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Trading the trend

US Markets Monday

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Major Averages Falling To New Lows For The Session

After seeing early strength, stocks have shown a notable move to the downside over the course of morning trading on Monday. The major averages have pulled back well off their highs for the session and fallen firmly into negative territory.

While a positive reaction to some merger-and-acquisition news contributed to the higher open, buying interest waned not long after the start of trading amid continued concerns about fiscal stability in Europe and the future of the European Union.

Resource stocks are helping to lead the lower amid concerns about the outlook for demand, with energy stocks posting notable losses amid a notable decrease by the price of oil. Gold stocks are also under pressure even though the price of the precious metal has moved higher.

Significant weakness has also emerged among housing stocks, which had moved notably earlier in the session. Banking, pharmaceutical, and retail stocks have also come under pressure.

The major averages have seen further downside in the past few minutes, falling to new lows for the session.

The Dow is down 90.92 points or 0.9 percent at 10,529.24, the Nasdaq is down 17.70 points or 0.8 percent at 2,329.15 and the SP 500 is down 10.35 points or 0.9 percent at 1,125.33.

Written by fxsunrise

May 17, 2010 at 5:46 pm

Euro-Markets update

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Problems with the Euro still have the markets in trouble. The Euro-wide deal at first created a huge rally which during the week tapered off.

Italy’s MIB index has been particularly volatile, with Italy in the frame as the next Greece. While its budget deficit has been seen as more manageable than many its overall level of debt has put it in line with Portugal and Spain as a risky Sovereign debtor.

The Yen is the key measure of market fear as it is to the Yen money has been fleeing. Japan itself is in debt trouble but for now it is considered a haven.

France’s Cac is doing little better and while the Dax is volatile it has corrected much less than other European exchanges.

The markets as a whole have still not completely got over the US market malfunction of May 6th. Regulators are claiming there was no ‘fat finger’ – an event where a single trade causes a violent market swing. This is of course bad on several levels.

The first is, this means the market is not sufficiently protected from malfunction by the exchanges and regulators. Secondly market experts know a ‘fat finger trade’ when they see one and if the regulators can’t work it out that is further proof the regulators are clueless. Thirdly after the announcement of ‘no fat finger,’ markets are reporting that a large trade in E-minis caused the crash and that after all a ‘fat finger’ was the cause.

This is not the kind of nonsense that will help markets regain their poise.

All markets are exhibiting the same pattern as the Euro-scare unwinds. After Friday’s flight from weekend risk, Monday should show whether we have a big fall ahead of us or just a period of volatility. Money should flow back into the market Monday but if the fall continues then the omens will be bleak.

Written by fxsunrise

May 17, 2010 at 12:39 pm

Forex markets update

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Sterling and Euro continue their slide as austerity bites
Austerity measures seem to be all the rage at the moment with Portugal, following its neighbour Spain in announcing fresh tax rises in response to the country’s worsening fiscal plight. This fiscal tightening across a large part of the Euro zone which includes Portugal, Ireland, Greece and Spain, while necessary given the financial strait-jacket these countries are in, could well be a shape of things to come in the UK.

As if to highlight the seriousness of the problems faced we have the new UK coalition government taking 5% ministerial pay cuts as a prelude to their own plans to cut the size of the UK deficit.
Yesterday’s worse than expected UK trade balance highlighted the scale of the problems as UK exports were unable to make the gains analysts were expecting as a result of the weaker pound, largely because of the problems in Europe, which is one of the UK’s biggest export markets.

This continued belt tightening in Europe will do nothing to assuage worries about how the UK increases its own exports and continues its climb out of recession.
The pound slid back on the currency markets on the back of these figures and continues to exhibit broad weakness against a basket of currencies.
The Euro continued its slide on the currency markets after the ECB intervened in the bond market buying up Spanish and Italian bonds as it indulges in its own form of quantitative easing.

All the while Gold continues to surge to new highs as investors look for safe havens on the back of the devaluation of fiat currencies.

EURUSD – despite making marginal new 14 month lows overnight at 1.2517 the Euro has so far managed to hold above the 1.2510/20 support area. This continues to remain a short-term obstacle to further losses and a test initially of the 1.2460 lows of March last year.
The overall downward momentum continues to remain in place with the upper trend line boundary currently around the 1.3520/30 area. There is also resistance just below the April lows at 1.3115/20. While the Euro continues to trade in this broad downward trend the target of 1.2135 over the next few weeks continues to be the primary objective. The 1.2135 level is a key Fibonacci support level in that it represents a 50% retracement of the up move from the all time Euro lows at 0.8230 set in the October 2000 to the highs of 2008 at 1.6040.

GBPUSD – Sterling has had a pretty lousy past two days, adding to its losses overnight after UK trade figures came in much worse then expected at -£7.5bn for March, caused by a jump in imports to their highest levels since August 2008.
The break of 1.4780 on a daily close now opens the way to a test of last week’s lows at 1.4475.
A break below these lows opens up a test towards the April 2009 lows at 1.4270. Resistance now lies around the 1.4780 previous support, and the pound needs to recover above this level by the end of the week otherwise a test of 1.4000 looks pretty much a certainty.

EURGBP – the Euro continues to regain ground against the pound, pulling away from its lows of the week around 0.8440 on the back of the poor UK data. This will in all probability only be a temporary respite for the Euro, though we could see a test of the main resistance around the 0.8730 area. The odds still favour a test of the key support around the 2009, and last week’s lows at 0.8400, and a break lower towards 0.8250.

USDJPY – The dollar yen remains in risk on/risk off mode as it trades within a broad range between 92.15/20 and the recent highs near 93.50/60 area. We would need to see a break above the 93.50/60 area to re-target the April highs around 95.00, while a break below 92.15/20 re-targets 91.20.

Written by fxsunrise

May 14, 2010 at 8:42 am

Posted in forex

Evening European market news

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Stocks end mixed
European shares have finished mixed with the German benchmark index posting strong gains but the French equivalent fails to make any headway.

Portugal is rumoured to become the latest eurozone country to unveil drastic new measures to cut its deficit and ease concerns that the problems afflicting Greece may spread.

Across the markets the German DAX finished up 68 points to 6,251 with the French CAC down 2 points to 3731, weighed down by banks.

French lender Credit Agricole led the decline after the bank reported first-quarter net income of €470m, missing estimates.

In M&A news, German software firm SAP has agreed to buy smaller US rival Sybase for $5.8bn. The price of $65.00 per share represents a 44% premium over the three-month average stock price of Sybase.

The deal will be funded from SAP’s cash on hand and a €2.75 billion loan facility arranged and underwritten by Barclays Capital and Deutsche Bank.

On the earnings front, BT is the strongest riser in London on news that telecoms giant returned to the black in the last quarter and the full year and reported a 6% rise in the dividend. Pre-tax profit hit £1.01bn in the year to 31 March versus a loss of £244m before.

Elsewhere in the sector, Spain’s Telefonica saw first-quarter earnings rose 2% to €1.66bn on net revenues of €13.93bn.

Written by fxsunrise

May 13, 2010 at 5:13 pm

Gold near term Trend Analysis

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Todays Gold Trend Analysis chart

Written by fxsunrise

May 13, 2010 at 5:37 am

European markets in short

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GDP figures boost bourses
European indices moved ahead as economic and earnings figures lifted investor sentiment. The Dax in Frankfurt jumped 145 points to 6,183 while the CAC in Paris moved 40 points higher at 3,733. The Swiss market gained 66 points to 6,575.

Spain has become the latest eurozone country to unveil drastic new measures to cut its deficit and ease concerns that the problems afflicting Greece may spread. Spain’s Prime Minister Jose Luis Rodriguez Zapatero on Wednesday announced cuts in civil service wages, pensions, social welfare spending and investment.

Under the new measures, civil service pay will be slashed by 5% this year and frozen in 2011, while an earlier decision to increase pensions next year has been reversed. Subsidies for new parents will be scrapped and public investment will be reduced by €6bn between 2010 and 2011. The new steps are designed to lower the deficit to 9.3% of GDP this year and to 6.5% in 2011, down from 11.2% in 2009.

Zapatero’s announcement comes as new figures shows that Spain’s first-quarter gross domestic product edged up 0.1% from the preceding quarter after contracting by 0.1% in the fourth quarter.

GDP across the 16-nation eurozone grew by 0.2% in the first three months of 2010, according to European Union statistics office Eurostat.

Germany’s economy grew for the fourth quarter in a row in the first three months of 2010, against expectations of zero growth. The economy expanded by 0.2% during the quarter, beating analysts’ expectations of stagnation during the quarter. The extremely cold weather during much of the period, which hampered construction activity, was expected to have held back growth.

On the corporate front, Dutch financial group ING Group gained after it swung back to a first quarter net profit of €1.33bn compared with a net loss of €793m last time, thanks to lower impairments and bad-debt charges.

Italian banking leader UniCredit posted a better than expected 16% rise in first quarter profit to €520m.

German insurer Allianz got a lift after announcing quarterly earnings almost quadrupled. Deutsche Telekom net profit jumped to €767m in the three-month period from a €1.12bn loss in 2009.

Written by fxsunrise

May 13, 2010 at 5:17 am

Euro markets and Forex News

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Sterling boosted by Cameron/Clegg bounce
So the day has finally arrived, after nearly 6 days of haggling the UK has a new Prime Minister and a new government. The pound initially rallied on the news, but has since slipped back on fears that attempting to agree on measures to tackle the deficit may struggle to overcome ideological and party boundaries.

The markets will be waiting to see whether the £6bn worth of cuts promised in the Conservative manifesto will get implemented. Every move with respect to fiscal policy the new government makes is likely to be scrutinised carefully. The markets and ratings agencies will also be looking for evidence of any divisions between the coalition partners about how to tackle the fiscal problems facing the UK, as these divisions could indicate a lack of urgency, and continue to undermine investor confidence.

Yesterday we had a good start with manufacturing and industrial production figures coming in way better than expected.
Today should see the UK publish its latest set of unemployment figures, where it is expected to see a drop of 20,000 in the April claimant count. The Bank of England is also publishing its latest inflation report, where the market will be looking for confirmation that the Bank’s inflation outlook hasn’t changed too much from its last report, given the recent increase in the PPI figures.

On the other side of the channel the Euro continues to remain vulnerable, despite the enormous bailout on Monday, due to the EU’s refusal to address the underlying structural problems afflicting the peripheral Euro countries. There is also the small matter of where all this cash is going to come from, especially in the Euro zone.

Fears that China will look to take further measures to cool their economy have also weighed on risk appetite and boosted the US dollar.

EURUSD – as the impact of Monday’s Euro bailout continues to diminish, the single currency continues to slide back towards its lows of last week of 1.2520. Since the beginning of February the Euro has been trading steadily lower in a downward channel, where the upper boundary currently sits around the 1.3530 area. There is also resistance just below the April lows at 1.3115/20. While the Euro continues to trade in this broad downward trend the target of 1.2135 over the next few weeks continues to be the primary objective. The 1.2135 level is a key Fibonacci support level in that it represents a 50% retracement of the up move from the all time Euro lows at 0.8230 set in the October 2000 to the highs of 2008 at 1.6040.

GBPUSD – yesterday’s late sterling rally, after the failure of the Lib/Lab coalition talks and the resignation of the Prime Minister, stalled just below the key resistance above 1.5020.
The 1.5020/50 area should continue to provide solid resistance in the short term, however if we do get above this level we could see a quick rally up to 1.5120. There is support around the 1.4780 area and now that the political haggling is out of the way the pound needs to stay above this support area to re-test the 1.5000 area.

EURGBP – the Euro still remains weak against the pound even more so now that the UK appears to have a government in place. The main resistance lies around the 0.8730/40 area, while the break below 0.8500 yesterday should now open up a test of the key support around the 2009 and last week’s lows at 0.8400.

USDJPY – The dollar managed to bounce off the 92.15 support area yesterday, and this prompted a brief rally back above 93.00. With declining highs and possible increased risk aversion the yen could continue to strengthen if we break below 92.15 and re-target the 91.30 area.
We would need to see a break above the 93.50/60 area to re-target the April highs around 95.00.

Written by fxsunrise

May 12, 2010 at 8:57 am