Short Term Highs Reached
28-10-2011
The EUR continued to gain in a strong way on Thursday as risk appetite was fueled for yet another day. Gold is at short term highs. Crude Oil has done rather well taken into consideration it has gained nearly ten dollars in the past month. And the equity markets globally have seen significant rises. The pace of the EUR stands out in light of its circumstances and proves the E.U. confidence game, spawned by its officials has won a critical round in its battle. The U.S. also released its Advance GDP figures and the result was better than anticipated. Growth while not robust in the States is showing signs of life for the moment.
After so much bad news had been factored into the broad markets over August and September it is apparent investors have decided to brush some of their fears to the side in the short term and take on risk. The GBP and AUD have sustained their values under the guise of the strength in the EUR, and going into the final trading day of the week have an air of stability around them. There will not be much in the way of critical economic data today, but the U.S. will see a Revised Consumer Sentiment reading from the University of Michigan. And it is sentiment which is driving the broad markets, because if taken on a purely fundamental perspective it is not economic outlooks which are causing the massive outpouring in optimism that is causing the drive upwards in risk.
The gains made in equities and within Forex among the EUR, GBP, and AUD are built on the hope that the E.U. has gotten its house in order. And investors for the moment have seemingly bought into the self congratulatory stances taken by the European politicians and officials who ‘wrapped up’ their latest emergency summit this week with nice speeches and handshakes. Unfortunately they didn’t really answer the full context of problems that the E.U. faces regarding its economic crisis. And traders would be wise to keep their short term notions on a hair trigger and be ready to reverse when the time calls for it. When will the trading landscape suddenly reverse? Well it doesn’t appear that that sentiment will crack today, and for those who have the stomach to manage trends, they might meet with good opportunities still.
For a sign that not all is wine and roses, one simply has to watch a televised interview that was given by French leader, Sarkozy, last night in which he gave his opinion that Greece should not have been allowed to join the EUR in 2001. Greece quickly retorted by saying that no one should be used as a scapegoat regarding the financial crisis that is gripping the continent. Questions abound regarding the entire continent and it still remains unclear if all the problems are even understood. What would happen for instance if French debt is downgraded?
The broad markets have had an outstanding month of gains across the board as risk has ramped up. The E.U. has done a good job of selling confidence. Equities have done well, but it should be noted that after the pounding they took in August and September, they are still below the water in many cases. The EUR finds itself as of this morning trading near its ‘old range’ with the USD. As we go into the weekend some traders may be asking how long the clock has until a different reality set in.
