Financial market research and analysis

Home prices in London recorded the sharpest drop in nearly six years according to the latest Rightmove release. Meanwhile, the rise in countrywide house prices dropped to 2.3% year-on-year in February, from 3.2% printed a month earlier.

Eventual exodus from London due to the Brexit combined to tighter lending conditions and higher taxes discouraged investors, who were already facing expensive home prices in London.

Of course, before the Brexit decision, London benefited from being Europe’s biggest financial centre besides being home to a variety of activities and services offered to a multi-cultural and cosmopolite population. The city was the perfect melting pot, and therefore could capitalise on its very unique title. Unfortunately, London’s position at the heart of Europe and the European financial place is at risk after the UK decided to walk out the European Union.

At this point, even a cheap pound could not revive appetite for London properties. As foreign businesses, investors face expulsion, the value of land in the UK’s capital city is also on a slippery ground.
Homebuilders were offered in London, despite the upbeat market open.

Taylor Wimpey (-0.96%), Persimmon (-0.80%)

Cable stabilized around the 100-day moving average (1.2420). In the absence of major macroeconomic news, the GBPUSD will certainly remain rangebound between 1.2370 – 1.2575 (50-day moving average – minor 23.6% retracement on post-Brexit sell-off) before Wednesday’s GDP data. GBPUSD below 1.25 is supportive of the FTSE purchases. The FTSE futures (+0.39%) were well bid hinting at a solid open in London.


Pullbacks in gold prices could be opportunity for buyers

Gold made a soft start to the week. After three straight weeks of gains, gold ETFs (Exchange Trade Funds) and hedge funds waned their long positions, either due to intermediate profit taking before a further rise, or due to a hawkish Federal Reserve (Fed) rhetoric. The price of an ounce remained below $1238 in Asia. Last week’s double top at $1245 could discourage the short-term longs and push the price of an ounce down to $1215 (minor 23.6% retracement on January 14 to February 8 decline), before $1198 (major 38.2% retrace).

Pullbacks in gold markets could be interesting opportunities to strengthen long positions as the mod-term view in the market remains bullish on gold. The ETFs worldwide expanded their long gold holdings by 2.4%. Gold is an efficient hedging instrument against the inflation and the market volatility. As such, the Trump-based reflation trade could keep the buying interest tight, as prospects of higher US rates are mostly priced in.


Kraft withdraws its 143 billion dollar bid for Unilever 

Kraft withdrew its 143 billion dollar bid to takeover Unilever on the back of Unilever’s unwillingness to approach the deal, which would have been the world’s biggest takeover in food and beverage industry.

Unilever tanked by 7.76% in London.


Signs of deeper yen sell-off against the US dollar

Traders trimmed their net long USD speculative positions to a four-month low last week, as net short JPY positions retreated to a two-month low.

The yen gave back gains against the greenback in Tokyo. The appetite in the USDJPY improved, as Japan’s larger than expected trade deficit revived the Bank of Japan (BoJ) hawks at the early hours of trading. Japan printed -1086.9 billion yen trade deficit in January, versus -625.9 billion yen expected and -640.4 billion yen a month earlier. The pair advanced to 113.19. The strengthening positive momentum suggests the possibility of a further recovery to 113.35 (200-hour moving average), 113.65 (100-hour moving average), before hitting the 114.00 barriers. Solid support is presumed at 112.65 (100-day moving average).


Euro-dollar resists pre-100-day moving average

The EURUSD hold ground above the 1.06 mark. Last week’s failure to trade above the 100-day moving average (1.0671) may have reinforced the resistance at this level. The bias in the EURUSD remains negative, as put options trail below the 1.0625 strike at today’s expiry. The upside potential could be limited throughout the day. A break through 1.0670/1.0680 could trigger an uptick to the critical 1.0707 (major 38.2% retracement on post-Trump decline).