Risk warning: Spread betting, FX and CFD trading carries a high level of risk to your capital and you can lose more than your initial deposit. These trading products may not be suitable for all investors so seek independent advice. View full risk warning
Well here we are – the last trading day of 2011. For many, it will be a year that couldn’t end soon enough. Before we look back over the year that has been, first lets have a round up of yesterday on what was the last full trading day in the UK. The morning started very flat, as all eyes were focussed on the 10 year Italian bond auction. After the successful 6 month bond auction on Wednesday, there was hope that this would follow through for demand for the longer dated stuff. Unfortunately, it was somewhat a mixed bag. While Rome managed to sell bonds at lower yields than has been seen in recent auctions, they only managed to sell 7 billion of the 8.5 billion Euros they had hoped to sell. This doesn’t provide the most encouraging of signs, given that Italy will need to sell 400 billion Euros of debt next year – half of which is to merely refinance its original debts.
This set the mood for the morning part of the trading session, as we sat in flat sideways markets. It was only with the release of a flurry of US figures later in the day, which were all interpreted positively, that the markets came to life and started moving higher. And it is this disparity between a Europe that continues to struggle but a US that is gradually starting to get the cylinders of its economy firing again that seems to be an emerging theme.
The FTSE at the time of writing is trading around 5560, which is pretty flat, down 5 points on the day. With the UK equity markets closing early today, at 12:30, and with no economic data out it would be surprising to see any meaningful move either way. You are looking at support and resistance over the near term at 5380, 5110 and 5620, 5780 respectively.
Elsewhere, in the currency markets, we hit a few notable levels. The Euro/USD fell to 1.2858, its lowest level since September 2010, before rebounding to be slightly weaker on the day at 1.2938. The trend remains downwards, and there doesn’t seem to be any real support until you hit 1.2650, although the psychological 1.2500 certainly seems a good bet. Even more interestingly, the Euro fell to a low of 100.05 against the Japanese Yen overnight, its weakest level in over 10 years. The trend in Euro/Yen remains shows no signs of turning at the moment, so it would require cautious buying even at these levels.
Gold also continued its downward fall yesterday morning, before bouncing with the opening of the US trading session. Again the strengthening dollar seemed to be the culprit, with the yellow metal mirroring, for the most part, what the Euro was doing. Without sounding smug, gold behaved pretty much as I commented yesterday. Having broken down to the 1536 spike we had back in September, it tried to push further, but ran out of gas around 1524, its lowest level for 6 months. 1530/36 then formed a battle ground, before the yellow brick bounced higher and never looked back. The long term trend is still up for the yellow metal, but until it can break above the 200 day moving average, it will struggle to keep up its momentum. 1600 is possibly where you might see the first signs of resistance.
So as we reflect on the year that has been, and also look forward to 2012, what can we say? Well, 2011 started off with a lot of hope and optimism, as the equity markets were coming off the back of a double year bounce from the 2009 lows. However, if there is one term that will be synonymous with 2011 it will be ‘Eurozone debt crisis’. It is the reason that the UK and key European equity markets are showing close to double digit losses, while our US cousins across the pond have managed to have their equity markets closing the year flat to up a little. There may not be much respite going in to 2012 either, unfortunately. We have further austerity measures to look forward to, together with a Eurozone crisis that is far from resolved. There is also uncertainty over how China’s slowdown will land, together with political issues, like the 2012 US elections and concerns over Iran, to contend with. 2012 is already shaping to be another exciting one. On that note, I bid you all a Happy New Year!
Ipek Ozkardeskaya is a Market Analyst at London Capital Group. She has strong technical background in quantitative finance. Previously, she worked as FX strategist in Swissquote Bank and as a client sales executive at HSBC Private Bank in Geneva. She also developed quantitative models in automatic trading as part of BCV’s Structured Products team. Ipek has a Master’s degree in Financial Engineering & Risk Management and a Bachelor degree in Economics from University of Lausanne.
Jonathan is also a dealer at Capital Spreads. Having started his career in the City trading interest-rate and bond derivatives in 2005, he entered the spread betting and CFD industry in 2007 by joining the dealing desk at City Credit Capital. After successfully managing multiple-asset risk books across the European, US and Asian time zones through the height of the financial crisis, he joined Capital Spreads in 2010.
This information has been prepared by London Capital Group Ltd (LCG). The material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument.
LCG accepts no responsibility for any use that may be made of these comments and for any consequences that result.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.
It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.