Volatility Slows as Markets Await Monday’s European Finance Ministers Meeting; Oil Approaches Major Resistance at 103.50

Market volatility has slowed as investors await the results of the next meeting with European finance ministers (set for February 20) where the second bailout agreement for Greece will be discussed.  Comments from officials have suggested that the European Central Bank (ECB) plans to exchange its old Greek treasury bonds with newer treasuries as the bank looks to reduce losses as debt holdings are restructured.

In macro data, the next major figures will be the Producer Price Index (PPI) out of Germany and Current Account numbers out of the Eurozone.  Yesterday’s economic figures out of the US were positive, so we will need to see similar results if markets are going to shift the focus from the Greek story.  FTSE 100 futures are pointed to a higher open (but only by about 20 points).  Monthly Retail Sales numbers will be released in the UK and this will be followed by earnings results from Spectris and Anglo American.

Asian equities markets are also seen higher on the back of the positive performance in stocks during the New York session and this is being aided by rallies in Bridgestone Corp., which was higher after the company made a large upward revision in its yearly income forecasts.  Export sector companies were also higher, with Nikon and Honda Motor posting gains on the improved currency outlook in Japan.  For most of last year, this was one of the bigger issues in the region as gains in the Yen were seen weighing on exporters but the BoJ continues to implement policies that are expected to bring down the value of the currency throughout 2012.

In the US, today will see some volatility following the release of the monthly Consumer Price Index (CPI) and the Leading Indicators report, and this will be preceded by earnings reports from Heinz, EOG Resources, Campbell Soup and Ventas.  Yesterday, Applied Materials was one of the main stories, posting gains of 5.6 percent during the aftermarket session on stronger earnings for the first quarter.  Sun Power had an even bigger rally (up 11.9 percent) on better earnings during the fourth quarter of 2011.  In other news, Congressional Republicans made comments discussing the possibility of a debt crisis in the US (similar to what is being seen in Europe) if President Obama’s 2013 budget proposal is passed but this had little effect on markets given that it is only a concern for one political party.

Technical Analysis:

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The EUR/GBP continues to be caught within a familiar range we have discussed previously, with resistance coming in at 0.84 and support coming in at 0.8260.  Prices are now approaching support along with oversold hourly indicator readings, making this a good buy at current levels.  Since the range has held for most of this year, this is one of the clearer trade entries we have seen for range traders.

Epoch Times Photo

Oil is showing a strong rally and is not pressuring major resistance at 103.50.  Short term sell positions can be taken into this region but stops should be kept tight as the higher lows we are seeing are indicative of an upside break.  A break of support at 96 will turn the bias back to neutral and likely send prices drifting back to 92.30.

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