investors cannot ‘buy’ other currencies. At some point this is all going to unwind with a bang but probably not today.
Betfair floated on Friday with a flourish showing strong interest from both institutional and retail investors. The stock ended the day some 15% to the good and remorse selling does not seem to have taken place this morning either.
The simple fact is that the company has what is in effect a monopoly position due to the liquidity available on its platforms. It will prove to be almost impossible for a competitor to arise, unless the US does its normal trick of permitting only domestic internet companies to operate until a position of dominance has been attained.
In the meantime BetFairs only real problem is trying to assuage the fears of whatever jurisdiction they accumulate their clients in. Several European nations are now requiring permits to operate, even though BetFair is actually in the UK.
The FTSE is back up at the recent highs as mentioned following the time trodden reaction to Dollar weakness. We are now just 50 points from the highs of the year marked out in April at 5839.
As mentioned a few weeks ago, when we were a hundred and fifty points lower, it would seem rude to come so far and not have a bit of a pop at the high.
This said, there is solid resistance at the 5800 level which proved too much on many sessions back in the spring and the one time we did get above the mark it proved to be a very temporary attempt. On the support side 5740/45 may prove to be good resistance and below here 5680/85.
The US markets are reacting higher as well with an early morning move pushing us above 11200 in the Dow Jones almost reaching the 2010 high of 11255. Markets are now back up at the high range of 1999-2001 where the FTSE spent three years battling with the major psychological level of 6000.
The Dollar is once again the whipping boy on the FX spread trading markets, closely followed by Sterling. Anything that suggests further QE and both these currencies get hammered.
The Tories must be scratching their heads thinking, “Why is Sterling plummeting when the market wanted us to perform spending cuts?”
Of course the major worry now is the dreaded double dip scenario which has come a step closer. Our mate Dave and his younger brother Nick are speaking to the CBI today to try and assuage fears for another recession.
Meanwhile GBP/EUR is perilously close to it’s lows of the year and edges ever closer to parity with the single currency.
Gold, believe it or not, is higher on the back of the Dollar weakness, knocking on the door of $1350 again this morning. Once again the recent sell off has presented a buying opportunity and our spread betting account holders are heavily long of the precious metal, hoping for another test of the all time highs.
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'Spread Trading 25 Oct 10' edited by SD, updated 25-Oct-10
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