Friday’s comments from Fed chairman Bernanke that the Fed stands ready to act to provide additional stimulus if necessary, especially if the outlook weakens significantly doesn’t really change anything from the markets perspective.

The market continues to behave erratically swinging from “risk on” to “risk off” with every piece of economic data.

As if to reinforce the point, further monetary easing by the Bank of Japan (BOJ) was met with indifference yesterday as the yen continued to strengthen from its Friday lows.

The BOJ raised the amount of fixed rate of loans to banks to 30trn yen from 20trn yen which was probably the least it could do in a move that was pretty much expected and as a policy response to yen strength completely insufficient given the current sentiment prevailing in the market.

To be fair any steps they could take would probably go the same way, given the lack of appetite for a co-ordinated policy response from other G8 nations, who have their own problems to deal with.

This weeks US economic data in the wake of Bernanke’s comments last week is going to be a key test for risk aversion across the markets, starting today with the Case Shiller home price index, followed by US consumer confidence for August, which is expected to show a reading of 51, and could well print even lower, as well as the publication of the minutes from the last FOMC meeting which is probably not likely to throw any new light on possible US policy responses to deteriorating economic conditions.

As a result of the continued nervousness and risk aversion felt by investors, in online spread betting, the Swiss franc, yen and gold have continued to hold up with the single currency set to continue to make new all time lows against the franc.

EURUSD – another failure to close above the 50 day moving average has seen the single currency slip back towards the key 1.2605 level over the past couple of days.

A close above 1.2760 is needed to see the euro push back towards last week’s highs around 1.2920, but it shouldn’t negate the overall bearish sentiment surrounding the single currency.

We still expect to see a break and close below the 50% Fibonacci retracement level at 1.2605 which would then target the 61.8% Fibonacci retracement level at 1.2435.

GBPUSD – also in FX spread betting, the pound continues to hold above the 200 day moving average at 1.5440 which has continued to prompt rallies back towards last week’s highs at 1.5620.

The lack of follow through doesn’t augur well for any further gains. We would need to see a break above 1.5620 for that to happen, and a push higher towards the 1.5730 level.

The next level of support below 1.5440 is the 50 day moving average at 1.5410 and then the 1.5320 level, which would be a 38.2% retracement of the up move from the 1.4230 lows to the recent highs around 1.6000.

EURGBP – the euro is currently stuck in a range between the recent lows around 0.8142 and the last week’s highs around 0.8245. Momentum continues to remain negative while below the longer term resistance around 0.8300/10.

However we have yet to see the single currency close the week below the 0.8165/70 level as it is the 50% retracement move of the 2007/2008 uptrend. This means that a test of the previous lows at 0.8065/70 cannot be taken for granted.

Until we see this happen the possibility of further euro losses towards 0.7785, remains unlikely.

USDJPY – the dollar will remain susceptible to short squeezes of the like we saw on Friday but until such time as the market is able to take the dollar above 86.25 then further downside is the preferred scenario.

The new 15 year lows of 83.60 remain the next target to aim at as the market looks to test for further US dollar declines towards the 80.00 level.

As long as the dollar is able to close back below the 84.70/80 level then we should see a slow fall back towards last weeks lows and then on towards the 80.00 level.

By Michael Hewson, Market Analyst, CMC Markets.

CFDs, FX and Spread Trading are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.

Please remember CMC Markets provide an execution-only service. Any of the above comments above, our research and charting tools are indicative and provided for information purpose and must not be relied upon as investment advice.

Where to Spread Bet on Australian Dollar/US Dollar

You can trade FX spread betting markets such as Australian Dollar/US Dollar with spread betting companies like:

• Financial Spreads
• GFT
• IG Index

How to Spread Bet on Australian Dollar/US Dollar

If you decide to spread trade on a foreign exchange pair such as the Australian Dollar/US Dollar then, looking at a spread betting website like Capital Spreads, at the time of writing you would find a spread betting price of $0.8900 – $0.8903.

This means you could spread trade on the Australian Dollar/US Dollar to move above $0.8903 or below $0.8900.

When spread trading, you bet on every unit the market increases or decreases; in the case of the Australian Dollar – US Dollar market a unit is $0.0001 of the forex pair’s price movement.

So, you could choose to bet £2 for every $0.0001 the Australian Dollar/US Dollar moves up or down.

 
Spread Betting on the Australian Dollar/US Dollar Market to Go Up
 

If you bought the Australian Dollar/US Dollar at $0.8903 and the forex pair rose then the spread could become $0.8956 – $0.8959. If that were to happen, you might decide to close your bet for a profit by selling at $0.8956.

Profit or Loss = (final price of the market – opening price of the market) x stake per $0.0001
Profit or Loss = ($0.8956 – $0.8903) x £2 per $0.0001 stake
Profit or Loss = $0.0053 x £2 per $0.0001
Profit or Loss = £106 profit

Conversely, if the market had decreased to, for example, $0.8858 – $0.8861, you could choose to close your trade to limit your losses. If that happened, you would sell at $0.8858.

With the same £2 per $0.0001 stake:

Profit or Loss = (final price of the market – opening price of the market) x stake per $0.0001
Profit or Loss = ($0.8858 – $0.8903) x £2 per $0.0001 stake
Profit or Loss = -$0.0045 x £2 per $0.0001
Profit or Loss = -£90 loss

 
Spread Betting on the Australian Dollar/US Dollar Market to Go Down
 

A key benefit of placing a spread trade is that investors can short the markets.

At the beginning of this example, the spread was $0.8900 – $0.8903.

If you were to go short of the Australian Dollar/US Dollar at $0.8900 and the forex pair decreased then the spread could change to $0.8849 – $0.8852. Therefore, you could decide to take your profits by closing your spread bet at $0.8852.

Profit or Loss = (opening price of the market – final price of the market) x stake per $0.0001
Profit or Loss = ($0.8900 – $0.8852) x £2 per $0.0001 stake
Profit or Loss = $0.0048 x £2 per $0.0001
Profit or Loss = £96 profit

Markets can also rise, if the market increased to $0.8937 – $0.8940, you could choose to close your spread bet to limit your losses. Assuming this was the case, you would buy back at $0.8940.

Therefore, with the same £2 per $0.0001 stake:

Profit or Loss = (opening price of the market – final price of the market) x stake per $0.0001
Profit or Loss = ($0.8900 – $0.8940) x £2 per $0.0001 stake
Profit or Loss = -$0.0040 x £2 per $0.0001
Profit or Loss = -£80 loss

Australian Dollar/US Dollar Rolling Daily spread betting prices quoted as of 27-Aug-10.

FX Spread Betting Guide

• Where can I Spread Bet on FX Markets?
• Where can I find Real-time Spread Betting Prices for FX Markets?
• Where can I find Live Charts / Candlestick Charts for FX Markets?
• How do you Spread Bet on FX Markets to Go Up?
• How do you Spread Bet on FX Markets to Go Down?

Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.

Where to Spread Bet on US Dollar/Swiss Franc

You can trade FX spread betting markets such as US Dollar/Swiss Franc with spread betting companies like:

• Financial Spreads
• Capital Spreads
• GFT

How to Spread Bet on US Dollar/Swiss Franc

If you decide to spread trade on a foreign exchange pair such as the US Dollar/Swiss Franc then, looking at a spread trading company website, you would currently find a spread trading price of SFr 1.0246 – SFr 1.0250.

This means you can spread bet on the US Dollar/Swiss Franc to go above SFr 1.0250 or below SFr 1.0246.

When making a spread bet, you bet on every unit the market increases or decreases. With the US Dollar/Swiss Franc market a unit is SFr 0.0001 of the forex pair’s price movement.

For this example, you could decide to trade £2 for every SFr 0.0001 the US Dollar/Swiss Franc goes up or down.

 
Betting on the US Dollar/Swiss Franc Market to Go Up
 

If you were to buy the US Dollar/Swiss Franc at SFr 1.0250 and the forex pair rose then you might see the spread move to SFr 1.0296 – SFr 1.0300. If that were to happen, you might want to close your bet for a profit by selling at SFr 1.0296.

Profit/Loss = (settlement price of the market – opening price of the market) x stake per SFr 0.0001
Profit/Loss = (SFr 1.0296 – SFr 1.0250) x £2 per SFr 0.0001 stake
Profit/Loss = SFr 0.0046 x £2 per SFr 0.0001
Profit/Loss = £92 profit

However, if the market had moved down to, for example, SFr 1.0196 – SFr 1.0200, you could choose to close your spread bet to limit your losses. If this were the case, you would sell back at SFr 1.0196.

So, with the same £2 per SFr 0.0001 stake:

Profit/Loss = (settlement price of the market – opening price of the market) x stake per SFr 0.0001
Profit/Loss = (SFr 1.0196 – SFr 1.0250) x £2 per SFr 0.0001 stake
Profit/Loss = -SFr 0.0054 x £2 per SFr 0.0001
Profit/Loss = -£108 loss

 
Betting on the US Dollar/Swiss Franc Market to Go Down
 
One of the advantages of spread betting is that you can short the markets.

To start with, the market was priced at SFr 1.0246 – SFr 1.0250.

If you were to sell the US Dollar/Swiss Franc at SFr 1.0246 and the forex pair decreased then the spread might become SFr 1.0191 – SFr 1.0195. If that happened, you might decide to close your trade for a profit by buying at SFr 1.0195.

Profit/Loss = (opening price of the market – settlement price of the market) x stake per SFr 0.0001
Profit/Loss = (SFr 1.0246 – SFr 1.0195) x £2 per SFr 0.0001 stake
Profit/Loss = SFr 0.0051 x £2 per SFr 0.0001
Profit/Loss = £101 profit

The markets can of course rise, if the market were to rise to, as an example, SFr 1.0301 – SFr 1.0305, you could choose to close your bet to limit your losses. In that case, you would buy at SFr 1.0305.

With the same £2 per SFr 0.0001 stake:

Profit/Loss = (opening price of the market – settlement price of the market) x stake per SFr 0.0001
Profit/Loss = (SFr 1.0246 – SFr 1.0305) x £2 per SFr 0.0001 stake
Profit/Loss = -SFr 0.0059 x £2 per SFr 0.0001
Profit/Loss = -£119 loss

US Dollar/Swiss Franc Rolling Daily prices correct as of 27-Aug-10.

FX Spread Betting Guide

• Where can I Spread Bet on FX Markets?
• Where can I find Real-time Spread Betting Prices for FX Markets?
• Where can I find Live Charts / Candlestick Charts for FX Markets?
• How do you Spread Bet on FX Markets to Go Up?
• How do you Spread Bet on FX Markets to Go Down?

Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.

Markets got a brief respite yesterday after weekly jobless claims surprised by coming in better than expected at 473k against an expectation of 488k, however the 4 week moving average of claims is at its highest level since last November, indicating that the employment market still remains weak, and this was reflected as the day wore on with the Dow finishing below the 10,000 level for the first time since the 6th July.

In any case it is events later today that will dominate the markets attention and it is expected to be a day of two GDP numbers, one from the UK and likely to be unrevised, and one from the US, and try and pick a number less than 2.4%.

There is also the prospect of Federal Reserve chairman Ben Bernanke expressing his views on the US economy from Jackson Hole, Wyoming, and in the process hopefully not talking the US into one.

His candid “unusually uncertain” remark has dogged him since he made it a few weeks ago and the prevailing sentiment has been one of “risk off” since then.

In FX spread betting, the pound gained some support yesterday when CBI Reported Sales for August posted a surprise increase to 35, up from July’s figure of 33, and way above expectations of 18 predicted by economists.

It remains to be seen if this support will be sustained when the first revision of UK Q2 GDP is released today. Expectations are for it to stay at 1.1%, which should continue to support the pound; however a downward revision could well result in a sterling sell-off.

The main focus later on today will be the release of the revision to US Q2 GDP, followed soon after by Bernanke’s speech from Jackson Hole Wyoming in the afternoon.

US Q2 GDP is expected to be revised downwards from a figure of 2.4% to 1.4%. However, a number of estimates have come in lower than that, with some as low as 1%.

Some commentators are suggesting that the Fed may be close to introducing some new easing, or stimulus measures and today’s speech by Bernanke will hopefully give some insight into that, as well as any change in views on the economic outlook in light of this weeks poor housing and durable goods data.

If that is the case then that could well present the Bank of Japan with a problem, because the last thing the Japanese need is further dollar weakness if they are set to introduce stimulus measures of their own in an attempt to slow the rise of the yen.

EURUSD – yesterday’s break through the 1.2730/40 area by the single currency stalled around the 50 day moving average currently around 1.2760, which was the area identified in yesterday’s note. However a close above 1.2760 could well see the euro push back towards last week’s highs around 1.2920, but it shouldn’t negate the overall bearish sentiment surrounding the single currency.

We still expect to see a break and close below 1.2605 which would then target the 61.8% Fibonacci retracement level at 1.2435.

GBPUSD – the pound continues to remain remarkably resilient holding above the 200 day moving average at 1.5460 and pushing back up towards this week’s highs at 1.5620.

This stabilising effect could well see a break above the highs of this week at 1.5620 and a push higher towards the 1.5730 level if the support at 1.5460 is able to hold.

The next level of support below 1.5460 is the 50 day moving average at 1.5380 and then the 1.5320 level, which would be a 38.2% retracement of the up move from the 1.4230 lows to the recent highs around 1.6000.

EURGBP – the euro continues to remain a little soft against the pound trading in a range between the recent lows around 0.8142 and the week’s highs around 0.8245. Momentum continues to remain negative while below the longer term resistance around 0.8300/10 but we need to see the single currency close this week below the 0.8165/70 level as it is the 50% retracement move of the 2007/2008 uptrend.

This would then increase the probability of a test of the previous lows at 0.8065/70, but also to open the possibility of further euro losses towards 0.7785, which would be a 61.8% retracement of the up move from the 2007 lows at 0.6535 to the 2008 highs at 0.9800.

USDJPY – also in spread betting, the pull back from the 83.60 level over the past day or so highlights the reluctance of the market to test the Bank of Japan’s hand too robustly ahead of today’s meeting at Jackson Hole.

Strong words from Japanese Finance Minister Noda about responding to yen moves in an appropriate fashion have had an effect but this may only be temporary.

The new 15 year lows of 83.60 are now the next target to aim at as the market looks to test for further US dollar declines towards the 80.00 level.

The 84.75/85 level continues to act as some resistance on any pullbacks, while behind that 86.25 is probably the larger resistance level.

By Michael Hewson, Market Analyst, CMC Markets.

CFDs, FX and Spread Trading are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.

Please remember CMC Markets provide an execution-only service. Any of the above comments above, our research and charting tools are indicative and provided for information purpose and must not be relied upon as investment advice.

If the markets had been looking for US economic data to start to improve yesterday they were sorely disappointed. It’s almost getting to the point that missing expectations with respect to US data is becoming the new normal, so often has it disappointed recently.

Yesterday US durable goods (excluding transportation) for July dropped 3.8%, much worse than expected, the biggest fall since the beginning of 2009, against an expectation of a 0.5% rise.

If that weren’t bad enough new home sales for July also disappointed, dropping by 12.4% to a record low, against an expectation of no change.

Surprisingly, given how poor the data was the US dollar lost ground as investors moved funds into the Swiss franc and the Japanese yen as well as into gold.

The yen was unable to build on its recent gains to new 15 year highs on concern that when Bank of Japan governor Shirakawa visits Jackson Hole this week, and the Federal Reserve’s annual symposium, he may come back and initiate further measures to try and weaken the yen.

Against the euro the Swiss franc continues to make new all-time highs, provoking some concern about possible direct Swiss National Bank intervention.

It would appear that the ripple effect of Ireland’s downgrade by Standard and Poor’s is also affecting bond spreads on Greek and Portuguese bonds, prompting new fears about capital flight from the euro zone, however slightly offsetting these concerns was improved German IFO business confidence which rose to its highest levels in three years in August.

Today’s US weekly jobless claims will be of particular interest after last weeks 500k number. Expectations are for a rise of 485k for this week and the hope is that the claims will soon stop rising, and won’t go beyond the psychologically important half a million level.

Looking more closely at the FX spread betting numbers:

EURUSD – the single currency continues to hold above the 1.2605 50% retracement level for the time being. A failure to follow through to the downside could be the precursor to a rally back through this weeks highs and resistance around 1.2730/40 which was the extent of yesterday’s bounce.

A break and close below 1.2605 would target the 61.8% Fibonacci retracement level at 1.2435.

The 50 day MA resistance now at 1.2750 should also act as some form of barrier; however a break back above could well re-target longer term resistance around last week’s highs around 1.2920.

GBPUSD – the pound made another attempt to push lower yesterday but it continues to hold above the 50 day moving average in the short term around 1.5370.

The cable needs to rally from these lows and get back and close above the 200 day moving average, now at 1.5465 for the downside risk to diminish somewhat.

The next level of support below the 50 day average should be around the 1.5320 level, which would be a 38.2% retracement of the up move from the 1.4230 lows to the recent highs around 1.6000. Expect to find resistance on any rallies towards Tuesday’s highs around 1.5475/80 as well as this week’s highs around 1.5620.

EURGBP – elsewhere in spread betting, the euro soon gave back most of Tuesday’s gains running out of steam just short of the 0.8245/50 resistance level and highs of this week.

This failure to get back above this resistance level means that downward pressure should continue to prevail but we need to see the single currency close the week below 0.8165/70 level as it is the 50% retracement move of the 2007/2008 uptrend.

This would then increase the probability of a test of the previous lows at 0.8065/70, but also to open the possibility of further euro losses towards 0.7785, which would be a 61.8% retracement of the up move from the 2007 lows at 0.6535 to the 2008 highs at 0.9800.

USDJPY – The yen has stabilised somewhat after Japanese Finance Minister Noda stated he would respond to adverse yen moves in an appropriate fashion, whatever that means, as currency traders took some profit just above the new 15 year yen highs.

The new 15 year lows of 83.60 are now the next target to aim at as the market looks to test for further US dollar declines towards the 80.00 level.

The 84.75/85 level continues to act as resistance on any pullbacks, and could even spill over to 85.20, but behind that 86.25 is probably the larger resistance level.

By Michael Hewson, Market Analyst, CMC Markets.

CFDs, FX and Spread Trading are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.

Please remember CMC Markets provide an execution-only service. Any of the above comments above, our research and charting tools are indicative and provided for information purpose and must not be relied upon as investment advice.

July may have been a lousy month for the dollar but the greenback is managing to pare back some of these losses in August on safe haven flows, despite some very poor economic data coming out of the US.

Last nights downgrade of Ireland to AA- by Standard and Poor’s, after the US market had closed, will certainly not win any awards for timing and certainly won’t help restore already shaky investor risk appetite with respect to the European financial system.

Reports of a lack of consensus between Federal Reserve policy makers about the eventual decision to buy more treasuries was not well received by the markets yesterday, who remain concerned that the central bank is not sure about how best to deal with the problems of the US economy, while yesterday’s US existing home sales data for July compounded investor jitters by falling over twice as much as expected, with a decline of 27.2%., to their lowest level in 15 years.

New home sales data for July, out later today is unlikely to offer any comfort with no change expected, while the expectation for durable goods data for July is for a slight improvement from June’s figure with a rise of 3%, but excluding transportation a rise of 0.5%.

Elsewhere in spread betting Safe haven buying has continued with the Swiss franc hitting new highs against the single currency while the Japanese yen also hit 8 year highs as concerns about the European banking sector continued to dominate sentiment.

The focus with respect to the yen and its continued rise remains whether the Bank of Japan and politicians will use anything other than words to prevent further yen strength, but with the Nikkei continuing to weaken the pressure to do something will inevitably increase over the coming days.

Gold spreads also rebounded strongly on safe haven demand after briefly trading around $1,212 it bounced off its 50 day moving average rallying $20 in the space of 90 short minutes above $1,230 very quickly.

EURUSD – yesterday saw the single currency hit the 1.2605 50% retracement level slightly overshooting in the process, making a low of 1.2590 before rebounding. A break and close below 1.2605 would target the 61.8% Fibonacci retracement level at 1.2435.

Yesterday’s rally off the 1.2590 lows stopped just short of Monday’s highs at 1.2735/40 and the 50 day MA resistance. Longer term resistance remains around last week’s highs around 1.2920.

GBPUSD – the pound had the rug pulled out from underneath it and finally closed below its 200 day moving average yesterday, hitting a low of 1.5370 before rebounding.

The subsequent rally from these lows found resistance around the 200 day moving average, now at 1.5475 and if the pounds decline is to continue it needs to stay below this key level.

The next level of support should be around the 1.5320 level, which would be a 38.2% retracement of the up move from the 1.4230 lows to the recent highs around 1.6000. Expect to find resistance on any rallies towards yesterday’s highs around 1.5475 as well as this week’s highs around 1.5620.

EURGBP – the euro selling yesterday dried up a little yesterday causing a rally back towards the 0.8220 area, but just short of the 0.8245/50 resistance level and highs of this week.

For downward pressure to increase we would need to see the single currency close the week below 0.8165/70 to not only target the previous lows at 0.8065/70, but also to open the possibility of further euro losses towards 0.7785 which would be a 61.8% retracement of the up move from the 2007 lows at 0.6535 to the 2008 highs at 0.9800.

While the euro stays below the larger resistance around the 0.8300/10 level, the downside momentum remains intact.

USDJPY – traders put there fears of possible intervention to one side yesterday pushing the dollar below the 84.70/80 level, towards its appointment with the low 80 levels. New 15 year lows of 83.60 could well be a pre-cursor to further US dollar declines towards the 80.00 level.

The 84.75/80 should now act as resistance on any pullbacks, while behind that 86.25 is probably the larger resistance level.

The move towards 80.00 looks like it may well be underway and in the absence of any intervention or physical stimulus it looks like it’s only a matter of time before we see it.

By Michael Hewson, Market Analyst, CMC Markets.

CFDs, FX and Spread Trading are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.

Please remember CMC Markets provide an execution-only service. Any of the above comments above, our research and charting tools are indicative and provided for information purpose and must not be relied upon as investment advice.

A brief revival in risk appetite early yesterday morning, on a fairly slow day for currencies, didn’t last particularly long as the single currency continued to remain under pressure after Eurozone manufacturing purchasing manager’s data for August came in slightly below expectations.

This poor data revived concern about the strength of the Euros recent recovery against a backdrop of widening credit default spreads with the region’s peripheral members.

Today’s revision of the recent record German Q2 GDP number is unlikely to alter that concern.

The Yen continues to gain after yesterday’s meeting between the Bank of Japan and the Japanese Prime Minister Nato Kan failed to formulate a plan to curb the Yen’s recent strength. The Japanese currency has pushed close to 15 year highs against the US Dollar and hit its lowest levels since 2001 against the Euro.

The Australian Dollar also remains choppy against a backdrop of political uncertainty and weakening commodity prices

The Pound had remained fairly well supported against a basket of currencies, making new 11 month highs. However, alleged comments from Bank of England monetary policy committee member Martin Weale, about the likelihood of a second recession in the UK sent the Pound lower across the board, particularly against the US Dollar, currently unable to regain the 1.5600 level.

Even though the markets will have an eye on the Fed’s annual get together at Jackson Hole, Wyoming this week, anything major with regard to policy is unlikely to come out ahead of this Friday’s US Q2 GDP revision where a revision to the downside is expected.

Today’s US data could do a lot to revive risk appetite with existing homes sales data for June due to be released, but that appears unlikely with a decline of around 15% expected. The Richmond Fed manufacturing index for August is expected to also slip to 12, from 16 in July.

The concern remains that a continued weakening, or double-dip, in the US housing market which appears likely given the recent data, could well drag the US economy down with it.

EURUSD – the single currency has continued to remain weak as it looks to test its support around 1.2605, the 50% retracement of the 1.1880/1.3335 up move.

A break of 1.2605 would target the 61.8% level at 1.2435.

The Euro has also stayed below its 50 day moving average which is in itself a bearish signal, however the fact that the US Dollar index has not yet closed above its same moving average could make the Euro susceptible to a sharp rebound.

The Euro has resistance around yesterday’s highs around 1.2735/40 and the 50 day MA, as well as around 1.2780 and the larger resistance and last week’s highs around 1.2920.

GBPUSD – Cable has so far been unable to close below its 200 day moving average, now at 1.5475, continuing to see sharp rallies, yesterday seeing 1.5620; however today’s push below it in Asia today could well be different as price weakness starts to take hold.

However to diminish the downside pressure building up from the lower highs of the last few days we would need to see a break and close above the 1.5700 area and break through the 1.5730 resistance which is currently weighing on the Pound.

With downside pressure continuing to build up, today’s break and a confirmed close below the 200 day moving average could result in further losses towards 1.5320, which would be a 38.2% retracement of the up move from the 1.4230 lows to the recent highs around 1.6000. Expect to find resistance on any rallies towards yesterday’s highs around 1.5620 as well as around 1.5730 and 1.5820.

EURGBP – the Euro continues to make new lows, yesterday at 0.8142, but really needs to close the week below 0.8165/70 to not only target the previous lows at 0.8065/70, but also to open the possibility of further Euro losses towards 0.7785 which would a 61.8% retracement of the up move from the 2007 lows at 0.6535 to the 2008 highs at 0.9800.

There is a risk of a retest towards the highs of the last two days around 0.8245/50, however, while below the larger resistance around the 0.8300/10 level, the downside momentum remains intact.

USDJPY – fears of possible intervention by the Bank of Japan appear to be receding after it transpired that currency intervention wasn’t discussed at yesterday’s conference call between the Bank of Japan and the Japanese Prime Minister Nato Kan. As such the Dollar / Yen spread betting market continues to edge towards the recent lows around the 84.70/80 level.

The recent highs and recent range highs around 86.25 remain the key obstacle to a Dollar rally but in the absence of any intervention or physical stimulus it looks like a move below the recent 15 year lows near 80.00 is only a matter of time.

By Michael Hewson, Market Analyst, CMC Markets.

CFDs, FX and Spread Trading are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.

Please remember CMC Markets provide an execution-only service. Any of the above comments above, our research and charting tools are indicative and provided for information purpose and must not be relied upon as investment advice.

The US Dollar has continued to strengthen on risk aversion capital flows, with the Dollar index hitting its highest levels in nearly a month, just shy of its 50 day moving average.

This came after European Central Bank governing council member Axel Weber said last week that the policy of unlimited lending to banks should be extended into next year, suggesting that policy makes still have concerns about the European banking system.

The Swiss Franc has also benefited from the same risk aversion flows as it looks to retest its recent all time highs against the Euro.

The Yen continues to tread water just below its recent 15 year highs, ahead of a scheduled meeting this week between Japanese Prime Minister Nato Kan and the Bank of Japan.

There is widespread concern that further Yen strength will hinder Japan’s export capability and growth and shrink the country’s ability to grow its economy.

While in Australia the surprise election deadlock between the two main parties has seen the Australian Dollar spin lower as the short term uncertainty created by the result has sent investors running for cover in a replica of what happened to the Pound just after May 6th.

The longer the uncertainty goes on with respect to forming a government the more pressure the Australian Dollar will likely find itself under.

With no UK or US data of note today the markets will be looking at Europe for news. The August purchasing manager data for Germany, France and the Eurozone will be scrutinised for evidence of further growth in manufacturing capacity, in light of the recent better than expected GDP growth figures reported earlier this month.

EURUSD – trend line support from the 1.1880 lows at the 1.2750/60 area give way on Friday as did the support at the previous reaction lows at 1.2735/40.

The support around 1.2605, the 50% retracement of the 1.1880/1.3335 up move, now comes into view as the longer term objective. The importance of the weekly bearish engulfing candle mentioned last week is now beginning to become apparent and while below 1.3000 the potential remains for further losses towards 1.2450 as a precursor to a revisit of the 1.2150 area.

However with the US Dollar index approaching resistance on its 50 day moving average we could see some Euro rebounds in the short term. Be careful of rebounds to resistance at 1.2780 and 1.2840.

GBPUSD – another attempt to break and close below the 200 day moving average failed on Friday, a low of 1.5465 being the extent of the fall before another sharp rebound.

The 200 day moving average is now at 1.5484 and continues to slide lower, however while the Pound is able to hold and close above it then sharp rebounds will always be the risk.

However to diminish the downside pressure building up from the lower highs of the last 5 days we would need to see a break and close above the 1.5700 area and break through the 1.5730 resistance which is currently weighing on the Pound.

The focus remains on the weekly bearish engulfing candlestick pattern identified a week ago as limiting the upside.

A break and close below the 200 day moving average could result in further losses towards 1.5320, which would be a 38.2% retracement of the up move from the 1.4230 lows to the recent highs around 1.6000. Expect to find resistance on any rallies towards 1.5730 and 1.5820.

EURGBP – we got the fall to 0.8170 on Friday which keeps the pressure on for a further fall towards the 0.8065/70, previous lows.

There is a risk of a retest towards the highs of the last two days around 0.8245/50, however, while below the larger resistance around the 0.8300/10 level, the downside momentum remains intact.

A test towards the previous lows around the 0.8065/70 level remains the preferred scenario while below the 0.8300/10 resistance.

USDJPY – dips below the 85.00 level remain fairly well sought after, ahead of a meeting this week between the Bank of Japan and Prime Minister Nato Kan, as no-one wants to get caught out by an easing of policy or some form of intervention

This reluctance for the market to push its luck has resulted in the Yen spread betting market weakening as it continues to trade between the support around the 84.70/80 support and recent range highs around 86.25.

Only a rally beyond the 87.00 level, the May flash crash lows could prompt an unwinding of Yen long positions. The broad range between 84.70/80 and 86.25 appears to be the way of it for now and any move towards 80.00 could well be long and drawn out.

By Michael Hewson, Market Analyst, CMC Markets.

CFDs, FX and Spread Trading are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.

Please remember CMC Markets provide an execution-only service. Any of the above comments above, our research and charting tools are indicative and provided for information purpose and must not be relied upon as investment advice.

Where to Spread Bet on Euro/Sterling

You can trade FX spread betting markets such as Euro/Sterling with spread betting companies like:

• Financial Spreads
• Capital Spreads
• City Index

How to Spread Bet on Euro/Sterling

If you are going to spread bet on a foreign exchange pair like the Euro/Sterling then, looking at a spread trading website on Friday 20 August, you would have found a spread of £0.8182 – £0.8184.

That means you can spread bet on the Euro/Sterling to move above £0.8184 or below £0.8182.

If you are spread betting, you bet on every unit the market goes up or down; with the Euro/Sterling market a unit is £0.0001 of the forex pair’s price movement.

For instance, you might decide to bet £2 for every £0.0001 the Euro/Sterling moves up or down.

 
Buying – Spread Betting on Euro/Sterling to Go Up
 

If you were to go long of the Euro/Sterling at £0.8184 and the forex pair went up then the spread might change to £0.8241 – £0.8243. If that were to happen, you might want to close your trade for a profit by selling at £0.8241.

Profits (or Losses) = (settlement value of the market – opening value of the market) x stake per £0.0001
Profits (or Losses) = (£0.8241 – £0.8184) x £2 per £0.0001 stake
Profits (or Losses) = £0.0057 x £2 per £0.0001
Profits (or Losses) = £114 profit

However, if the market had moved down to, as an example, £0.8135 – £0.8137, you might want to close your bet to restrict your losses. Therefore, you would sell the market at £0.8135.

Therefore, with the same £2 per £0.0001 stake:

Profits (or Losses) = (settlement value of the market – opening value of the market) x stake per £0.0001
Profits (or Losses) = (£0.8135 – £0.8184) x £2 per £0.0001 stake
Profits (or Losses) = -£0.0049 x £2 per £0.0001
Profits (or Losses) = -£98 loss

 
Selling – Spread Betting on Euro/Sterling to Go Down
 

One benefit of spread betting is that you can go short of the markets.

At the beginning of this example, the spread was £0.8182 – £0.8184.

If you were to go short of the Euro/Sterling at £0.8182 and the forex pair decreased then the market might be re-priced at £0.8128 – £0.8130. If so, you could close your spread bet for a profit, if so you would buy at £0.8130.

Profits (or Losses) = (opening value of the market – settlement value of the market) x stake per £0.0001
Profits (or Losses) = (£0.8182 – £0.8130) x £2 per £0.0001 stake
Profits (or Losses) = £0.0052 x £2 per £0.0001
Profits (or Losses) = £104 profit

The markets can of course rise, if the market had risen to, for example, £0.8224 – £0.8226, you might want to close your trade to prevent further losses. If this were the case, you would buy back at £0.8226.

So, with the same £2 per £0.0001 stake:

Profits (or Losses) = (opening value of the market – settlement value of the market) x stake per £0.0001
Profits (or Losses) = (£0.8182 – £0.8226) x £2 per £0.0001 stake
Profits (or Losses) = -£0.0044 x £2 per £0.0001
Profits (or Losses) = -£88 loss

Euro/Sterling Rolling Daily spread betting prices taken as of 20-Aug-10.

FX Spread Betting Guide

• Where can I Spread Bet on FX Markets?
• Where can I find Real-time Spread Betting Prices for FX Markets?
• Where can I find Live Charts / Candlestick Charts for FX Markets?
• How do you Spread Bet on FX Markets to Go Up?
• How do you Spread Bet on FX Markets to Go Down?

Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.

Where to Spread Bet on Dollar/Yen

You can trade FX spread betting markets such as Dollar/Yen with spread betting companies like:

• Financial Spreads
• City Index
• Spreadex

How to Spread Bet on Dollar/Yen

Should you decide to spread bet on a foreign exchange pair such as the Dollar/Yen then, on visiting a spread trading website like Financial Spreads, on Friday 20 August you would have found a spread trading price of ¥85.78 – ¥85.80.

This means you could spread trade on the Dollar/Yen to move higher than ¥85.80 or to move lower than ¥85.78.

When making a spread bet, you trade on every unit the market moves up or down; with the Dollar/Yen market a unit is ¥0.01 of the forex pair’s price movement.

In this case, you might choose to bet £2 for every ¥0.01 the Dollar/Yen increases or decreases.

 
Betting on Dollar/Yen to Go Up
 

If you were to buy the Dollar/Yen at ¥85.80 and the forex pair increased then you might see the spread move to ¥86.31 – ¥86.33. Therefore, you might decide to close your trade for a profit by selling at ¥86.31.

P&L = (final level of the market – opening level of the market) x stake per ¥0.01
P&L = (¥86.31 – ¥85.80) x £2 per ¥0.01 stake
P&L = ¥0.51 x £2 per ¥0.01
P&L = £102 profit

However, if the market had decreased to, as an example, ¥85.20 – ¥85.22, you may want to close your spread bet to prevent further losses. If that happened, you would sell your spread bet at ¥85.20.

With the same £2 per ¥0.01 stake:

P&L = (final level of the market – opening level of the market) x stake per ¥0.01
P&L = (¥85.20 – ¥85.80) x £2 per ¥0.01 stake
P&L = -¥0.60 x £2 per ¥0.01
P&L = -£120 loss

 
Betting on Dollar/Yen to Go Down
 

One useful benefit of placing a spread trade is that you can short the markets.

At the beginning of this example, the spread was ¥85.78 – ¥85.80.

If you were to go short of the Dollar/Yen at ¥85.78 and the forex pair fell then the spread could change to ¥85.19 – ¥85.21. Assuming this was the case, you might decide to close your trade for a profit by buying at ¥85.21.

P&L = (opening level of the market – final level of the market) x stake per ¥0.01
P&L = (¥85.78 – ¥85.21) x £2 per ¥0.01 stake
P&L = ¥0.57 x £2 per ¥0.01
P&L = £114 profit

Nevertheless, if the market increased to, for example, ¥86.42 – ¥86.44, you may want to close your spread bet to restrict your losses. If so, you would buy at ¥86.44.

So, with the same £2 per ¥0.01 stake:

P&L = (opening level of the market – final level of the market) x stake per ¥0.01
P&L = (¥85.78 – ¥86.44) x £2 per ¥0.01 stake
P&L = -¥0.66 x £2 per ¥0.01
P&L = -£132 loss

Dollar/Yen Rolling Daily prices accurate as of 20-Aug-10.

FX Spread Betting Guide

• Where can I Spread Bet on FX Markets?
• Where can I find Real-time Spread Betting Prices for FX Markets?
• Where can I find Live Charts / Candlestick Charts for FX Markets?
• How do you Spread Bet on FX Markets to Go Up?
• How do you Spread Bet on FX Markets to Go Down?

Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.