23 January 2012 at 9:08 GMT
The band keeps playing the same tune seemingly on an endless loop and the market keeps dancing its merry little jig, without even a hint of fatigue.
More headlines promising resolution, once again fading into obscurity, as nothing emerges over the weekend. Any hope for a final structured solution to the “Greek Discount” failed to materialise as the discount window at first increased to almost 70%, before once again stalling and hitting yet another roadblock. Only definitive action taken so far has impacted the oil markets as Iranian embargoes have been agreed to and so far enforced.
I’ve had a gutful of this nonsense. There is no resolution in sight, markets will continue to track sideways and with Asia out on holiday practically all week, all attention will once again focus on overpaid, overstuffed and entirely redundant European officialdom.
Turning to currency markets today, we saw the EURUSD open with a gap lower last night in a very light Asian session as headlines appeared once again about failure to agree Greek terms. Stops from Friday’s close were taken out as we gapped lower, only to then have this gap filled once again this morning and we trade into fresh highs around the 1.2950 area. At this pace and in the absence of any real black swans, I can see this pair trading into 1.3080/90 in the next day or so, before this mini cycle of strength fades. For a cleaner indication just take a look at a daily chart of the DXY. Once we peak in this pair, the return road should take us into 1.2750 before we have another look at what’s actually happening in the world.
The AUDUSD keeps trading to the moon and won’t feel remotely settled until it has now tested the 1.0580 level. Stops and good offers are mixed above the 1.0530 level and those looking to fade rallies, and one strategy would be to wait for the stop loss clean out before getting strategically short. It could well be that this run higher is not quite finished.
The Cable, having closed on Friday around the 1.5550 pivot level continues to show strength and while pullbacks will be evident, possibly still has room to the upside, in which case dips are to be bought... The top end of this move needs to clear 1.5630 for confirmation of range trade play into 1.5780. Will it get there? Probably not that far, but for the time being there is no sense in arguing with a clear trend.
Welcome to the year ahead folks, more rumblings, more political rhetoric and in actual fact, absolutely no change. Economists and strategists will try and explain and predict and theorise etc etc etc, but in reality no one has got a real clue. Traders on the other hand are just going to try (as always) to ride this out, made only harder with each passing day as volatility in the market and general flow diminishes...
Good luck and what a Monday....