EURUSD, equities – Slovakia, Alcoa disappointed

In yesterday’s comment we underlined that both EURUSD and S&P500 futures faces some key resistances at 1,3690 and 1192 pts. respectively. As it turned out both levels were tested and both times without a success.

The moods were spoiled somewhat by Slovakian parliament which rejected the EFSF expansion and by Alcoa that disappointed in a season-opener by posting EPS at 15c instead of expected 22c. Those must not be cornerstones. Slovakia is likely to hold another vote and opposition signaled it might support expansion now that the government is dissolved. Alcoa attracts a lot of attention as the first DJIA company to report earnings each season but as a commodity company it does not necessarily represents a broader market. Results from JP Morgan Chase and Google (both Thursday) will be much more relevant this week.

Neither has a situation reversed on charts. The EURUSD drew a hang-man candle on a daily right below the resistance but it still needs to be confirmed. The S&P500 drew a spin and failed to mark a new local high decisively but it hasn’t caused a sell-off yet.

While we do not see a large upward potential remaining for both EURUSD and equities in the mid term, both markets may well continue a rally in a short term (with resistances at 1,38 and 1228 pts. respectively). Second part of the week will bring more drivers with the FOMC minutes (today), Chinese CPI data and more quarterly results (tomorrow), US retail sales data and G20 finance ministers’ meeting (Friday). Some warning signals were offered yesterday to the bulls but it doesn’t mean they are out of the game this week.

Przemysław Kwiecień PhD, Chief Economist

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