Liverpool supporters do not know whether to be delighted or dismayed about the possibility of Anfield passing from American into Chinese ownership.

Some fear that it would make the team too reliant on the left wing. Others argue that a huge influx of new supporters would overwhelm the 45,000 capacity stadium. On the positive side, it should improve the volume discount on replica shirts.

For China, the football firm would probably be a more reliable investment than some of the property loans made by the nation’s banks. Stress tests ordered in May by the China Banking Regulatory Commission (CBRC) had to include the impact of a 30% decline in real estate values.

Some lenders apparently went a step further, examining what would happen if prices fell by 60%. It might well have been prudent risk management but it was a psychological blunder. When it emerged this week that the banks might be factoring in what could only be described as a property collapse investors sold shares in banks and real estate firms.

The regulator attempted to reassure the market, telling investors to get real. It said in a written statement; ‘Testing all types of circumstances does not represent the CBRC’s judgment about a tendency in the real estate market and does not represent a possible change in policy toward real estate credit.’ What the Chinese experience does reinforce is the decision of the Committee of European Banking Supervisors (CEBS) not to include the possibility of a sovereign default in its own stress tests.

Unfortunately, however, it also underlines the inherent weakness of stress tests: if they are tough enough to be truly stressful they run the risk of creating that very stress. Markets are more to do with psychology than logic.

Spread Betting on House Prices

If you are looking closer to home note that you can spread bet on UK House Prices

• For an example see Spread Betting on the Housing Market
• You can spread bet on UK house prices with IG Index

Currency Trading and Spread Betting carry a high level of risk to your capital and you can lose more than your initial investment, they 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.

Article by Moneycorp

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The US dollar posted its first positive day in seven yesterday against a basket of currencies, pushing back above its 200 day moving average, helped by a better than expected ADP employment report which saw 42k jobs added last month.

This was followed soon after by ISM non-manufacturing composite data for July which rose to 54.3, above market expectations.

As a precursor to Friday’s key payrolls data it was just what the dollar needed to help arrest the recent slide and prompt some short covering ahead of the employment numbers. However it will take more than a couple of positive data announcements to prevent further dollar losses in the short term and the hope is that Friday’s figures will provide that.

In the UK and Europe the two key central bank rate setting meetings aren’t expected to yield any big surprises with the Bank of England and the European Central Bank both expected to leave monetary policy unchanged, though the Bank of England meeting could well be an interesting affair given the current lack of consensus about rate levels amongst the members.

In Europe Trichet’s post meeting press conference will no doubt be scrutinised for his assessment of the European economic outlook given that the EU and IMF are due to disclose the latest assessment of the Greek economy.

In the meantime US weekly jobless claims are expected to be pretty much unchanged from last week at 455k, while US chain store sales for July should give some idea of whether US consumer sentiment has improved, with expectations of a rise of 3%.

EURUSD – having touched 1.3265 earlier this week in the forex spread betting market the single currency has run into a bit of a wall and is testing back towards the 1.3125 break-out level and 38.2% Fibonacci level. While the single currency is able to hold above this level we should see a rise towards the 1.3510 area which is the 50% retracement level of the 1.5145/1.1880 down move.

In the online spread betting market there is also interim trend line support around 1.3095 from the 1st July lows at 1.2190/00. Below this we also have support around the 1.2950 level a break of which would open a test towards the 1.2840/50 level.

GBPUSD – the 1.5860/70 area which is the 61.8% retracement level of the down move from 1.6880 to the May lows at 1.4230, is currently acting as support after the highs of 1.5970 early this week.

This area needs to hold for a move towards the 3rd February highs at 1.6070 and even higher towards 1.6280. A break below 1.5860/70 could well see a deeper correction towards the 1.5520/50 support area. Long term trend line support levels, remain around the 1.5400/10 area, from the June lows at 1.4350.

EURGBP – the euro currency spreads continues to hold below the 0.8315 neckline and remains on target to test the 0.8245 61.8% retracement level of the up move from 0.8065 to the 0.8520 double top. While it stays below the old neckline support around the 0.8315/20 level the euro should head towards the 0.8245 level, and back towards the lows at 0.8070.

A break and close above 0.8315/20 re-targets 0.8410

USDJPY – a sharp rebound from 85.33 has seen the US dollar rally back above the 86.25 level while behind that there is also selling interest around the 87.00 area.

The key support remains around last years lows at 84.80, a break of which would then look to target the 1995 lows below 80.00.

However, this spill over the 86.25 level could go as far as 87.00 without negating the lower dollar, stronger yen scenario. Furthermore while the dollar is unable to overcome the larger 88.00/10 level, the focus remains solidly on further yen gains in the short term.

By James Hughes, 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 gained little support from yesterday’s economic data as it broke below its 200 day moving average against a basket of currencies. The Dollar was also hit six month lows against the yen after Japanese Finance Minister Noda appeared to appear remarkably relaxed about the yen’s recent rise.

Continued speculation about further Fed easing measures continues to dominate the market as economic data remains stubbornly weak and US treasury yields continue to fall.

Yesterday’s data was uninspiring to say the least with unexpected flat consumer spending and incomes in June; weak factory orders, down 1.2 per cent compared with forecasts for a fall of 0.5 per cent, and a further 2.6% drop in pending home sales all contributed to unease over the US economic outlook.

The dollar is unlikely to get much respite today either with economic data coming thick and fast, with a host of German PMI and euro zone economic data out today likely to be good, and further boost the euro.

In the UK more PMI data for July, this time from the services sector, is expected to come in relatively unchanged from June’s figure of 54.4, increasing to 54.5. The hope is that this data will live up to forecasts unlike yesterday’s data which disappointed slightly.

In the US the usual pre-cursor to Friday’s employment data is the ADP employment report for July which could well give early indications with respect to Friday’s number. Expectations are for a figure of 33k, up from June’s 13k number. This data is followed soon after by the ISM non-manufacturing composite data for July which is expected to show a small decline to 53.

All this data serves to make tomorrow’s European Central Bank and Bank of England rate meetings little more than a sideshow with both expected to leave monetary policy unchanged.

Euro/Dollar spreads – having overcome the 1.3125 38.2% Fibonacci level the single currency has pushed higher touching 1.3265 in the last 24 hours. This old resistance level should now act as a launch pad for a rise towards the 1.3510 area which is the 50% retracement level of the 1.5145/1.1880 down move.

There is also interim trend line support around 1.3055 from the 1st July lows at 1.2190/00. Below this we also have support around the 1.2950 level a break of which would open a test towards the 1.2840/50 level.

Pound/Dollar spreads – having broken successfully above 1.5865/70, the 61.8% retracement level of the down move from 1.6880 to the May lows at 1.4230, the pound should now be able to use this as support for a move towards the 3rd February highs at 1.6070 and even higher towards 1.6280.

The highs around 1.5970 should only be a temporary stop on the way to much higher levels as long as the 1.5520/50 support area and 50% level hold firm in the near term. Long term trend line support levels, remain around the 1.5360/70 area, from the June lows at 1.4350.

Euro/Pound spreads – having broken below the 0.8315 neckline the euro stopped short of the 0.8245 61.8% retracement level of the up move from 0.8065 to the 0.8520 double top, bouncing from 0.8255. It is currently attempting to get back above the old neckline support around the 0.8315/20 level which has so far rebuffed the rebound.

While this level caps the euro should head towards the 0.8245 level, and back towards the lows at 0.8070.

A break and close above 0.8315/20 re-targets 0.8410

Dollar/Yen spreads – another day and another new low at 85.33 for the US dollar as it slowly edges towards last years lows at 84.80. The support level around 86.25 is now behind us and should act as some resistance, while behind that there also selling interest around the 87.00 area for now.

While the dollar is unable to overcome the bigger 88.00/10 level the focus remains solidly on further yen gains in the short term.

Current indifference by Japanese officials to current yen strength could be a precursor of some form of intervention, if words don’t succeed in weakening the yen. These intervention fears will only intensify if we break below the 84.80 area, which would then look to target the 1995 lows below 80.00.

By James Hughes, 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 story over the last 24 hours remains one of US dollar weakness and increasing risk appetite, despite continuing lacklustre US economic data.

The US ISM reported its manufacturing gauge fell to 55.5 in July from 56.2 in June; however some comfort was taken from the fact that the number came in better than the figure of 54 that economists had expected.

With Europe and the UK showing PMI improvements sentiment is shifting away from the US dollar, and into currencies like the Australian dollar, the pound and the Scandinavian currencies.

Meanwhile in a speech in South Carolina Federal Reserve Chairman Bernanke reiterated his concerns over the US economy, and his desire to keep fiscal policy fairly loose in the near term, saying that the US had some way to go to achieve a full recovery. As a result the US dollar index is now heading towards its 200 day moving average at 80.74, and possibly its 9th straight weekly decline.

If today’s US economic data continues to disappoint then we could well see further US dollar declines.

June personal consumption data is expected to increase by 0.1%, with personal spending at 0.1%, and personal income data at 0.3%, all due at 1:30pm.

At 3pm factory orders for June are expected to come in at -0.5%, while pending home sales are expected to rise by 4% in June, after May’s 30% shock decline.

The pound by contrast, has continued its meteoric rise higher on the back of manufacturing PMI for July yesterday, which came in at 57.3 instead of the 57 expected, sending sterling close to 11 month highs on its trade weighted index at 82.50.

Today’s UK PMI construction data for July should also continue to be supportive with expectations of 58, a slight fall from June’s 58.4.

In Australia today the Reserve Bank of Australia kept rates on hold at 4.5% as building approvals for June fell sharply by 3.3%, against expectations of an increase of 2%, while retail sales increased also less than expected at 0.2% against an expectation of 0.4%, prompting a fall in the Australian dollar as traders speculated that rates would not be rising again for the remainder of 2010.

EURUSD – the single currency finally reached the 1.3125 38.2% Fibonacci level. The subsequent break above this key area now opens up the possibility of a larger rise towards the 1.3510 area which is the 50% retracement level of the 1.5145/1.1880 down move.

Interim trend line support now comes in around 1.3030 from the 1st July lows at 1.2190/00. Below this we also have support around the 1.2950 level a break of which would open a test towards the 1.2840/50 level.

GBPUSD – the pound continues to push on breaking above the 1.5870 the 61.8% retracement level of the down move from 1.6880 to the May lows at 1.4230, and spilling over to 1.5908. The pound looks capable of extending these gains towards the February 3rd highs of 1.6070, however with momentum continuing to remain a touch stretched it could dip back towards the 1.5520/50 support area and 50% level in the near term. Long term trend line support levels, remain around the 1.5320/30 area, from the June lows at 1.4350.

EURGBP – the break below the head and shoulders neckline at 0.8315, and the 50% retracement level at 0.8300 of the up move from 0.8065 to the 0.8520 double top, opens up a test of 0.8245, the 61.8% retracement level, and back towards the lows at 0.8070, while 0.8410 caps. Resistance should also be found around the old neckline support around the 0.8315/20 level.

USDJPY – despite the new spike low last week at 85.95, progress towards last years yen highs at 84.80 remains remarkably slow. The support level around 86.25 seems to holding on a daily close but rallies seem restricted to the 87.00 area for now.

While the dollar is unable to overcome the bigger 88.00/10 level the focus remains solidly on further yen gains in the short term.

Pressure on the Bank of Japan with respect to monetary policy will only intensify if we break below the 84.80 area, which would then look to target the 1995 lows below 80.00.

Spread betting, FX and CFDs are leveraged products. They 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. Seek independent advice if necessary. Note that CMC Markets provide an execution-only service. CMC Markets research and charting tools are indicative and provided for information purposes and must not be relied upon as investment advice.

Article by James Hughes, Analyst, CMC Markets.

The above content does not constitute investment advice. Neither CMC Markets nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the above.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, registration no. 173730.

Today’s online spread betting summary:

• Five out of this morning’s six economic data points have come in lower than expected and its not even nine o clock.
• The main news is Japanese CPI (inflation) coming in at -1.3%, marginally worse than expected and preliminary industrial production coming in well below estimates at -1.5%.
• UK consumer confidence came in slightly lower than expected, Australian consumer credit disappointed and German retail sales kept up the morning’s negative trend.
• Also coming up today we have Canadian GDP and US GDP at 13.30 GMT. Canada is expected to show a slight rise with the US showing a slight dip.
• The Japanese data has negative implications for the global economy, discouraging risk taking, but as the ‘safe haven’ currency du jour, the news has actually strengthened the yen this morning.
• The USD/JPY has hit its lowest level since November 2009, down 0.75% so far today.
• The AUD/JPY and EUR/JPY are down 1%, with the GBP/JPY down 0.7%.
• The dollar is generally stronger against non yen currencies, with the EUR/USD down 0.25% and the AUD/USD down 0.3%.
• The main exception is the Swiss franc which is quickly regaining its status of safe haven currency #2. The USD/CHF is down, 0.35% (meaning the Swiss franc is stronger). The USD/CHF looks to have broken prior support around 1.0400.
• Gold is steady around $1169.
• The FTSE is trading down around 0.3% with US futures indicating the Dow Jones will open down by a similar amount.

The Financial Fixed Odds update by David Evans, Market Analyst, BetOnMarkets.

This website content does not constitute investment advice. No individual contributor, contributing company, BetOnMarkets nor Online-Spread-Betting.com accept any responsibility for any use that may be made of the content.

AstraZeneca and Reed Elsevier were the stand out performers in a stronger trading session on Thursday, helping the FTSE 100 to erase yesterday’s losses and rally 0.6%.

The FTSE 100 seems primed for another attack at the 5400 level, where it has found resistance previously. In truth however, as we head deeper into the summer months and traders vacate their desks for holidays, there is every chance the FTSE could be range trading until September.

Company earnings are coming in thick and fast and the general theme so far has been one of outperformance as opposed to disappointment, and this has invigorated appetite for risk.

Much of today’s advances are being dictated by gains in the Pharmaceuticals and mining sectors, whilst the banks have recovered from a late sell off in yesterday’s trading session.

AstraZeneca leads on buyback and FDA Brilinta approval

AstraZeneca shareholders cheered the company today after the pharmaceutical firm raised its EPS guidance for the year to $6.65, doubled its share buyback scheme and received approval from the FDA for its heart drug Brilinta. It’s been a day of good news and more good news for AstraZeneca share holders and as a result its shares, despite having rallied 3% this week already, are in high demand and lead the FTSE 100 winners list.

Reed Elsevier earnings beat expectations

Reed Elsevier shares traded strongly on Thursday after the company reported underlying revenue of £2.99bn, beating market expectations. The news prompted Numis to upgrade its price target on the stock to 550p, from 525p. The upgrade from Numis and the fact that Reed believe they have seen some encouraging sales signs which have helped it to return to revenues growth, has triggered strong demand in its shares, which have rallied 5% in the process.

Contracts for differences (“CFD”) trading and spread betting carries a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors. Ensure you fully understand the risks involved and seek independent advice if necessary.

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Last night saw the latest rally in US equity markets run out of steam and briefly show signs that there could be some downside to come.

The major indices had been range trading until recently hitting a run of strong sentiment that has seen some aggressive gains. The rally had been criticised by many for having no substance and last nights move will only fuel the fire that a pullback is on the cards.

The European session again looks a little light of any key data, especially on the economic calendar. So we could well be looking to earnings yet again tomorrow to give us some direction. As the session moves on US durable goods orders will likely be a focus as will the oil inventory data. With a tropical storm heading for the Gulf of Mexico the oil spreads are likely to see some volatility.

It’s another busy day for results on Wednesday with FTSE stalwarts BG Group, BAT, Compass, Invensys, Rexam, Rolls-Royce, Sage and Centrica all fighting for attention.

Centrica, which trades under the British Gas and Scottish Gas brands, is expected to have benefited from a chilly winter in the UK. The residential business will have done well from what Citigroup called “a benign pricing environment”.

The broker is predicting operating profits from British Gas of £583m at the interim stage, up from £299m last year, while the business division is tipped to double profits to £132m.

Catering giant Compass Group will release sales details for the third quarter of its financial year. Nomura predicts third quarter organic revenue growth of +4.3% year on year (you) versus -1.7% in the first quarter and +2.5% in the second quarter.

Tobacco firm BAT should report an increase in interim pre-tax profits, with Charles Stanley pencilling in a figure of £2,460m, up from £2,176m in the first half of 2009. The broker is hoping for a boost to the dividend from 27.9p last year to 33.1p at the interim stage this time.

Ahead of the open we expect to the FTSE to open up 3 points at 5,369, the DAX up 7 at 6,214, and the CAC up 1 at 3,667.

Spread betting, FX and CFDs are leveraged products. They 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. Seek independent advice if necessary. Note that CMC Markets provide an execution-only service. CMC Markets research and charting tools are indicative and provided for information purposes and must not be relied upon as investment advice.

Article by James Hughes, Analyst, CMC Markets.

The above content does not constitute investment advice. Neither CMC Markets nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the above.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, registration no. 173730.

The US dollar continues to come under pressure across the board, despite the high degree of cynicism towards Friday’s benign outcome to Europe’s stress tests.

Improving economic data and continued strong earnings performance have also helped in this regard, boosting risk appetite at the expense of the greenback while gold slips back near to its lowest levels since May, and also near a key trend line support level around $1,176 which links the lows from October 2008 lows at $682.50.

The Australian dollar has also traded back above 0.9000 for the first time since early May as the US dollar index continues its declines hitting its lowest levels since the end of April and heading towards a 50% retracement at 81.44, of its entire up move since the beginning of December last year.

US new home sales for June, surprised to the upside with a rise of 23.6% against an expectation of a rise of 5%, however this was a little offset by the revision of the May figure from -32.7% to -36.7% and this has encouraged a market determined to take on more risk.

In further consumer related data out today US consumer confidence for July will be scrutinised especially after the surprise falls last month, with analysts expecting a slight fall to 51 from June’s 52.9 reading.

In UK data out today the pound should continue to find support by way of the CBI’s distributive trades survey for July, which is expected to show a continued month on month improvement, showing that the balance of retailers reporting that sales were up year-on-year rose to +5% in July from -5% in June, and a 14-month low of -18% in May.

Euro – Dollar Spreads – The single currency continues to hold up well against the dollar but continues to find the going tricky just below the recent highs around the 1.3030/40 level of the past seven days. While below these peaks, the risk remains for a pull back towards Friday’s lows around the 1.2840/50. However, while above Friday’s lows the likelihood of a move towards the 38.2% Fibonacci retracement level of 1.3125, increases on a break above the recent highs around 1.3030/40.

Pound – Dollar Spreads – the pound continues to gain against the dollar matching its April highs yesterday around the 1.5520 level.

The pound’s recent rise now brings it close to a couple of important technical levels around 1.5560, which is the 200 day moving average, and the 50% retracement of the down move from the November highs at 1.6880 and the lows this year at 1.4230.

If one also includes 1.5610, which is the 61.8% retracement level of the 1.6460/1.4230 down move, then a break up through here could well target 1.5900 in the coming days.

Long term trend line support levels, remain around the 1.5190/00 area, from the June lows at 1.4350, while there is also minor support around the 1.5330/40 area. A break below 1.5180/90 potentially opens up 1.4980,

Euro – Sterling Spreads – while the euro remains stuck below the 0.8400/10 area then the potential remains for further losses on a break through support at the 0.8320/30 level.

Back above the 0.8400/10 level would re-target last week’s highs around 0.8520/30 via resistance at 0.8470. A break below 0.8320/30 back towards 0.8240, while 0.8410 caps.

Dollar – Yen Spreads – the 88.00/10 level remains the key barrier to any dollar gains here in the short term on the back of another failure yesterday to break above it.

While on the downside the 86.25 support remains the key obstacle towards further yen gains towards last year’s yen lows at 84.80. A break above 88.00/10 would re-target the 89.20/30 level while a break of 84.80 would look to target the 1995 lows below 80.00.

Spread betting, FX and CFDs are leveraged products. They 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. Seek independent advice if necessary. Note that CMC Markets provide an execution-only service. CMC Markets research and charting tools are indicative and provided for information purposes and must not be relied upon as investment advice.

Article by James Hughes, Analyst, CMC Markets.

The above content does not constitute investment advice. Neither CMC Markets nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the above.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, registration no. 173730.

European markets are set to get their chance to react to Friday’s stress test results as the market opens this morning, and after strong gains on Wall Street on Friday it could be that we get set for a stronger open.

The stress test results offered up no real surprises on Friday as only 7 of the 91 banks failed the test. The inevitable feeling that the tests were too lenient will be the dominating force today as the unpicking of the results can begin. Despite the cynicism the stress tests results are likely to help European indices add to gains this morning and start the week off on a positive footing.

There is other news circulating around this morning, the most notable of which is the unsurprising news that BP CEO Tony Hayward is in the process of negotiating an exit package. Ever since Mr Hayward told the media he wanted his life back it seems that he had been a dead man walking, and the task now begins of not only cleaning up the affected area in the gulf but also the much more arduous task of cleaning up the company’s reputation.

More than one-fifth of the constituents of the FTSE 100 are set to make trading statements in the last week of July so there is heavy competition for attention, but there is little doubt that the second quarter update from oil giant BP is the one the market and the press are most eagerly anticipating.

The company has not spent much time out of the spotlight since the oil leak in the Gulf of Mexico occurred on 20 April, but the results announcement will give the company the opportunity to demonstrate that other parts of the business have not been neglected while senior management has been fire-fighting the Gulf of Mexico crisis.

Today sees another company recently in the news, Reckitt Benckiser, releasing its interim results. The company announced an agreed £2.5bn bid for foot care and condom firm SSL on Wednesday, raising fears that the company may be finding it harder to achieve organic growth.

The acquisition of SSL has long been rumoured and some investment analysts are asking why it is taking place now, though the answer may simply be that the decline in the value of sterling has made SSL very attractive to US companies such as Johnson & Johnson and Colgate-Palmolive.

Chip designer ARM will have been among the more enthusiastic of cheerleaders when Apple announced record results earlier this week. The company’s intellectual property is used in most of Apple’s hot products and this has not gone unnoticed by the market, which has chased the shares 10% higher this week.

Ahead of the open we expect to the FTSE to open up 30 points at 5,343, the DAX up 25 at 6,191, and the CAC up27 at 3,634.

Spread betting, FX and CFDs are leveraged products. They 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. Seek independent advice if necessary. Note that CMC Markets provide an execution-only service. CMC Markets research and charting tools are indicative and provided for information purposes and must not be relied upon as investment advice.

Article by James Hughes, Analyst, CMC Markets.

The above content does not constitute investment advice. Neither CMC Markets nor Online-Spread-Betting.com accepts any responsibility for any use that may be made of the above.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, registration no. 173730.

Yesterday’s US holiday gave the market the perfect excuse to do as little as possible as currencies traded in fairly tight ranges.

Concerns about global growth continue to weigh on markets over the last 24 hours after the slowing service data out of China last week, with UK Service sector PMI for June yesterday coming in slightly worse than expected at 54.4, against an expectation of 55.0, its slowest rate for 10 months. This weaker than expected data knocked the pound lower and has lowered expectations of any move higher, or indication of a move higher on interest rates in the near future.

The other noteworthy announcement on an otherwise quiet day was the addition of NIESR’s Martin Weale to the Monetary Policy Committee from the August meeting, though this was largely met with indifference by the market due to the fact that he sits broadly between the dove and hawk camps.

The single currency has also slipped back slightly after its recent gains after comments from European Central Bank President Trichet urging continued austerity measures amongst European governments to rein in their budget deficits.

As expected the Reserve Bank of Australia kept rates unchanged at 4.5% exercising caution and a pause over concern about the global growth outlook and this inaction has boosted risk appetite slightly in Asia, with the US dollar losing a little ground.

The only US data of any note today is ISM Non-manufacturing data for June which is expected to come in around 55, a slight decline on last months figure of 55.4.

EURUSD – the failure to get above the $1.2610 level on a daily close throws into doubt the ability of the single currency to follow through on its break higher last week. While the unexpected break up through $1.2400 has certainly delayed the anticipated move back to the June lows at $1.1880 it certainly hasn’t ruled it out. Dips so far have been confined to the $1.2480 level.

The 50 day moving average should act as an area of support around the $1.2450 level and this area needs to hold for further upside to be forthcoming.

The inverse head and shoulders pattern break we saw last week would ordinarily herald a strong move higher; however its break conflicts with a much longer term 5 year monthly break down which could cap the Euro around $1.2780. Next resistance remains around $1.2610, a break of which targets $1.2670.

GBPUSD – the drift back from Friday’s highs has seen the stretched momentum begin to subside as the pound has slipped back towards the interim support area around $1.5080 yesterday. A break below yesterday’s lows could well yield up a deeper test towards $1.4980.

The key resistance levels on the top side remain around the 50% retracement level of the $1.6460-$1.4230 down move at $1.5345, as well as trend line resistance from the November 2009 highs at $1.6880 which comes in around $1.5375/80.

EURGBP – the failure so far to break above £0.8300 keeps the focus on the downside despite the gains of the past few days.

The lower euro scenario continues to remain intact for now while the single currency is able to hold below resistance around the £0.8320/30 area. In the unlikely event of a move above this area the longer term resistance around 0.8400 should cap.

Longer term the objective remains for a test towards £0.8000 on the way to £0.7785 over the coming few month’s which is a 61.8% Fibonacci retracement of the 3 and half year up move from £0.6570 to £0.9805.

USDJPY – continues to look heavy on the back of declining US yields and diminished risk appetite. The US dollar looks to be set to head towards ¥84.80 by way of support around ¥86.80. A recovery back above ¥88.20/30 is needed to stabilise the dollar in the short term

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Article by Michael Hewson, Analyst, CMC Markets.

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