Fundamentals:

European equities should be relatively supported during the Thursday session after we saw stronger than expected ADP employment data from the US yesterday.  The data yesterday is encouraging market sentiment and aiding the argument that employment increases are showing that the final verification of economic recovery in the U.S. is taking shape.

Today, we will be watching Eurozone retail sales at 10:00 GMT and German factory orders at 11:00 GMT.  These releases are important and have the capability of determining overall sentiment for the session.

The strong ADP employment data from the U.S. has bolstered the argument that we will see a positive surprise in what is arguably the most important data release of them all, which is the U.S. Non Farm Payroll number. This release comes tomorrow.  If these expectations are actually realized, we expect equities to make another push higher, further strengthening the uptrend that is already in place.

This would translate into other assets as well, some in counter intuitive ways.  In the AUD/USD, for example, the U.S. Dollar could actually weaken, as global risk sentiment is encouraged and traders sell safe haven assets looking for higher yields.

So, today markets will have a distraction from the U.S. story and focus on Eurozone retail sales, which will be an indication for investors, showing whether or not the European consumer is still able to spend.  German factory orders (an indicator of industrial production) will give an additional component to the equation. Eurozone retail sales are expected to drop on a monthly basis, but show increases on a yearly basis.

German factory orders at 11:00 GMT will be particularly important because Germany is the main economic engine for the region and one of the few positives supporting the Eurozone figures.  Both the monthly and yearly figures are expected to show declines.  Any surprise to the downside would be discouraging for European equities, but the uptrend is still very strong so we don’t expect much of a drop based on this alone.

Technicals:

Commodities:

Gold was able to find something resembling support near some historical lows but the recent moves have been drastic enough to make any trader proceed with caution.  Current levels are significant because the 1360 support level still has not broken, but if this level goes, we are definitely going to start expecting a deeper retracement.  The break of the uptrend line from 1330 has removed our bullish bias for the time being.  So we are going to wait for a test of at least 1330 before getting back into long positions.

Currencies:

The EUR/USD chart is starting to look interesting as we have a range forming at mid levels on the daily charts.  The bounds of the range are 1.35 to the upside and 1.2970 to the downside.  A violation of one of these levels is needed before we can settle on a bias going forward.  A break of resistance targets 1.3790, followed by 1.4290.  If we see support go, our bias turns bearish, targeting 1.2660.  The daily indicator is bullish and not far from oversold territory, which would suggest later strength.

Stocks:

Surprisingly, the FTSE is still pushing up and managing to make new highs above 6000.  We use the word “surprising” because all of the longer term indicators are rolling over from overbought territory and prices are showing almost nothing in the way or a meaningful pullback.  Only breakout traders would be interested in buying at these levels, and since this is not our common strategy, we would not argue for that position.  Support comes in at 5920 and 5880.  If these levels break, it will take some pressure off the topside.