Weekly Technical Analysis by Lloyds TSB

The first two weeks of the new year are usually a good period to avoid from a trading perspective, but once again the market has managed to deliver in excess of a month’s worth of price action in just a few trading days.

The first two weeks of the new year are usually a good period to avoid from a trading perspective, but once again the market has managed to deliver in excess of a month’s worth of price action in just a few trading days. Whilst it is generally acknowledged that volumes are thin, those that have kept their powder dry will hopefully be encouraged into the market in the coming trading sessions. As volume starts to increase, dollar weakness is the expected prevailing
theme.

The current market’s expectation that European bond yields have to fall in line with UK & US yields has so far caused the current weakness in the euro. The main sticking points with regard to extending this trend against the dollar are equities and commodities. It is clear that precious metal demand has increased. Whilst this can be discounted on the market’s safe haven attitude, the increasingly positive signals in base metals and the modest reversal in the
baltic dry index and softs are implying that the market can not get too complacent about ever falling commodity prices. Euro bears should then look to euro swiss and euro sterling as the main way to express this view, but euro dollar should find support (possibly long term) between 1.30 and 1.3150. This is not a clear cut situation and hopefully into next week we should get some clarity.

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