27th June 2011
Equity Overview

Equity markets climbed at the beginning of last week in expectation of the Greek government being given a vote of confidence but the S&P500 future could not break the 1290.00-95.00 level. Since then the markets have sold back off but have not yet broken the recent lows

Thoughts from the trading floor

The markets had a strong bounce off the lows made at 1256.00 and reached key resistance at 1290.00-95.00 which held on both Tuesday and Wednesday, topping out before Fed chairmen Ben Bernanke indicated QE3 was off the table for the foreseeable future. We have since sold off back towards the lows, touching 1257.00 on Thursday and overnight in the Asian session today. These two areas now mark key support and resistance and should either break, expect momentum to take the market further.

This week is likely to be dominated by Greece, not for the first time. Meetings start this evening by the government to debate the deeply unpopular austerity measures ahead of a vote of Wednesday. EU leaders are demanding to see approval this week to take away the threat of bankruptcy. Without it the EU and IMF say they will not disperse the fifth tranche of last years €100bn bailout and this will send shock waves through the markets, already concerned about the impact of the bailouts within the EU. This would surely leave a Greek default as an inevitability and with nobody seeming to quite know what the impacts will be, the ramifications could be huge across the financial markets.

With this in mind, technical levels may go out the window should big news hit the markets this week. Below the 1256.00-57.00 level in the S&500 future though, the 1246.50 level is also key. A break below here and expect to see further losses down towards 1234.00. To the upside 1290.00-95.00 remains key resistance and needs to break before we would be confident of seeing further gains. Above here 1302.00-06.00 is important.

Important events this week.

● Tuesday: US Consumer Confidence
● Wednesday: US Pending Home Sales
● Thursday: US Initial Claims, Chicago PMI
● Friday: US ISM Manufacturing, Michigan Sentiment

Bull View
The bulls have defended the 1256.00-57.00 on the retests but the market has not bounced a great deal since. A recapture of the 1300.00 handle is key to the market bouncing long term again.

Bear View
The bears have momentum again and attention turns to the recent lows again and whether these can be broken. If so then 1246.50 will be targeted, before 1234.00.

Futex View

We are still slightly bearish the equity markets though last week’s buy up shows you what good news out of Greece can do for bullish sentiment. This week is likely to be dominated by fundamentals and we will look to play range of last week backed by news coming from the Greek vote. A break below 1256.00-57.00 should see further selling pressure however.

24th June 2011
Currency overview
Focus on the Cable (GBP/USD)

Cable has broken lower over the past few days as talk of more QE in the UK, coupled with Bernanke seemingly ruling out QE3 in the US in the near term has weighed on the currency pair.

Thoughts from the trading floor

After holding the 1.6060 low last week the market fell just short of our 1.6280 target, topping out at 1.6260 on Wednesday. Since then we have seen a strong sell off with the Pound trading below 1.6000 for the first time since April 1 after finally making a clean break of the daily head shoulders. The market bounced of the key low made in March at 1.5940 yesterday as risk markets across the board saw a bounce going into the US close. This will be key going forward and a break below here should see further losses down to 1.5830. The low made in late January at 1.5750 is the major support level to the downside. In the longer term, the head and shoulders target is around the 1.5100 handle.

If yesterday’s low turns out to be a double bottom then upside resistance lies at 1.6060 first, before 1.6110 comes back into play. The daily head and shoulders retest today lies at 1.6125 and this will need to hold over the next few sessions if we are not to bounce back into the top half of the years trading range.

The pound has sold off over the past couple of sessions mainly due to the issue of Quantitative Easing on both sides of the Atlantic. In the UK there is quite a debate within the MPC between the doves and the hawks and the doves are currently winning. This stance was further strengthened with arch-hawk Andrew Sentance leaving the MPC recently. A poor reading from this months CBI distributive trades was further evidence of the weak recovery currently ongoing in the UK. Couple this with Fed chairmen Ben Bernanke seemingly ruling out another bout of stimulus (QE3) and the Pound has suffered against the Dollar.

Bull View

Bulls will hope yesterday’s low creates a double bottom at 1.5940 and will look to test the 1.6060 and 1.6110 levels. Getting back above the head and shoulders neckline is key if the market is to regain some upward momentum.

Bear View

A successful break of the head an shoulders neckline has lead to further selling down to the key short term 1.5940 level. Bears will look to make another test down here and a break should see further pressure come into the market, with 1.5830 and 1.5750 eyed.

Futex View

We will look to sell any bounces up to 1.6110-25 with a view to a break of yesterday’s low over the coming sessions.

20th June 2011
Equity Overview

Equities tried to bounce back in the early part of last week but could not break resistance at 1293.00 and sold off again back down to support at 1258.00. After bouncing off this level the markets have opened down this morning after more worried about Greece.

Thoughts from the trading floor

Technically the S&P 500 futures still look fairly bearish as the markets have failed to hold on to any gains made in the last few sessions. The market failed at key resistance last week and the 1290-95 level to the upside is now an important tipping point. While the market remains below here traders will be selling into any strength. We briefly traded through resistance at 1273-75 on Friday but could not close above here and sold off going into the close. The selling continued overnight and so far this morning, the markets are yet to bounce. 1273-75 remains resistance in the short term, with minor resistance also seen at 1268.50-69.00.

The market is currently trading just below the 1258.00 level and below here the market will eye the low made in March in the wake of the earthquake in Japan at 1247.00. This will be a key test for the market. A break below this level could lead to a much bigger correction many currently think. 12.34.00 is the next level below here. In Europe the FTSE 100 futures mirror the chart of the S&P 500 with the March’s low at 5503 now in sight and the major support to the downside. Above here 5585 should also act as support. To the upside the first point of resistance is the 5585-95 level and above here 5658-65.

The Dax in Germany has held up relatively well in the face of the crises in Greece and is a long way off the low’s made in March, though the Dax was particularly hit hard after Japan and sold off far more strongly than any other equity market at the time. A series of lows between 6990 and 7040 are the key support here and a break below here should lead to further losses with little in the way of support until 6880-6905. The key level lower is 6848.

Important events this week.

● Tuesday: German ZEW, US Existing Home Sales
● Wednesday: EU Industrial Orders, US FOMC Interest rate announcement and press conference.
● Thursday: US Initial Claims, New Home Sales
● Friday: German IFO Survey, US Durable Goods orders, GDP (Final)

Bull View
The key level for the bulls is 1290-95 as below here there will be plenty of sellers in the market. If the market continues to sell off and the bulls do not defend the they key 1246.50 March low there could be more pain ahead.

Bear View
The bears still have the momentum and if they can break support at 1258.00 then a test of 1246.50 is surely likely. It will also be important to defend any buying up to 1268.50-69.00 and 1273-75.

Futex View
We are still bearish the equity markets but would like to see the market reaction around 1246.50 before looking for further downside moves. The market sentiment this week will likely centre around Greece again so any good news regarding the situation could see a fair amount short covering.

17th June 2011
Currency overview
Focus on the Cable (GBP/USD)

Cable failed to make a significant move above 1.6450-6500 earlier in the week and has subsequently sold off along with other riskier assets such as equities and oil as we have seen a general risk-off trade in the last few sessions, but is still trading above short-term support at 1.6060.

Thoughts from the trading floor

Since breaking key support at 1.6280-6310 last Friday Cable has been fairly volatile. We saw a reversal on Monday as risk-on trades took preference across all asset classes but this proved to be short lived as Tuesday and Wednesday saw the equities markets sell off again and the Dollar strengthen. This has caused Cable to sell off back down to close to May’s lows with short term support coming in at 1.6060. Below here are the series of lows created in February and March’s trading range with the key support area being 1.5930-70.

If in the coming days we can hold the 1.6060 level then expect another test back up to the 1.6280-6310 area. Price action around these levels is key as it appears to be a turning point for the market whenever it has been here. The short term momentum is definitely to the downside however. A trend line drawn from March’s low through the low made on 24 May today comes in at 1.6110. We spiked through the line yesterday but could not close below it. A close below it today and a subsequent move below 1.6060 would attract more sellers into the market and March’s lows would be the next target.

The Dollar has remained relatively strong in the face of poor data coming out of the US in recent weeks but this seems to be mainly due to the safe haven bid in recent session across all asset classes. The key test of it’s strength could come next week with the meeting of FOMC. We don’t expect anything major to come out of the meeting but there has been growing talk in recent weeks of the possibility of QE3 from the Fed and should any such measures be announced or even hinted at, then the Dollar could see some big moves.

Bull View

We are still above short term support at 1.6060 but the bulls need to get the market back above the 1.6160 level, and look to target the 1.6280-6310 area. If we move lower then the 1.5930-80 support is key if we are to remain bullish in the long term.

Bear View

The bears successfully broke through 1.6280, though it took two attempts and have made moves on the 1.6160 level. A close below the daily trendline and 1.6060 should lead to more selling pressure in the coming sessions.

Futex View

In the short term, 1.6110 down to 1.6060 must hold today else we may see a move down to the March lows next week. If we can hold the market needs to get back above 1.6160 before 1.6280 becomes the target.

10th June 2011
Currency overview
Focus on the Cable (GBP/USD)

A fairly range bound week this week in Cable between 1.6300 and 1.6470. We have traded down from the top of that range yesterday though and are sitting just around lst Friday’s low and short term support at 1.6285 this morning.

Thoughts from the trading floor

Technically the market is trading around important levels this morning and where we close today could be key going forward. A break below 1.6280 leads the way to a further move lower down to 1.6160. Although European equities closed strong on the day yesterday the US equity markets sold off going into the close, suggesting the risk-off trade of recent days has not surpassed. This would be bearish for Cable and fresh lows for the month could be tested in the coming sessions.

In the medium term resistance lies at 1.6470 and should we break here then 1.6550 will surely be tested. Above here there is still further resistance at 1.6600. We still look a little bearish on the chart however and if the main support at 1.6060 through to 1.6110 will have to hold if we are to prevent a further leg lower.

Later today we have a slew of UK data in the form of Industrial Production and PPI, as well as the BoE inflation attitudes survey. This data may give a clue as to the day’s sentiment so watch for moves soon after their release at 0915BST. The BoE yesterday kept key interest rates at their record low of 0.50%, in line with expectations as well as keeping QE at £200bn. There has been some speculation in recent weeks, from both within and outside of the BoE that this number could be increased to help the flagging economy. For the mean time though this remains an outside chance.

Bull View

We are still trading in the middle to top end of the years trading range so the long term picture remains relatively strong, but the market must remain above 1.5950 to maintain the long term bullish stance.

Bear View

If we break and close below 1.6280 today then the bears will look to test 1.6160 to the downside before trying for last month’s lows at 1.6060.

Futex View

We favour buying the cable if it gets to 1.6100-60 with stops below 1.6050 and selling any up moves towards 1.6500-50, trading the bigger range over the coming week.

9th June 2011
Currency overview
Focus on the Euro (EUR/USD)

The Euro has settled above the 1.4600 handle over recent days, trading to around the 1.4700 handle in Tuesday before easing back a little. Today we expect the ECB to hold rates at 1.25%

Thoughts from the trading floor

The ECB hiked interest rates in April to 1.25% from 1.00%. Since the start of the year ECB have ramped up their hawkish stance on policy by dropping the appropriate word to describe rates. In January, they introduced the statement that the see short-term upward pressure on overall inflation, and at the same time “very close monitoring is warranted.” In March, the ECB signalled an April rate hike by announcing that “strong vigilance” was warranted on upside inflation pressures. Last month, the ECB signalled that they will “monitor very closely” the upside risk to price developments. The policy stance was described as “accommodative”.

Going back to the start of the year, the ECB announced that they would “monitor very closely” in January and February before signalling “strong vigilance” in March. The monitor very closely statements of the last 2 months imply that if this pattern is to hold, then we would expect a “strong vigilance” comment. Looking at the recent movements in the short-end of the curve, neither the risk of a strong vigilance or monitor very closely comments have been fully priced in. Therefore, we should expect a good move in either direction today.

Key words to look out for:

“Appropriate”- This would suggest that potentially the ECB have had a one off hike and are on a wait and see stance again. The ECB may then put the monitor closely line back in as per their stance in January. This would be a dovish development.

Announcing “monitor very closely”, with rates remaining “accommodative”- same as last month- should see brief relief rally in bonds, and small unwinding of longs in the Euro, i.e. Not as hawkish as feared.

Strong vigilance would indicate a hiking of rates next month. Doing so may need the ECB to use the words “(very) accommodative” to describe interest rates. This should be very hawkish.

Interest rate corridor width:

Currently stands at 150bp. (marginal rate minus deposit rate). The pre-crises width for this corridor was 200bp. Whilst the ECB’s liquidity provisions are being implemented (MROs, etc.) widening the corridor to 200bp. should have a limited impact (may initially be taken as a tightening of liquidity). If this is announced alongside the easing out of the liquidity facilities, this would be seen as a further hawkish development. However, would put ECB in difficult position as many peripheral banks need the liquidity facilities to remain solvent.

Today’s side focus for the markets may be on the ECB measures to support peripheral banks. There has been talk of a two tier system where banks in the bailed out nations receive further liquidity provisions than the others.

With regards to the non-standard measures, described as “enhanced credit support” and the Securities Markets Programme, the ECB stated that these are “temporary in nature”.

Bull View

The bulls will look for the ECB to signal a July hike today. The continued immediate term strength may depend on the ECB announcing further tightening going forward.

Bear View

The bears look for the ECB to signal that rates will be on hold for another month. With the April hike as a one-off and return to a wait and see stance. With the Euro pricing in a potential series of hikes going forward, it will be left vulnerable especially considering the fresh developments in the Eurozone debt crises overnight..

Futex View

We favour the bears. The market has impressively shrugged off the Eurozone issues. However the continued hope of higher interest rates has kept the Euro well bid against the USD, which should be stronger considering how weak risk markets are at the moment.

27th May 2011
Currency overview
Focus on the Cable (GBP/USD)

After last week’s range bound trade the British Pound vs. the Dollar has strengthened this week after false breaking last week’s lows on Monday. After touching 1.6060 at the beginning of the week the market has bounced considerably and is trading around 1.6450 this morning.

Thoughts from the trading floor

After making a couple of brief new lows through last week’s trading range the GBP/USD has bounced nicely this week as the Dollar has weakened across the board. Having broken the March and April highs at 1.6345 and 1.6420 the market now looks strong again. If the market can close above 1.6420 today then the bulls will be firmly in control. Having broken to the upside the short term target is 1.6520 and beyond here 1.6600. With the Dollar looking weak against all the major currencies there is definitely further room for some upside moves, but today’s price action could be key for next week’s trade.

Though the market looks particularly strong at the moment we have seen in recent months plenty of breaks to both the upside and downside be met with strong contrarian resistance and the market fall back into it’s previous trading range. This was evidenced at the end of March and in April when both breaks to the upside of the recent range were immediately sold off the following day. Because of this we are slightly cautious of further moves up. Ideally, we would like to see today and Monday trade and close above 1.6430 to give us some confidence that the market will continue to break higher.

Should we see a pull back of any sort then 1.6300 will act as the first level to look for, with 1.6230-50 providing key support if the market is to keep its upside momentum. We may see some moves in the Dollar after the weekend if we see some action from the EU/IMF on Greece. We have seen in recent sessions the main risk to the markets stems from the European sovereign crises and the risk of contagion. Though the Dollar has performed poorly this week if we go into next week with doubts still remaining over Europe, we may see a risk off trade take place which would be bearish for GBP/USD.

Bull View

The bulls currently have control of the market and need the market to close above 1.6430 today to really show an intent to push higher. 1.6520 is the first target before 1.6600. While the market remains above 1.6230 however, the market remains in a bullish stance.

Bear View

After such a strong sell off from the yearly highs at the beginning of the month the market has bounced strongly again and today’s close will be important. The bears will need to sell the market to below 1.6430 to create another false break of the upside levels.

Futex View

We have been bearish the Dollar in the long term for some time now and see no reason to change this stance. We expect the highs to be tested in the coming weeks. We do remain cautious of some pull backs in the short tern however due to the recent run up in prices. We favour buying between 1.6230 and 1.6300. If we close today above 1.6430 we expect 1.6520 to be tested next week.

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.

16th May 2011
Equity Overview

Since selling off after making new highs at the beginning of the month the equity markets has been predominantly range bound for the last week, though increased volatility has seen some large and fast moves taking place. The S&P 500 future is this morning trading around 1330.00 - close to the lows of the trading range.

Thoughts from the trading floor

For the last two weeks equity markets have been mainly range bound, with the S&P 500 futures support coming in around 1325.00 and resistance at 1358.00. Within this area we have seen some violent moves however, with both strong bounces and sell-offs when the market has hit these levels. Much of the volatility has come about due to the large moves seen in the commodity markets which have often led to big moves across all asset classes including currencies, bonds and equities. Neither the bulls nor bears are creating sustained momentum at the moment and we are seeing these sharp moves take place as market participants try and gain control of the market.

We would need to see a clear break of the recent support or resistance levels before and medium term direction can be determined. As well as lows printed at 1325.25 we have further support in the form of a daily trend line which today comes in at 1328.00. We have briefly traded below that line this morning but the reaction of the market during cash trading hours this afternoon could be key. The line is drawn from the low made on 17 March in the wake of the Earthquake in Japan through the low made on 18 April after Standard and Poor’s rating agency downgraded the US outlook to negative. A firm break through this line, and through the recent support could see an extended move to the 1291.00-98.00 levels.

The biggest event risk to the equity markets remains the sovereign debt crises in the Eurozone, with any debt restructuring from Greece or Ireland having a big impact on the regions banks and financial institutions. Any news in this form and we expect the FTSE and the Dax to under perform their US counterparts. The Ftse 100 future is already underperforming as the commodity rout has hurt the natural resource companies the most. Look out for the market reaction if it touches the head and shoulders neckline (from the lows made on 18 April and 5 May) which currently comes in at 5856.00. A move below here and a close below 5816.00 on the daily and the long term target is 200 ticks lower.

Important events this week.

● Monday: Empire Manufacturing Survey
● Tuesday: UK CPI, German ZEW, US Housing Starts, Industrial Production
● Wednesday: UK BoE Minutes, US FOMC Minutes
● Thursday: US Initial Claims, Existing Home Sales, Philly Fed Survey

Bull View
We are still trading above the 1325.00 support and close to the highs made in April around 1335.00. Having touched the daily trend line this morning the bulls will look to cause another market bounce of these support levels with an eye to breaking 1353.00-58.00.

Bear View
Having sold off after new highs were made at the beginning of May the market has not manage to gain any momentum back to the upside and has tested support three times now on the daily chart. Bears will look to break the trend line and close below 1325.00, with a view to testing the 1291.00-98.00 levels.

Futex View

While in this range of the past two weeks, we would favour trading the range with tight stops. We remain cautious to a bigger down move should 1325.00 fail to hold again in the early part of this week. Keep an eye on commodities as equities have tended to trade in tandem with Oil etc during the last few volatile sessions.

13th May 2011
Currency overview
Focus on the Cable (GBP/USD)

The British Pound vs. the Dollar has sold off over the last two weeks after making new yearly highs towards the end of April. After almost touching the 1.6750 level we mentioned last month, the market has sold off along with most other currencies against the dollar as the rout in commodities has led to dollar strength. It is currently trading just below the 1.6300 handle.

Thoughts from the trading floor

The GBP/USD, much like other currencies against the dollar has sold off since making new highs at the end of April. As commodities across the board have sold off hard on margin calls and possibly weak longs getting squeezed out there has been a flood of money rushing back to the dollar. Cable did mange to reach the initial upside level of 1.6750 but after a double topping on the daily has weakened somewhat. On a medium term outlook the picture still remains fairly bullish. Despite the recent sell off the market remains above April’s low of 1.6167 and still has plenty to go before reaching the major support of 1.5940-80 - the lows of the trading range of February and March.

The short term outlook is a little less certain with many of the moves in Cable mirroring that of the commodities as the risk on/risk off trades dominate the markets. For now, commodities are still particularly volatile and this leaves room for big swings in the dollar against all currencies when these moves take place. The last two days have seen Cable hold above small support at 1.6232 and so long as we remain above April’s low a further 60 pips away then we would expect to see a bounce back up to the 1.6400-30 levels initially. A firm break below here though and the February/March lows will be eyed.

The data out of the UK has been mixed in recent weeks, with both the manufacturing and services PMI’s surprising to the downside which has probably also caused some downward momentum in Cable. Next week we see the release of CPI data for April as well as the month’s retail sales. These numbers could have a bearing on where Cable moves first in the short term, especially if the recent volatility in commodities subsides and economic fundamentals begin to shape the market moves again.

Bull View

The bulls will be confident of another move up if they can keep the market above 1.6170 and we see no further huge downside moves in the commodity markets. The initial target will be a break above March and April’s previous highs and up to the 1.6510 level.

Bear View

Since touching the level at 1.6750 bears have been in control of the market for two weeks and will look to break down lower beyond April’s low of 1.6167. A break below here and the major long term support of 1.5940-80 will be eyed. To keep the bearish sentiment in the market they must defend the 1.6430 level.

Futex View

Over the long term we favour a bounce back up to the highs, with a test of the 1.7050 level (2009 highs) possibly coming in the next few months. The short term outlook is more uncertain however and direction may be decided by how the commodities trade and the resulting affects of money flowing back into or out of the dollar.