Equity markets and high yielding currencies moved lower overnight on news stories that European finance ministers failed to pass its latest loan tranche of 130 billion Euros due to the lack of commitment in Greece to implement austerity measures.  The Euro was lower against the Dollar, but the bear move was limited and the EUR/USD still trades above 1.3250 at time of writing.

In other central bank news the Reserve Bank of Australia lowered its inflation forecast for the remainder of 2012, which is somewhat at odds with the bank’s latest decision not to lower its base interest rates from 4.25%.  Any further downward revisions to the inflation forecast will lead analysts to call for additional rate decreases before the first half of the year is finished.

In the UK, FTSE 100 futures are trading slightly lower (maintaining the modest risk-off trend we are seeing as we close the week) and today the main macro data will be the Producer Price Index (PPI).  We will also see some significant corporate earnings in the financial sector from Barclays, and this will be followed by releases from Skywest Airlines and Zenergy Power.

In the US, S&P 500 futures are showing a flat to slightly lower open, with the index currently down 8 points.  Today’s volatility will come with the release of the January Trade Balance figures and the month’s Michigan Consumer Sentiment survey.  Corporate releases are mostly second-tier, with only PPL Corp. and FLIR Systems scheduled to report today.  With the lack of guidance from earnings figures, the trading tone is likely to be guided by the latest headlines out of Europe, as we are currently seeing political obstacles derailing the ability of the Greek government to secure additional loan funding.

Yesterday’s big equities mover was LinkedIn, which posted an 8.9 percent rally in the aftermarket session Thursday on improved earnings results for the fourth quarter and released an upwardly revised forecast for the first part of 2012.  Whole Foods and Visa were also higher on the day after producing similar earnings results.  Less positive, however, were the Expedia earnings, which missed market expectations and sent the stock 3.7 lower during the New York session.

Overall, we expect a mostly quiet session to close the week as there is little to induce fresh volatility other than some major headlines out of Europe.  German and Swiss CPI will be released but this is unlikely to have anything other than a short term effect on trading sentiment.  Position squaring into the close could be the overriding factor and sent equities markets drifting lower.

Technical Analysis:

The EUR/GBP is once again caught within a clearly defined and prominent range on the 4H charts.  Prices are currently pressuring the top end of the range, which is now seen at 0.84 but the oversold readings on the shorter term charts could be what prevents the pair from trading much higher.  The longer term trend is clearly downward, however, so this puts us in the bear camp for a medium term trade, given the elevated levels on the shorter time frames.

The FTSE 100 is pressuring some significant resistance above 5860 but prices have been stalling in this area and are now vulnerable to a downside move given the inability for the index to post a daily close above these levels.  Because of this, risk to reward favors sell positions here but stops should be triggered if we see a daily close above 5875.

Related posts:

1. Debt Ceiling Debates Alter S & P Ratings Bias; Italy Votes on Austerity Measures
2. Markets Brace for Second Austerity Vote in Greece; Canadian CPI Rises to 3.7%
3. Markets Gap Lower as Euro Debt Concerns Continue; G7 Meeting Fails to Suggest Joint Intervention
4. Markets Focus on Greece’s Troika Impasse; Euro Gaps Lower to Start the Week
5. Markets Drift Higher as Sentiment Improves; FTSE 100 Focused on 5760
6. Positive Eurozone Manufacturing Data Supports Markets Before US Non Farm Payrolls; FTSE 100 Seen Stalling at Range Highs
7. Markets Broadly Lower as Fitch Downgrades Greece; Bernanke Dovish in His Congressional Testimony
8. Markets Lower after US Fails to Reach Debt Ceiling Agreement; Gold Continues its Bull Rally above 1620
9. Markets Quiet in Anticipation of Friday’s US Non Farm Payrolls Release; FTSE 100 Stable Ahead of 5630
10. Euro Lower on Continued Turmoil in Greece and Italy; DAX Focused on 5760 Support