Eurozone Retail Sales to Determine Sentiment in Equities; FTSE 100 to Test 5840

Selling in the Euro helped to drag down the other high yielding currencies to start the week as sentiment is weaker on expectations that today’s Eurozone Retail Sales figures will show a decline for the third month in a row.  Moody’s also made headlines after its decision to downgrade Greek credit to its lowest rating (to C from Ca).  Safe haven assets are higher in Monday’s Asian trade, in part due to downward GDP revisions out of China.  The latest official growth forecasts now show that the government expects GDP to 7.5 percent for 2012, which, if accurate, would be the lowest increase seen since 2004.

Futures prices in the FTSE 100 are also moderately lower (negative by roughly 15 points) and today we will see some significant macro data from the region to guide price activity.  Service Sector Purchasing Managers’ Index (PMI) figures are scheduled (along with Changes in Official Reserves) and this will give markets an indication of the extent to which debt contagion in the Eurozone has reduced productivity levels.  Corporate earnings will also be seen from Petrofac LTD, Intertek, Amlin, and Paddy Power.

In the US, S&P 500 futures are little changed ahead of the Services ISM and Factory Orders reports out today.  Services ISM represents a much larger section of the economy (when compared to the manufacturing report), so, given that we will see similar data out of both the US and UK today, markets will give a greater level of importance to the figures than what is generally seen with this data.  US corporate earnings will also be released by VeriFone Systems, Quanex, and ABM Industries.

In terms of general market themes, volatility has slowed in the past few weeks as markets are left without clear sentiment direction.  But price activity on Friday was largely negative, propelled in part by negative headlines out of Spain, where the government raised its budget deficit forecast for the remainder of this year.  The S&P 500 was lower by 0.3 percent during the New York session with the Resources sector showing some of the biggest declines.  Energy companies we also seen lower as the recent rally in oil abated and fell back from its yearly highs.

In addition to the Services data out today, the main driver of sentiment will be the Retail Sales figures from the Eurozone.  Another negative report will likely bring renewed selling pressure in to the Euro, as this along with the Moody’s downgrade in Greece will weigh on sentiment and regional equity markets.

Technical Analysis:


The NZD/USD has now broken some very critical levels on the 4H charts, with quadruple bottom support at 0.8250 currently bring broken.  We have been short this pair for about two weeks and from here are next downside target is seen at the confluence of Moving Average, Fibonacci and psychological support just ahead of the 0.80 figure.  If not currently short, wait for bounces to enter as prices work off oversold hourly conditions.

The FTSE 100 continues to have problems with the 5930 area and after a fourth test of these highs, prices are now seen rolling over.  The next area to watch comes in at 5840 and a break here will signal that a short term top is in place at the yearly highs.  Wait for a break and then retracement before entering into new short positions.