1st July 2011
Currency overview
Focus on the Cable (GBP/USD)

Cable has been relatively choppy this week but overall has bounced a little from the double bottom made at 1.5912-13. We are currently trading above the 1.6060 level but have still failed to break back above the head and shoulder neckline.

Thoughts from the trading floor

Cable traded below the 159.40 level on both Monday and Tuesday but managed to only move lower by 20 ticks, making a double bottom at 1.5912-13 which is now key short term support. A break below here and further losses down to 1.5820 and then 1.5750 are expected. The previously broken head and shoulders neckline today comes in at 1.6140. As long as the market fails to close above here on a daily basis then technically the market still has a bearish outlook.

Despite weakness seen in the sterling currency in recent weeks the recent run up in stocks going into the end of the quarter has lead to some weakness in the dollar as risk assets have seen a sharp bid. Sterling against the Euro is still very weak and the recent bounce in Cable seems more to do with the weakness in the Dollar rather than Sterling strength. The market is still currently trading below the 1.6110 level and the aforementioned neckline. If we do continue to bounce and break above these levels then the next area of interest is 1.6260-80 with 1.6310 providing key resistance.

Cable does still seem to be suffering from a fear of more QE by the Bank Of England and still looks weak across the board. However moves today and early next week may be dictated by market sentiment elsewhere. If we see an unwind in some of the ‘window dressing’ moves we have seen in the equity markets the past few days that could lead to a weakening of risk assets including Oil, which would lift the Dollar against the major currencies. If however the moves we have seen recently are the start of a more protracted move higher in the equities then expect Cable to see some more gains in the coming sessions.

Bull View

The bulls defended the 1.5940 level well this week and will look to target 1.6140 to the upside. A close above the head and shoulders neckline is key if the market is to bounce further.

Bear View

The market has failed to break the 1.5940 level significantly so far but the bears will look for another retest in the coming sessions. A break below the daily double bottom will target 1.5820 and 1.5750.

Futex View

We are still bearish the sterling currency in the medium term but are wary of risk related trades affecting the strength of the Dollar. We will still look to sell into bounces up to 1.6110-40 but view the equity and Oil markets closely.

10^th February 2011 

Currency Overview

Euro vs. the US Dollar (EUR/USD)

The Euro stabilised last week after rejecting fresh 3-month highs at an elevated print of 1.3856. However, the market did dip towards the 1.35 handle on the back of strong demand for dollar assets before calming. Trade now enters a quiet end to the week with no significant economic releases.

Thoughts from the trading floor

The EUR/USD March Future pushed higher last week, despite an aggressive drop which bounced off strong support at the 1.35 handle. The chart posture still indicates sufficient bullish influence in the market. Buyers have shown their resilience by holding key daily support at 1.3495 and further upside gains are expected despite momentum indicators having taken a dip over the past week. Bulls will be looking to recapture some of their former aggression and propel the market back towards 1.3850 resistance. Sellers have temporarily stalled the short-term uptrend, yet they were unable to advance past 1.3495 support. If sellers are able to break through this level, the market could easily extend losses and slide lower towards the next major level of 1.3234 as long positions quickly panic.

Yesterday saw Federal Reserve Chairman Ben Bernanke comment that the unemployment rate is likely to remain high “for some time.” The Dollar dropped as Bernanke added further that unemployment will persist even after the biggest two-month drop in the US’s jobless rate since 1958. The markets took his comments as dovish, with US output growth likely to be moderate for a while and potentially the unemployment rate taking several years to return to a more normal level.

The Euro also trimmed gains against the greenback as hawkish Bundesbank President Axel Weber declared that he would step down later this year. This action has left him out of the race to succeed ECB’s Trichet as head of the European Central Bank. This decision shook the markets as Weber was a firm favourite for the job.

Bull View

Bulls remain determined and firmly rejected an initial retracement towards 1.3495. Yet to make the most of their advantage, buyers will need to hold a firm base above the 1.36 handle.

Bear View

Bears have dented the current upward trend and cast-off any moves above the 1.3850 level. Sellers will wish for volatility in the global economic picture to strain the market and generate safe haven flows to strengthen the dollar.

Futex View　

We are still bullish the Euro. Our strategy continues to be to buy dips in the market; the medium to long-term projections still point to further Euro gains.

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