Market volumes remain somewhat lighter than average but there are a few fundamental and technical concerns which have come to light today.
Firstly, on a fundamental basis, with headlines due to be coming thick and fast during the EU summit, for me it still seems as if no immediate decisions will be made on the subject of Eurobonds or addressing liquidity/solvency issues within the Eurozone. Elsewhere, the LIBOR fixing scandal has today hit Barclays hard, and reports out of the US suggesting JP Morgan's credit trade losses are significantly higher than first speculated, both are big company related negatives but the former in particular is likely to damage any investor trust. Technically, the Euro broke through the 1.245 support level (briefly tried to regain on reports of the German finance minister suggesting a greater role for the EFSF), further weakness now looks likely. With such an FX move risk off is again gathering momentum, on the S&P the 200 day (around 1297) and horizontal support (around 1292) are key, a clean break of such would lead to a retest of lows made earlier this month. If the latter is breached 1200 is the next significant level technically and pyschologically. Tomorrow is the end of the quarter so we may have an element of window dressing, but EURUSD technicals suggest a rough time ahead.
Posted by Philip Ball | Sales and Trading