Range Bound & Cautious
19-10-2011
While Wall Street did in fact gain on Tuesday it did not manage to wash out cautious sentiment completely. And as the debt crisis continues in Europe, as Spain this morning had their debt downgraded, the EUR managed to stabilize in late trading yesterday. An article from by the Guardian newspaper in the U.K. pointed towards an increase in the E.U. emergency funding package, but this has proven unsubstantiated thus far this morning. This weekend’s upcoming E.U. summit looms but no clear answers have been brought to light. Thus as equities managed to bounce back somewhat on Tuesday, what continues to produce is evidence is that short term moves are being fueled by rather speculative momentum as profits are sought in what have proven to be inconsistent markets.
Gold is trading at 1658.00 USD as of this morning and illuminates the confusion felt by many investors. Gold reached record heights only a couple of months ago but has languished the past month as traders essentially wait for a clear path to follow. Economic data has proven to be rather downbeat globally including from the likes of China. This has put a damper on the commodities markets, but nonetheless in the past week physical resources have found some wind in their sails. And the same could be said for equity markets which have shown some stability after experiencing massive sell offs in August and September. October has proven to be better for equities so far. And investors who have been betting on further erosion within bourses and some currencies may be scratching their collective heads as they wonder when the next shoe will drop. Perhaps the selloff in the EUR and on global bourses have found good resting grounds, perhaps the selloffs have been factored into existing prices and ‘bad news’ has already been digested into the marketplace. Perhaps.
What is for sure is that important data will keep coming. Today the U.S. will release critical sector numbers with Building Permits and Housing Starts results. Tomorrow along with the Philly Fed outcome, the Existing Home Sales figures will be published, and the ugly truth is that most signs indicate that the housing sector in the U.S. is still in the midst of a depression.
The interconnectedness of the global markets is breathtaking and the E.U. financial saga has amplified this for all investors as they ponder possible domino effects should they start to fall. This weekend’s upcoming meeting has had its goals downplayed by Germany and investors may prove cautious not knowing what will take place. The GBP and AUD have both performed well. Once again both currencies have proven that they are direct recipients of risk taking based on sentiment that develops in quick fire ways around the EUR. The affect of the E.U. debt scare on the global economy and its possible ramifications are proving strong.
The JPY continues a well defined consolidation. Traders who watch the currency must have a profound amount of patience and the discipline to let the JPY simply range trade and take advantage of the moves.
Forex will feel the weight of the E.U. financial story today, but American data may play its part on Wall Street too. Also quarterly earnings will continue to be published by corporations. Cautious with the likelihood for short term range bound trading is the scenario for Wednesday.
