Global Macro Data to Guide Sentiment Today; AUD/USD Pressures Support Above 1.01

Markets have put the breaks on the last week’s risk rally as traders square positions ahead of a wide range of macroeconomic event risks scheduled for today.  Contributing to this lack of optimism is the continued volatility seen in Italian treasury bonds, which is also starting to be seen in Spain as well.  These increases in borrowing costs are leading analysts to revise growth forecasts lower as investors are now requiring higher premiums before investments are made in European sovereign debt.  The US Dollar was the main beneficiary overnight as high yielding currencies sold off along side equity markets.

In the UK, FTSE 100 futures are pointing to a lower open ahead of today’s CPI, RPI and Home Prices data.  This will guide trading in the London session along with earnings releases from Burberry Group, Talk-talk Telecom, and Oxford Instruments.  Equity markets in Asia, Europe and the US are all following this trend and trading in the negative so it appears as though we will need to see some positives in today’s economic releases in order for this to change course.

During the New York session, we will see the PPI, Advance Retail Sales, and the Empire State Manufacturing Index alongside some significant earnings reports.  Corporate earnings today will come from Home Depot, WalMart, Staples, Autodesk and Agilent Technologies.  In Europe, data will be seen with the Eurozone GDP and ZEW reports, along with the EU Trade Balance data.  There are no major earnings releases but these would be unlikely to attract much attention anyway, as markets continue to be focused on the negative effects caused by the sovereign debt story, and the macro data gives a better indication of this.

In Australia, the RBA released the minutes from its last policy meeting and these got some attention as well, in that some members argued that a decrease in interest rates was unnecessary.  The dovish members won out, however, and from the minutes we can see that the prevailing decision was based on the uncertain global outlook and the recent declines in inflationary price pressures.  The minutes will likely lead some analysts to revise their interest rate forecasts as further rate cuts in 2012 start to look more questionable.

Technicals:

The AUD/USD is starting to look more and more like a head and shoulders pattern on the 4H charts, with the neckline coming in at 1.0125.  The level has already been tested and has held so far, but the bounce has been limited and the negative momentum indicator suggests that we will see another test in the coming sessions.  A break would be very bearish and target the daily 61.8% Fib retracement.

The FTSE continues to be caught in its daily descending triangle formation, with consistent lower highs being seen since the beginning of the month.  Momentum is in neutral territory, so it is difficult to anticipate the direction of the next break.  Better to wait on the sidelines until we see a daily close below 5330.  5560 can also be used as an acceptable short term sell area.

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