European equity markets continue to post weekly declines, with the Europe Stoxx 600 benchmark showing its biggest drop in a month after the latest bond auction in Spain failed to attract a suitable number of buyers. Risk sentiment was weakened on the news and this is leading to renewed speculation that the debt crisis has yet to come to a clear resolution. US stock futures were pushed lower as well, with markets in Asia closing mixed.
The Stoxx 600 is now showing a 2.1 percent decline so far this week, and a negative close on Friday will mark a third consecutive bearish weekly close. Yesterday’s downward move was the biggest drop seen since March 6th, and the negative sentiment is also seen as a carry-over from the previous Federal Reserve story, which suggested that the quantitative easing program in the US will no longer be necessary without substantial downside surprised in economic data.
Elsewhere in Europe, the French bond auction was another unremarkable event, with bond yields rising to 2.98 percent today as the average rate (after the 2.91 percent yield that was seen at the March 1st bond auction). In the UK, the Bank of England Governor (King) will conduct a stimulus vote today, with most of the market expecting a result similar to what was seen in the US, where the central bank will signal that stimulus measures will no longer be implemented.
Looking ahead, markets will be watching the Initial Jobless Claims figures in the US, with consensus estimates calling for a drop to to 355,000 for the week ending on March 31st. In forex markets, a key factor to watch will be the price activity seen in the EUR/CHF pair, as prices managed to break the 1.20 floor established by the Swiss National Bank. Downside follow through was limited but many traders expect massive stop losses not far below this level, which, if triggered, will generate a great deal of momentum. The key factor here will be the action taken by the SNB, as any intervention could send prices forcefully in the opposite direction.
The NZD/USD continues to be confined within some very clear technical parameters, with the trading range moving lower and support turned resistance limiting any upside moves. To the downside, the key level to watch is 0.8040, which has been tested multiple times and represents the confluence of the 38.2% Fibonacci retracement of the move from below 0.75, as well as the 200 period EMA on the daily charts. A downside break here will accelerate losses and target levels more than 200 points lower.
The S&P 500 continues to break support levels, and the latest move signals that a short term top is in place at 1420. This area is a double top and with the MACD indicator crossing into negative territory, this area is likely to contain prices going forward. The next major support comes in at 1380, with is the 50% retracement of the 4H bull wave as well as the 200 period EMA. A break here turns the larger structure bearish and will be key for gauging long term momentum.