General investor sentiment has remained under pressure throughout the morning, with one notable exception being Sterling, which has strongly appreciated. The UK Retail Sales data for February came in strongly ahead of expectations by over a percentage point for both month-on-month and year-on-year. This caused a spike of over 60 pips on Cable. The Euro has been weak throughout the morning, while the FTSE 100 has remained under pressure during the morning session and hardly been impacted by the better news.
Traders will now look towards the US data this afternoon. The GDP final reading will be keenly watched, with 2.7% the expectation. Also with an estimated reading of 325,000 the weekly Jobless Claims are expected to continue to drag the 4-week average lower below 327,000 and a 3 month low.
EUR/USD has broken below its key support at $1.3748 today. The move has only been brief, but the intent is there. The immediate technical picture may unwind some of the move, with the hourly chart slightly stretched, but there is now a resistance band $1.3775/$1.3808 to contain another lower high. The outlook remains weak for a move towards the $1.3700 implied target from the large intraday top pattern.
GBP/USD has accelerated its recovery this morning and now I must look at changing my outlook. I had previously seen this recovery as just another bear market rally, but now it seems to be something more than that. The 60 pip spike came this morning on better than expected UK Retail Sales, but the technical picture is now looking to improve again. I would like to see the rate calm down first before laying down a renewed outlook. If the move fails to hold above $1.6603 (the 38.2% Fibonacci retracement) then the move may be false. A break above $1.6653 would confirm the bullish upside break. Be careful as the US data could also have a significant bearing on the near term chart. It could end up being a volatile day.
USD/JPY has settled after its overnight bout of yen strength that dragged the rate below 101.95. There is currently a slightly bearish bias to this chart, but the rate settling down reflects caution in front of the US growth data and of course the Japanese inflation data tonight. Again this could show increased volatility later today.
Gold continues to weaken under $1300. The 50% Fibonacci retracement of the December to March bull run comes in at $1288.13 and will be watched, as will the 144 day moving average at $1287.25. The downside bias which shows a series of lower highs (latest at $1306.65) shows little sign of abating yet.
There has been a divergence in fortunes for the European indices in the past 24 hours. The FTSE 100 is back under pressure once more after the slide that began yesterday afternoon and has continued today. This move has retreated back to the support around 6570 which now becomes important near term. A breach of this level would seriously question a recovery and re-open the recent lows 6506 and 6493. The DAX on the other hand has remained resilient today amid the deteriorating sentiment. Holding above the breakout level at 9376 is encouraging for the health of the recovery. There is also a reaction low in place at 9407 which is acting as support today.
The S&P 500 continues to threaten a rolling top, with little ground having been made in March and a failure to continue to push into new high ground. Yesterday’s sell-off into the close is once more posing questions for the bulls. Holding above 1850 is a near term requirement for the bulls to consider themselves in control, whilst holding above 1839 is now a must. Near term momentum is not positive now.