Spread Trading 29 Sep 10
Spread Trading 29 Sep 2010
The Bank of England’s Adam Posen seems to have gotten in on the currency devaluation act with comments on the need for even more QE to prevent a lost decade of growth.
One does wonder where the lessons of Japan have gone. Japan has done nothing but stimulate through state spending for the last 20 years to no great effect.
All the billions of Pounds across the globe, probably trillions by now, seem to have done little other than push the problem further down the track and the effort to drive it further is getting heavier and heavier.
Poor growth and unemployment are terrible things but at some point it has to be recognised that selling our future to prop up the present is, possibly, not a solution.
Whether the BoE does do more QE is still a moot point but the mere threat of it had, presumably, the desired effect with Sterling slipping to €1.1625 versus the Euro, falling another cent on the day, having been at €1.2280 a month ago.
Effectively the Sterling move was the same as the Dollar’s reaction to the FOMC statement last week. At some point soon we can probably expect a statement from an ECB member stating that the Eurozone is pondering more rescue/stimulation packages in an attempt to reverse the recent Euro strength.
The BoJ has already nailed its colours to the mast with actual intervention a couple of weeks ago when the USD/JPY cross fell below ¥83.00 which drove us briefly up to ¥86.00. We are now back at ¥83.60 so the question will be “if the market slips to ¥82.85 again will the BoJ come in”?
Only an hour into the day and the FTSE has already spiked up to the high range of the last few weeks, had a quick look, shaken its head and gone back down again to the closing levels of yesterday.
The reaction this morning is almost a mirror activity to the open yesterday and we can see the 5490/5500 to 5630/40 range getting more and more entrenched as the month goes by. Every day looks like breaking in one direction or the other only for the attraction of 5550 to pull us back.
Support and resistance levels remain the same as yesterday as mentioned above.
The Dow is also struggling to maintain prices above 10850/75 and with October just around the corner we may find that discretion is the better part of valour for many of our financial spread betting account holders. Memories are long and many of the big bear moves have started in October which tends to make traders wary.
Currency markets remain Dollar unfriendly, and Sterling unfriendly after Posen’s comments, and so our spread trading clients are heavily short of the Euro. At the moment they seem to be suffering as they are trying to pick a top and are being squeezed.
As we commented yesterday the brief Dollar rally had a ‘dead cat bounce’ look about it and the afternoon action just drove the Euro and Yen higher and higher.
Resistance for the Euro is just above $1.36 and up at $1.3680/90 support is at $1.3550/60 and $1.3500/10
Cable is worrying a bit as we are being pushed around by comments but the supports at $1.5770 and $1.5725 look solid for the moment.
As previously warned, the spike lower in the gold spread betting market was very short lived and the price recorded a 30 Dollar high low range as the early sell off was reversed yet again by buying out of the US. The 13:00-14:00 time period in the UK really does seem to be critical every day.
We are now above $1300 and any sellers must be well and truly squashed flat. The break above the previous high of $1265 has proved decisive for the time being and we have had no attempts to retrace back down.
New highs for gold tend to be followed about a fortnight later with a small sell off so historically we might be looking for caution. However, as we have stated many times in these comments, shorting the yellow metal is a very dangerous occupation just at the moment.
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'Spread Trading 29 Sep 10' edited by SD, updated 29-Sep-10
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