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Minor Movement on Forex Pairs, Financials Pull down Stocks
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Greece, Portugal and Spain continued to weigh on the markets yesterday, forcing the major indices into negative territory. The Dow Jones Industrial Average closed below its major psychological level of 10,000 points, a level only last seen in November.
Western European countries have grabbed headlines over the last couple of weeks as Greece has been giving its best effort to try to provide a plan to reduce its enormous debt. Credit default swaps (a type of insurance that is bought to protect against an economy’s default) have jumped over the last couple of weeks, as Greece’s economy is now on the verge of a meltdown. The problems have had an enormous effect on sentiment, forcing investors back into safe-haven, causing major corrections across the board.
Toyota also had an effect on the intraday session. Even though the news wasn’t a major market mover, the stock dropped as Toyota said it is recalling about 437,000 Prius and other hybrid cars worldwide to fix brake problems.
Financials were the lager of the day, forcing the indices down to major technical support levels. The S&P500 finished the day with a loss of -0.89%, while the Nasdaq closed with a -0.70% loss. From a technical point of view the major S&P500 presented a reversal candle on Friday, but failed to provide a confirmation candle. Even though the trend is clearly a downtrend, the indices are in need of a bounce – one that could occur around upcoming support.
A Bounce Off SupportOn the Forex market most of the currency pairs traded steady, as a lack of economic data from the U.S and mixed signals from European countries, allowed traders to take a rest from the recent high volatility.
On individual pairs, the EUR/USD bounced higher during the first part of the session but quickly lost its steam. To date this pair is trading around prior resistance/support of $1.3733 – a level which could provide some ground. The GBP/USD also found some ground, after breaking support of $1.5795. BRC Retail Sales dropped by -0.7% compared to its previous 4.2%, but RICS House Price Balance increase by 32.00% vs. an expected 30.00%.
After yesterday’s weekly report the AUD/USD bounced off its 200 day moving average and managed to climb to higher ground. To date the chart is trading above trend line support and its moving average - two levels which could provide double support and lead to a minor bounce. One must note that this pair is being now affected by the on goings in China and global momentum, rather than economic data from Australia. Further Dollar strength could lead to a break of support.
Market Data to Watch Out ForOn the data front, the U.S will release a few minor events, including wholesale Inventories and it is IBD/TIPP Economic Optimism. Australia will take the stage later on during the session and release its Home Loans and CGPI.
To view the full economic calendar click here.
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