20th May 2011
Currency overview
Focus on the Cable (GBP/USD)

The British Pound vs. the Dollar has been relatively range bound this past week with the market struggling to make a meaningful move in either direction. Up moves have been capped around 1.6300 while short term support lies at 1.6110-50.

Thoughts from the trading floor

The GBP/USD has settled into it’s current trading range after a sell off was seen after touching the 1.6750 level at the beginning of the month. As commodities and equities have weakened somewhat over the past three weeks there has been some pressure on all currencies against the Dollar as traders have turned to risk off mode. We have seen a bounce in these markets over the past few sessions however and are starting to show signs of possibly another leg higher. This would be bearish in general for the Dollar and we could see some upside in the Cable.

Currently, the market remains bearish as long as we are still trading below the top of the March/April range at 1.6350-1.6420. While we remain below here the move up at the end April and beginning of May still amounts to a false break of the recent highs. If we can get back above here then the market would eventually look to target the yearly highs of 1.6750 again so the price action around these levels will be key. Before here there is small resistance at 1.6570-1.6600. To the downside, short term support lies at 1.6110-50 with the lows of February and March providing strong support at 1.5930-80.

Data out of the UK this month has been pretty bearish for Cable throughout, apart from the CPI data we saw this week which again indicated rising costs for the average UK consumer. With CPI showing little signs of backing off, it could be a case that the Bank of England simply have to raise interest rates in the coming months. This of course would be extremely bullish for Cable, especially with the expected continuation of the ZIRP policy by the Fed in the US. As the minutes from this months BoE meeting show however, there is still reluctance within the Bank to raise interest rates as the economy still struggles to emerge with any strength from the recession.

Bull View

The bulls will look for the 1.6110 lows to form a base for another retest of levels to the upside. The first target is the top of the previous trading range at 1.6400-30. Beyond here there is small resistance at 1.6570-1.6600 before the major level at the yearly high of 1.6750.

Bear View

The bears will be content after the market sold off after making new yearly highs and as long as the market remains below 1.6430 the the outlook remains bearish. Through the lows formed this week at 1.6110 the major support lies at 1.5930-80. A break through here and we could see an extended move to the downside.

Futex View

We are still a little bearish on the dollar in the long term so expect a retest towards the highs over the next few months. In the short term however the picture is mixed and we expect the market to remain relatively range bound. We would look to play the February and March range until another meaningful move takes place.

25^th January 2011

Bond Overview

Bonds grinded lower last week, with the market still feeling the pressure of inflation fears. German Bunds entered fresh monthly lows printing 123.35. The market will look forward to a busy economic week with key GDP data out of both the UK and US, along with the ever-important FOMC Rate Decision.

Thoughts from the Trading Floor

From a technical perspective, German Bunds continued to tread a bearish path. The market extended to the downside breaking through the daily triple bottom at 123.76, making a low at 123.35. The trend is still bearish from the chart view, with momentum indicators continuing to drop into negative territory and it is likely that sellers will still be dominant over the coming days. A break below 123.35 would be grim news for any buyers. Bulls will be hoping to keep the market above the key triple bottom level at 123.76 and from here they may be able to stabilise the market and build a value area platform to halt the current bearish grind. Buyers will also be hoping to snap back through 124.36 and if successful may be able to buy themselves some breathing room to stage a more meaningful advance with important target levels at 125.05 and 126.54.

The European Central Bank now owns almost 20 percent of the outstanding government bonds of Greece, Ireland and Portugal via its Securities Markets Programme. Due to this, the ECB is distorting the market pricing in the periphery creating a deformation in the CDS and Cash bonds relationship. From this European leaders are considering assisting struggling countries to potentially buy-back their own distressed debt. This would in theory allow countries like Greece to restructure their own debt in the open market. If effective, this bond buyback proposal could solve the tricky problem of lowering a country’s debt without having to default, even after the EU bailouts. The way the ECB handles the EFSF and the transfer of ownership of their peripheral debt over the coming months will be key in solving the crisis.

Important events this week

• Tuesday: GDP (Advanced) (UK), Consumer Confidence (US)

• Wednesday: New Homes Sales (US), FOMC Rate Decision

• Thursday: Durable Goods Orders (US)

• Friday: GDP (Advanced) (US)

Bull View

Bulls need to re-establish themselves back in the market by maintaining support above 123.76 if they are to keep their heads above water. Ideally buyers will need to reach 125.05 to assert their presence.

Bear View

Bears continue to thrive and make steady progress in the market. Sellers will look to accelerate the trend as momentum indicators have picked up and they should capitalise on their advantage.

Futex View

We maintain our bearish outlook on the bond market as prices are still declining and we will follow the trend. There is no reason to change our perspective either fundamentally or from a technical view.

Overview

Last week the Bund continued to find itself under pressure as equities performed strongly. The US Ten Year has also found itself under pressure but has proven far more resilient likely aided by the pricing in of QE2. This week the (more...)

Overview

Last week equity markets remained fairly resilient only slipping slightly, whilst holding above key technical support. Overall the macro fundamental releases last week were solid with GDP coming in close to expectations. This week is (more...)

Overview

Last week equity markets came under pressure as the S&P 500 future dropped nearly 60 full ticks from its weekly highs. The predominant driving factor was ongoing speculation of (more...)

USA GDP

25 june figures

Overview

Last week world equity markets again came under pressure as confidence ebbed away from the bulls and uncertainty surrounding Europe again dominated the agenda. On Friday the S&P 500 future dropped below May's (more...)

USA- GDP-Personal Consumption-Expectation-Estimates-Range -Previous

download to read more (more...)