Once again nerves over the eurozone are just reminding investors that all is not well across much of the economic block. 

Moody’s threat to downgrade Spain’s credit rating reminds us that all is not a bed of roses so December’s rally is halting for now.

Markets have well and truly been in rally mode with December’s gains totalling almost 7% so far.  Clients have continued to oppose the move higher so far this month by selling into the strength.  It would seem that they simply don’t believe the momentum can continue given all the uncertainties that remain.  This morning they are being justly rewarded for their persistence as the FTSE is some 30 points lower in early trade.

The past resistance of 5850 that was taken out yesterday should provide the bulls some support over the short term and if we head below there then 5800 should provide some support.  To the upside there’ll be no surprises to hear that 5900 is the resistance for now.

On the economic data front we get UK unemployment released at 9.30.  Even though we’ve seen a number of surprises (considering the circumstances) that would suggest the labour market in the UK isn’t all that bad, a lot of the good numbers have not been supported by new full-time jobs.  The manufacturing sector is seeing a change in fortunes and is hiring people, but other sectors are not seeing the same sort of demand which is being reflected in wages too.  The number of claimants is expected to fall, but with jobs being hard to come at the moment don’t be surprised to see this figure rise.

Later at lunchtime we have US inflation numbers.  US CPI is a mere third of that in the UK and it’s surprising to see considering the amount of QE that they’ve pumped into their system.  PPI is double that of CPI and it indicates that the rise in prices is not being passed onto the US consumer as the economy so heavily relies on their strength in order to sustain is recovery.

The euro’s breakout above 1.3280 was not exactly followed through yesterday and as far as candlestick formations goes the shooting star it formed will come as some concern for the bulls.  This would indicate that the uptrend is over but considering that we are not in an uptrend it can probably be discounted and traders will focus more on the recent outbreak to the upside which could see further strength.  This morning however the threat of a downgrade to Spain is taking its toil on the single currency and EUR/USD is at 1.3310 having taken out support at 1.3350. Below here the past resistance of 1.3280 is quite a major support level now.

Cable has been rising slowly but surely in a sort of two steps forward one step back scenario.  1.5900 was tested yesterday and we failed there so that’s the near term resistance for now.  At 1.5750 this morning, to the downside support is seen at 1.5720, 1.5675 and then 1.5650 will be in focus.

Once again the 84.00 level has proved too much for USD/JPY as the dollar’s strength just seems to have been called into question for the time being.  The recent low at 82.80 is support and a break below here bears will target the 82.40 area.  To the upside 84.30-40 is where the cross has failed on five occasions so far, so you’ve got to fancy that if it can break out above here it’s going to head further north.

Gold seemed to be content above 1400 having spent the whole day above there yesterday, but has dipped back below is Asia’s session and early this morning.  1411 is still the resistance bulls will want to see taken out before we can expect another test of the all time highs, but for now the precious metal is back at 1390 at the time of writing.

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