The improvement in risk appetite amongst equity investors has not been translated through to the currency pairs. Sterling has strengthened slightly on the back of inflation data in line with market expectations, but there has not been a substantial move. The Euro has weakened this morning after ECB board member and Bundesbank chief Jens Weidmann suggested that he was open to dovish moves such as potential QE and negative interest rates.
The big move in the US session is likely to come around 14:00GMT with Consumer Confidence and New Home Sales. Expect some volatility around this time.
EUR/USD seemed to be resuming its downside shift following Weidmann’s comments. The breakdown below $1.3824 should now ensure that rallies are once more sold into which is something that I will be looking to do. I am looking upon any move into the band around $1.3824 as a chance to sell.
GBP/USD has strengthened slightly on the back of the inflation data. However the near to medium term outlook remains negative and I am looking on this as a chance to sell again. Once the move following the data has calmed down I will be looking to sell for at least a retest of the $1.6459 low.
USD/JPY is a difficult call to make with any real conviction. The slight upside bias remains but the rate continues to range trade. Therefore I would continue to play the range that it has been in for the past few days. Any dip toward 102.00 could be seen as a chance to sell, to take profit around 102.60.
Gold broke below $1319.61 yesterday which I see as a key near term breakdown. It means that the uptrend has been breached along with a key support. The continued weakness suggests that rallies should be now sold into. I expect the price to retreat towards $1300 in due course at which stage I expect support to begin to form.
The near term outlook for FTSE 100 has improved significantly today. The support around 6500 has been bolstered and the bulls will be looking towards a test of 6628 resistance. I am still concerned by the underperformance of the FTSE 100 versus other bourses such as the DAX and more specifically the S&P 500 but for now the outlook is improving. The DAX has now got open the prospect of an inverse head and shoulders reversal pattern on the hourly chart, needing a move above 9377 to complete. The bulls have got the strength at the moment, but be careful as the move higher in equities seems to have come on the back of potential artificial stimulus in China which should by no means be relied upon.