Markets are just slightly on the back foot as a number of things combine to let investors just reassess the bullishness that we’ve seen so far this year.
The markets have enjoyed a very good start to the year but as we head into the spring bulls have had to reflect on signs that the weeks and months ahead are not going to be easy. The bombshell from China in the downgrade to their growth forecasts yesterday, then the poor PMI data in the eurozone coupled with the worse than expected number from the UK and the record deposits with the ECB has all produced a concoction that’s not conducive to buying equities. Uncertainty also remains ahead of the Thursday evening deadline to just how much PSI there’ll be in respect to Greece’s debt.
As a result the FTSE is not in the best of shape this morning, but then it’s not diving for the lows either. At the time of writing the index is at 5860, having been a little lower already touching a low of 5850. This is seen as the near term support which we bounced off last Thursday and so far this morning it has held up. A break below here could lead to a test of 5800 and if this is breached to the downside this could open up the way for 5730. To the upside there are no prizes for working out where the resistance is, seen at 5925/45 and then the big 6000 level.
With the lack of any economic data today focus will be on the near term support and resistance levels. The week gets more involved as we go on though with one of the major focal points being Thursday night. It’s unlikely that the PSI will not save Greece by the majority not taking part, but there’s always the chance of the result ending up as unfavourable and the worst case scenario being a default by the country. This of course is in no one’s interest at this time as a default is not expected and the ramifications for the wider markets will be huge.
The current risk off situation seems to be affecting the FX markets more than anything else right now with the euro struggling to hold onto any gains. Until the decision this Thursday is out of the way it’s unlikely that we’ll see many traders committing to a higher euro. The short term double top in EUR/USD at around 1.3485 has caused a retracement of over two percent taking us to 1.3185 where we sit at the time of writing. Support and resistance is seen at 1.3160, 1.3125, 1.3100 and 1.3240, 1.3280 respectively. The near term support just seems to be building up at the moment so there might be a little attempt to the upside for the pair, but the trend remains negative so if 1.3160 is taken out, then we could see further weakness.
The dollar’s march higher against the Yen just seems to have come to a standstill at the moment. USD/JPY is at 81.30 this morning and now seems to be attracting a few sellers at these levels. If metal prices make a turn higher again, especially gold, then we may have seen the end of this little run upwards for the greenback. Near term support and resistance is seen at 81.10, 80.80, 80.60 and 81.60, 81.85 respectively.
Gold has recovered from its big move to the downside back in the middle of last week and it still hovers around the 1700 level. It’s been a tough one to call recently in light of the volatility but for now just seems to be finding support at 1700. At the time of writing the yellow brick is at 1697 and its lack of recovery to sustain levels above 1700 is causing a little concern amongst the bulls who have been starting to question the metal’s longer term trend for some time now.
Brent has also traded sideways so far this week and sits at 123.95 at the time of writing. The big spike higher and subsequent retracement from above the 128 level has got a few alarm bells ringing for the bulls, but there’s yet to be any major follow through of the selling and the uptrend for now remains in tact.