Friday, March 14, 2014

Forex markets in the doldrums | Chinese apprehension | Happy Saint Patrick’s Day

The Forex market is in a funk of indecision at the moment. Typical of the difficulty most pairs have in finding direction is Cable, or the pound Sterling against the US dollar (GBPUSD), for which it has proved impossible to refrain from hugging the Monthly 200 period Simple Moving Average (SMA) (see chart above) for some time. We have previously alluded to the significance of this price level in Technical Analysis terms. See “British pound could push the boundaries”.

Elsewhere, the market is dominated by a wait-and-see attitude over the upcoming referendum in Crimea, due to take place this coming Sunday. Most Western leaders have made noises about making Russia pay for this intervention, but Vlad Putin seems to be willing to press ahead and rely on the Machiavellian calculations he presumably has made about NATO’s non-existent appetite for armed conflict and Europe’s, and in particular Germany’s, reliance on Russian gas for its much of its energy needs.

Hopefully they will sort it all out and we can get back to commenting on the US economic upturn, which is now backed not just by good employment numbers but also by a rise in retail spending, which has just been announced, the situation in Oz and New Zealand, on which we remain well focused, and the likelihood or otherwise of the Bank of England to follow the lead of our Kiwi friends and raise interest rates, sooner rather than later, among other things.

Chinese apprehension

Talking about Australia and New Zealand, it is worth noting that all might not be going as swimmingly well in China, those countries’ biggest trading partner, as might be thought by many.

The Dow Jones Newswire has recently succinctly captured much that should concern us about The People’s Republic:

China unveiled a raft of data that showed slower industrial and retail activity in the first two months of the year, the latest evidence to suggest the world's second-largest economy is losing steam.

"This is terrible," Liu Li-Gang, a Hong Kong-based economist at ANZ Bank, said. "I wasn't expecting high figures, but this is worse than I thought."

Industrial output rose 8.6 per cent year-over-year in the January-February period, down from a 9.7 per cent increase in December, data from the National Bureau of Statistics showed Thursday.

The rise in the two months--combined to adjust for distortions from the Chinese Lunar New Year holiday--is the slowest since 2009.

Growth in fixed-asset investment also eased to 17.9 per cent year-over-year, the weakest pace since 2002, down from 19.6 per cent last year as a whole.

While activity continues to expand, the pace of growth is poor by Chinese standards. It now seems unlikely that economic growth in the first quarter of this year will match the 7.7 per cent year-over-year rate logged in 2013”.

Happy Saint Patrick’s Day

Next Monday is the 17th of March, St. Patrick’s Day, and a national holiday here in Ireland. We wish all readers a happy one.

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