Rick sentiment relative to the Euro was improved overnight on analyst expectations of an improved PMI report (both manufacturing and services) scheduled for release later today.  In addition to this, the European Central Bank (ECB) President (Draghi) released comments that were mostly optimistic and suggested that the debt situation in Europe is showing signs of stabilization.  We did see a short term break down in the typical correlations between the Euro and the high yielding currencies (such as the Aussie and Kiwi), as the Euro managed to move higher despite the massive sell-off seen in the AUD/USD.

Part of the reason for the declines in the Aussie were seen when the HSBC Flash Purchasing Managers’ Index (PMI) for the manufacturing sector in China showed declines for a fifth consecutive month in March.  China is the primary destination for Australia’s commodity export companies, and a slowdown in manufacturing productivity will likely result in a drag in demand for raw materials (copper, in particular).

In the UK, stock futures are mostly flat ahead of today’s Retail Sales report for the month of February.  Later in the London session, we will see earnings reports from Kingfisher and Premier Oil.  Asian markets were mixed overnight, with the Nikkei 225 posting gains after the Japanese Trade Balance showed a surplus for the month of February, bringing the benchmark index back above the 10,100 level.  Chinese markets saw declines in early trade on the disappointing manufacturing report but those losses did manage to reverse later in the session as investors bought on weakness.

In the US, macro date today will come with Initial and Continuing Jobless Claims, Leading Indicators and the House Price Index.  Corporate earnings will come from Nike, Accenture, Game Stop, Dollar General, and ConAgra Foods.  These figures will allow markets to adjust after the Eurozone and German Manufacturing and Services PMI, Industrial New Orders and Consumer Confidence survey.  We will also see the Swiss and Italian Trade Balance later in the session.  Corporate earnings will come from Dassault Aviation, Lanxess, and Esso Societe Anonyme Francaise.

Technical Analysis:

The head and shoulders pattern in the EUR/USD (which has been discussed here previously) is still in play and prices are now seeing strong declines back into neckline support at 1.2970 on the daily charts.  We are still a ways off but a break here will be very significant as this area is also a double bottom.  Losses would likely accelerate to the 1.26 region before any real bounce can be expected.  In the other direction, only a break back above 1.3280 will take pressure off of the downside and bring the focus back to trendline resistance.

The short term downtrend in Gold in still the dominant theme for the metal, with prices targeting a test of support at 1620.  This area is both a Fibonacci and historical level, and a break here will target a full retracement of this years rally.  Resistance has moved down to 1670 and a break here turns the bias back to consolidation.