We saw a strong rebound on European markets yesterday, and this looks set to continues this morning as investors put aside concerns about events in Russia and focussed on some fairly reasonable economic data,
from Germany and the US, as well as the prospect of additional policy easing which drove strong gains across the board and into Asia this morning.
This move higher was given added impetus from two different directions starting with an expectation of some form of additional stimulus from Chinese authorities, and which came combined with a potentially significant softening of position from Jens Weidmann, President of the German Bundesbank
, about the prospects of further policy easing by the ECB to counter a potential deflationary threat in the euro area.
It would appear that whatever concerns investors had about the Federal Reserve dialling back on stimulus are starting to become yesterday’s story
, particularly after yesterday’s comments from FOMC voting member Charles Plosser that last week’s comments from Fed Chief Janet Yellen were no mistake, with some hoping that the ECB could well step in to fill the gap left by the Fed.
While that belief is undoubtedly premature, Mr Weidmann’s comments were very significant given the Bundesbank’s considerable and consistent opposition
to any such extraordinary measures over the past four years of the crisis in Europe.
While he didn’t give the process a “green light” the fact that he said it wasn’t out of the question was a significant shift of position
, despite the fact that obstacles to such measures remain high due to the recent German constitutional court ruling, which does suggest that this could merely have been an attempt to try and jawbone the euro lower.
Mr Weidmann also opened the door to the prospect of negative deposit rates
to help cap the recent rise in the euro.
In the US,
markets finished higher for the first day in three after consumer confidence recovered in March to its best levels since January 2008, raising hopes that the recent downturn in the US economy is starting to turn around.
Today’s durable goods numbers for February
are expected to show an improvement on the disappointing 1% decline seen in January, with a rise of 0.8% expected. This may well be too soon given that large parts of the eastern US were still experiencing extremely cold temperatures, and in some cases still are.
– the support at 1.3750 continues to remain fairly solid for now, but we need a break through the 1.3850 level to stabilise and suggest a retest of the recent highs at 1.3970. Below 1.3750 targets a move towards 1.3640. The 1.4000 level remains a key psychological barrier to a move towards 1.4200.
– after the low at 1.6460 this week the pound appears to be finding a base and could well be headed back towards the 1.6570 resistance area. The pound needs to get back above the 1.6570 area to suggest a retest of the highs last week at 1.6650.
Only a move below 1.6460 suggests the possibility of a move towards the 100 day MA 1.6435. A break below 1.6425 opens up the road for a move towards 1.6300.
– the euro continues to remain resilient but has thus far managed to stay below the 0.8400 level keeping the bearish engulfing candle seen last week intact. The resistance at the 200 day MA at 0.8420 remains a key obstacle to further gains. Only a move below 0.8320 retargets the 0.8270/80 area.
– the rebound seen over the last week or so needs to get back above the 102.70/80 area or run the risk of a revisit of the 101.20 area which has acted as strong support for the whole of March.
As such the risk remains on the downside while below the 103.00 area. The focus still remains on the February lows at the 100.70/80 level. The 200 day MA is also a key level at 100.35.
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