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Cable Leads the Pack as Week Begins

Last updated 1/18/2010 4:49 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

Top Stories

• UK Housing data hotter prompting rally in cable
• US on bank holiday, flows very muted
• Nikkei drops more -1% on weak US data Europe rebounds after weak open
• Oil keeps dropping to $77/bbl
• Gold steady at $1134/oz.

Overnight Eco

• AUD MI Inflation Gauge 0.3% vs. 0.3%
• JPY Revised Industrial Production 2.2% vs. 2.6% eyed
• GBP Rightmove HPI 0.4% vs. -2.2% last

Event Risk on Tap

• CAD Foreign Securities Purchases expected at 4.23B

Price Action

• USD/JPY hovers at 91.00 in very quiet trade
• AUD/USD bid tone improves into Europe as 92.00 level holds
• GBP/USD performs best fo all challenging 1.6350 on stong houisng data
• EUR/USD capped at 1.4400 as Merkel's problems weigh

A predictably quiet start to the  trading week with European calendar barren of any data and US capital markets closed today for Martin Luther King holiday.  Most of the majors have been trapped in miniscule 30 point ranges as dealers are happy to provide two way trade with little external news affecting flows.

The one  exception to the placid pace of trading has been the pound, which has remained bid throughout early morning London session on combination of better than expected housing news and anticipation of more M&A flows. On the economic front the  Rightmove housing survey registered an increase in prices in January of 0.4% after declining  for the past two months. The rise in price was driven by both an increase in buying interest and a rise in seller confidence suggesting that the UK housing market is stabilizing as the economy returns to positive growth.

Cable also saw a boost from M&A flows as the seemingly unending Cadberry saga could see some resolution within the next several days on expectations that Kraft may raise its offer. The stock was quoted higher in morning  London  trade and cable benefited from possible prospects of a deal actually getting done.

The euro meanwhile remained moribund for most of the session carving out a very narrow 1.4390-1.4370 range in very light trade.  We noted that dollar positioning in et futures markets has become skewed to the short side which could trigger a rally later in the greenback this week if EZ data disappoints. The key release in our opinion will be the PMI readings due this Thursday January 21st.   In his press conference last week ECB chief Jean Claude Trichet acknowledged the possibility of a slowdown in economic activity in the region. If the PMI survey miss to the downside, confirming the notion that  growth in the 16 member union may have stalled, the EUR/USD& nbsp; could see more downside pressure as risk flows diminish   further.

The unit also remains under pressure due to the fiscal problems in Greece, but the overall tone of trade is rangebound rather than directional today and we expect the North American session to remain quiet as well, barring some possible volatility on the fix.  

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.