The Euro is coming off of yesterday’s highs ahead of regional data out of Germany and France. This will be followed later by the critical Non Farm Payrolls (NFP) report out of the US which should be the key determinant for how equity markets close out the week. We have seen something of a rally in risk assets since Tuesday as markets had positive expectations for a finalized Greek PSI agreement, despite a lower participation rate and some downside surprises in European and Australian macro data. Now that the Greek deal is completed, markets are preparing for a heavy data calendar to close the week.
In the UK, FTSE 100 futures are pointed to a mostly unchanged open, as positions are squared ahead of a slew of data releases scheduled for today. These will be seen with the NIESR GDP estimate, Trade Balance, Industrial Production, and Producer Price Index (PPI). In addition to this, we will also see earnings releases from Carnival, JD Wetherspoon, Old Mutual, Headlam Group, and Marshall’s.
Asian markets posted positive closes, for the most part on general optimism for a completed Greek deal and inflation reports out of China showed that consumer prices eased in the month of February, to a much lower 3.2 percent. This is the lowest level in nearly 2 years and a significant difference from the 4.5 percent printing that was seen last month. The inflation report gives credibility to the arguments that the Chinese will be able to enact a more accommodative monetary policy this year and this is likely to take some pressure off of equity markets going forward.
Despite the overall Greek story and the export and industrial production data out of Germany and France, most of the volatility today will likely be generated by the NFP numbers today out of the US. In addition to the NFPs, we will also see the nation’s Trade Balance, Unemployment Rate, Trade Balance and Wholesale Inventories. No major earnings reports are scheduled for today.
The market consensus for the NFPs is for the total number of jobs created to come in at 210,000 new hires. A number in this region should keep equity markets supported and bring buyers back into the commodity currencies. Traders should remain careful into this report, however, as the NFP tend to create more volatility than any other macro release and the reactions can often be erratic and two-sided.
The EUR/USD looks to be in the early stages of a head and shoulders pattern on the longer term time frames but we will need to see a break at 1.31 support to confirm the pattern. The neckline will be seen at 1.2970 and conservative traders will look for a break here before establishing short positions. The MACD reading is still showing negative momentum and the RSI is trading at neutral levels, so there is plenty of room to extend to the downside.
The DAX continues to trade near its highs but we are currently at very significant resistance level on the longer term charts and short positions are still seen as the preferred strategy. On the downside, first support will come at the confluence of 100 and 200 EMAs and this will be followed by the 38.2% Fibonacci retracement of the 2011 rally at 6180.