Nevertheless, spread betting markets sold off aggressively with reports that the next election is likely to be an in or out referendum on euro membership.

German finance minister Schaeuble indicated as such when he stated that Greek politicians needed to be honest with their people.

The bailout package was not negotiable, though bi-lateral measures could be taken to help, but if they wanted to stay in the euro, it had to be implemented.

German Chancellor Angela Merkel and new French President François Hollande also weighed in by promising to consider new measures to revive economic growth in the country.

Recent opinion polls suggest that Alex Tsipras’ Syrizas party would win as the largest party and he has committed to tear up the bailout package.

However, those same polls also show that over 70 percent of Greeks want to stay in the euro, which on the face of it is completely contradictory and this is the circle that needs squaring.

The choice facing Greek voters is the certainty of more spending cuts and austerity until 2020 when it is hoped that the debt to GDP ratio will fall to 120 percent of GDP or the uncertainty of a sharp brutal default and exit.

The latter holds the possibility, if things do go to plan, of a potential return to growth in two to three years, if reforms are implemented.

If the second election produces a similar result to the first one then it remains unclear how Greece could stay in the euro, a fact acknowledged by IMF chief Christine Lagarde when she said last night that “we have to be technically prepared for anything.”

In ordinary times, UK unemployment numbers and the Bank of England inflation report would probably be headline events, however they are mere sideshows to the events happening in Europe.

With the UK economy languishing in a technical recession and worries about spill over effects from events in Europe, it probably won’t be a surprise to see the March ILO unemployment rate rise from 8.3 percent to 8.4 percent. Meanwhile, jobless claims look set to increase by 5k for April.

The squeeze on average earnings looks set to continue on a quarterly basis in March slipping back again from 1.1 percent to 1 percent.

With average earnings remaining squeezed and inflation remaining sticky, today’s Bank of England inflation report isn’t likely to offer too much in the way of comfort.

Inflation risks are expected to be broadly balanced, if slightly tilted towards the upside despite this week’s sharp drop in oil prices which should help lower fuel costs.

Given that arch dove Adam Posen recently changed his vote from more asset purchases it would appear that the bar has been raised slightly with respect to further QE, despite the recent poor data.

Growth targets look likely to be lowered, while the inflation projections could get nudged back above 3 percent.

Events in Greece are expected to warrant a mention or two, however the report won’t factor those in so expect the governor to have to field some questions on that, especially now.

EURUSD

 
Confidence continues to ebb away from the single currency after yesterday’s break below 1.2800 as it closes in towards the long term objective and January lows at 1.2630.

This area is likely to be a key support level as the 1.2600 level is also the August 2010 lows.

A concerted break below that could well target 1.1880 the 2010 lows, put in soon after the first Greece bailout.

Pullbacks are likely to find resistance at the 1.2810/20 level and yesterday’s lows and then 1.2950/60.

The gap at 1.3085 remains the longer term cap, while only a move back above the gap at 1.3085 has the potential to stabilise in the short term and target a retest of 1.3200.

GBPUSD

 
Yesterday the pound finally succumbed to the support around the 1.6050 area as well as the trend line support at 1.6000 from the January lows at 1.5235.

This suggests the pound could well be lining up for further losses, however the 55 day MA could provide some support at 1.5960, given that it has held since mid March.

Pullbacks are now likely to find selling interest around the 1.6060/70 area as well as 1.6130.

The emphasis has now shifted to the downside and towards 1.5770 which is 50 percent retracement of the entire up move from 1.5235 to 1.6305.

EURGBP

 
Having held below 0.8020 yesterday and posting another three year low at 0.7950 the prospect of a move towards 0.7845, the November 2008 lows moves ever closer.

The key resistance level lies in the gap between 0.8085 and 0.8105 but to stabile it needs a move above 0.8140 to retarget resistance at 0.8220 and trend line resistance at 0.8245 from the February highs at 0.8505.

USDJPY

 
Also in forex spread betting, the US dollar continues to ping around between the broader resistance around the 80.40/50 area and support at the 79.70 level.

Downside pressure remains the predominant theme here after two successive weekly closes back inside the cloud resistance at 80.40.

The risk remains for a move towards 79.20 initially on the way to 78.45 and the 200 day MA.

The 80.42 cloud line should continue to act as a resistance level and for the dollar to stabilise we would need to see a close back above this key level.

Equity market calls

 
FTSE 100 is expected to open 59 points lower at 5,379.

DAX is expected to open 47 points lower at 6,354.

CAC40 is expected to open 20 points lower at 3,019.

FTSEMib is expected to open 69 points lower at 13,242.

Spread betting carries a high level of risk to your capital and it is possible to lose more than your initial investment. Spread betting may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Forex trading news by Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, register no. 173730.

Any CMC Markets research and charting tools are indicative, they are provided for information purposes, they must not be relied upon as investment advice. CMC Markets provide an execution-only service.

The above content should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The content is not a recommendation. You should seek independent advice as to 1) your suitability to speculate in any related markets 2) your ability to assume the associated risks 3) the tax, legal and accounting consequences of any transaction.

Last night, the agency reduced the ratings on 26 of them by between one to four notches, with negative outlooks citing increased funding stress and prolonged recession.

Greece remains front and centre in Europe with talk now doing the rounds of some form of technocrat government. However, this seems a big ask given that the whole point of the recent elections was to move beyond the technocrat government of Papademos.

It is also unlikely that Syrizas would have any incentive to sign up to such an agreement which would immediately undermine any legitimacy it might have.

Greece is also expected to announce its preliminary Q1 GDP numbers today and they aren’t expected to be pretty. Furthermore it also has to make a €436m bond payment due today on bonds issued under UK law which were not part of the original debt exchange in March, and whose bondholders are still in dispute.

The big question is will these hold outs get paid out. If they don’t then Greece will find itself in default, again, however we may have to wait 30 days to find out.

Despite the market focus on the political deadlock in Greece, the small matter of growth, is likely to garner the markets attention today, with the publication of preliminary growth forecasts for Q1 from Germany, France, Italy and the Eurozone as a whole.

With spread betting investors eager for good news, particular attention will be on Germany’s GDP number and the hope that Europe’s largest economy has returned to growth, and avoided a double-dip recession.

Expectations are for a 0.1 percent rise in Q1, which given some of the data seen in the past three months could well be on the optimistic side.

If this number disappoints then investors will be hoping that the latest ZEW survey for May paints a more positive picture, however, expectations are for a slip back from 23.4 to 19.

As for France, Italy, Holland and the rest of the Eurozone the key question will be how poor the data ends up being with expectations for a stagnation in France and contractions of -0.7 percent, -0.3 percent and -0.2 percent respectively in the remainder.

Portugal is also expected publish its Q1 GDP numbers with a contraction of -1 percent expected.

In Berlin, German Chancellor Angela Merkel is set to meet new French President Francois Hollande for the first time.

However, it seems unlikely that anything tangible will come out of the meeting though it seems likely that the subject of growth and fiscal discipline will be on the agenda given the French Presidents comments on the subject in his election campaign.

Eurogroup finance ministers are also set to continue their meeting in Brussels where the topic of conversation is likely to revolve around ways to kick start a growth agenda, The subject of a Greek withdrawal is likely to well be discussed as well.

In the UK, the March trade balance numbers look set to improve slightly from a deficit of £8.77bn to £8.4bn.

In the US, advance retail sales for April are expected to drop sharply to 0.2 percent from 0.8 percent in March.

EURUSD

 
The single currency continues to push lower towards the long term objective and January lows at 1.2630.

A push below 1.2800 could well give the extra impetus required to achieve this long term objective.

Any pullbacks should now find resistance at 1.2960 and behind that at 1.3060, while the gap at 1.3085 remains the longer term cap.

Only a move back above the gap at 1.3085 has the potential to stabilise in the short term and target a retest of 1.3200.

GBPUSD

 
The pound continues to find support around the 1.6050 area talked about last week, and while above this area remains susceptible to short covering.

If we do move below 1.6050 the bigger support comes in at trend line support at 1.6000 from the January lows at 1.5235.

Below that and we could see 1.5770 which is 50 percent retracement of the entire up move from 1.5235 to 1.6305.

Primary resistance remains at the trend line resistance at 1.6315 from the 2011 highs at 1.6750, as well as 1.6200, the highs this week.

EURGBP

 
In EUR/GBP spread betting, the break below the psychologically important 0.8000 support level; now opens up the possibility of a move towards 0.7845, the November 2008 lows.

The key resistance level lies in the gap between 0.8085 and 0.8105 but to stabile it needs a move above 0.8140 to retarget resistance at 0.8220 and trend line resistance at 0.8245 from the February highs at 0.8505.

USDJPY

 
Downside pressure remains the predominant theme here after two successive weekly closes back inside the cloud resistance at 80.40.

The risk remains for a move towards 79.20 initially on the way to 78.45 and the 200 day MA.

The 80.42 cloud line should continue to act as a resistance level and for the dollar to stabilise we would need to see a close back above this key level.

Equity market calls

 
FTSE 100 is expected to open 12 points lower at 5,453.

DAX is expected to open 12 points lower at 6,440.

CAC 40 is expected to open 9 points lower at 3,049.

FTSEMib is expected to open 141 points lower at 13,520.

Spread betting carries a high level of risk to your capital and it is possible to lose more than your initial investment. Spread betting may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Forex trading news by Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, register no. 173730.

Any CMC Markets research and charting tools are indicative, they are provided for information purposes, they must not be relied upon as investment advice. CMC Markets provide an execution-only service.

The above content should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The content is not a recommendation. You should seek independent advice as to 1) your suitability to speculate in any related markets 2) your ability to assume the associated risks 3) the tax, legal and accounting consequences of any transaction.

What was once declared unthinkable is now starting to permeate mainstream thinking in Europe.

European Central Bankers are publicly talking about a Greek euro exit as the political deadlock continues in Athens. This comes despite the best efforts of the Greek President to broker a deal for a coalition government.

Talks look set to reconvene today between the Greek President and the other parties, with the exception of Syriza’s leader Tsipras, who won’t be attending according to reports.

The likelihood of fresh elections continues to look ever more likely as the old Greek political order of New Democracy and Pasok starts to look ever more fragile.

The likelihood of another election appears to be something both parties fear, as opinion polls continue to suggest that Syriza would gain further support if a second poll was held.

If all the uncertainty in Greece wasn’t bad enough, the weekend’s German state elections saw Chancellor Angela Merkel face a major setback for the second weekend in a row. The Chancellor suffered significant losses in North Rhineland Westphalia, which followed on from the previous weekend’s defeat in Schleswig-Holstein.

These defeats could weaken her hand in trying to pass the fiscal compact through parliament at a time when her insistence on fiscal discipline or austerity comes under attack from around Europe.

Against this backdrop there are a number of auctions in the European bond markets with Italy looking to sell up to €3.5bn of 2015, 2020, 2022 and 2025 bonds.

Spain is also looking to sell 12 and 18 month T-bills. This comes at a time when investors remain concerned that the measures the Spanish government is taking to deal with the problems in its banking sector are “too little too late”.

All these moving parts will certainly give food for thought at today’s meeting of European finance ministers. The main topic here is likely to be the wide scale ramifications of a Greece exit of the Eurozone.

Economic data is likely to prove something of a distraction, however it will probably prove to be a sharp reminder of the problems facing Europe.

Industrial production for March is set to show a year-on-year contraction of -1.4 percent, a slight improvement on February’s -1.8 percent decline.

In Asia the news isn’t much better, with China cutting its bank reserve requirements ratio by 50 basis points. This comes as concerns continue to rise about the pace of the Chinese growth story following last week’s disappointing industrial production data as well as the poor import and export data.

CMC Markets is currently expecting the major European stock market indices to open lower.

The FTSE 100 is expected to open 45 points lower at 5,531, whilst the German DAX is set to fall 71 points to 6,509.

We are also calling the French CAC to open 31 points lower at 3,097 and the FTSEMib is to open 155 points lower at 13,890.

EURUSD

 
The downside pressure continues to build after the triangle breakout last week. Whilst the EUR/USD spread betting market continues to struggle just below the 1.3000 level, further losses look likely.

Given the potential for headline risk there remains a chance for a short squeeze back towards 1.3060, but while below the gap at 1.3085, downside pressure prevails for a move towards 1.2630.

Only a move back above the gap at 1.3085 has the potential to stabilise in the short term and target a retest of 1.3200.

GBPUSD

 
The pound finally succumbed to the pressure to move lower towards the 1.6050 support talked about last week, but while above this area remains susceptible to short covering.

If we do move below 1.6050 the bigger support comes in at trend line support at 1.6000 from the January lows at 1.5235. Below that and we could see 1.5770 which is 50 percent retracement of the entire up move from 1.5235 to 1.6305.

Primary resistance remains at the trend line resistance at 1.6315 from the 2011 highs at 1.6750, as well as 1.6200, the highs this week.

EURGBP

 
The single currency continues to hold the above the psychologically important 0.8000 support level; however the downtrend remains intact while below the 0.8100 level.

The key resistance level lies in the gap between 0.8085 and 0.8105 but to stabile it needs a move above 0.8140 to retarget resistance at 0.8220 and trend line resistance at 0.8245 from the February highs at 0.8505.

USDJPY

 
Downside pressure remains the predominant theme here after two successive weekly closes back inside the cloud resistance at 80.40.

The risk remains for a move towards 79.20 initially on the way to 78.45 and the 200 day MA.

The 80.42 cloud line should continue to act as a resistance level and for the dollar to stabilise we would need to see a close back above this key level.

Spread betting carries a high level of risk to your capital and it is possible to lose more than your initial investment. Spread betting may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Forex trading news by Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, register no. 173730.

Any CMC Markets research and charting tools are indicative, they are provided for information purposes, they must not be relied upon as investment advice. CMC Markets provide an execution-only service.

The above content should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The content is not a recommendation. You should seek independent advice as to 1) your suitability to speculate in any related markets 2) your ability to assume the associated risks 3) the tax, legal and accounting consequences of any transaction.

You can place spread bets on the CAC 40 stock market index with:

• Financial Spreads
• CMCMarkets
• Capital Spreads

The spread betting companies mentioned above also offer tax free* spread betting on a range of other financial markets such as forex, commodities and UK, US and global shares.

For more information about:

• Where to trade, read Spread Betting Companies
• Indices trading, read Spread Betting on Indices
• CAC 40 spread betting, read Spread Bets on the CAC 40

CAC 40 Spread Betting Example

On Friday, the price of the CAC 40 Rolling Daily market was 3079.5 – 3080.5 with companies like Tradefair.

Like most leading indices, investors can speculate on the CAC 40 either increasing or decreasing. With this CAC 40 Rolling Daily market, an investor can bet on:

a) The CAC 40 to move above 3080.5, or
b) The CAC 40 to move below 3079.5.

It should be noted that with the CAC 40 market you trade in £X per point, where a point is 1 point of CAC 40 movement. As an example, if you had a stake of £6 per point and the CAC 40 index moves 5 points then that would be a difference to your profits (or losses) of £30.

CAC 40 Index Spread Betting Example

For example, let’s assume you see the live price on a spread betting website and it shows a spread of 3079.5 – 3080.5. So, following your analysis of the markets, you might come to think that the CAC 40 will increase and move higher than 3080.5. Therefore:

1. You think the CAC 40 should rise
2. Therefore, you want to go long of, or buy, the market at 3080.5 and you risk £3 per point
3. The market rises with the market moving to 3122.1 – 3123.1
4. With this new price you could choose to take a profit and close your bet. You would do this by selling at 3122.1
5. Initial buy price = 3080.5
6. Profit/Loss = (Settlement Price – Initial Price) x stake
7. Profit/Loss = (3122.1 – 3080.5) x £3 per point
8. Profit/Loss = 41.6 x £3 per point
9. Profit/Loss = £124.80 profit

Investing does not always go to plan. Had the market failed to move as forecast, and had the CAC 40 decreased in value, with the market going down to 3044.3 – 3045.3, then you may choose to settle your bet and prevent any more losses. In order to do this you would sell at 3044.3.

5. You initially bought the spread at 3080.5
6. Profit/Loss = (Settlement Price – Initial Price) x stake
7. Profit/Loss = (3044.3 – 3080.5) x £3 per point
8. Profit/Loss = -36.2 x £3 per point
9. Profit/Loss = -£108.60 loss

Please note that when Rolling a bet over to the following day you might incur a charge or income for every day that the trade is continued. To learn more see: Rolling Daily Spread Betting Charges.

(Market quoted: 11-May-12)

Latest Financial Spread Betting Accounts and Offers

If you are considering spread trading as a part of your portfolio then for more details on:

• The newest financial spread betting offers, read Spread Bet Offers
• Financial spread betting accounts, as well as a comparison of spread betting companies, read Spread Betting Account

 
Important Note: Spread betting is a leveraged investment product, it involves a high degree of risk to your funds and can result in you losing more than your initial stake. Ensure that it fits your investment requirements as it might not be suitable for all types of investor. Before you trade, make sure you are fully aware of the risks. Only speculate with funds that you can afford to lose. Where necessary seek independent financial advice.

* As per current UK and Irish tax law, this may change/differ depending on your own situation.

You can place spread bets on Bumi shares with:

• Financial Spreads
• CMC Markets
• IG Index

The spread betting companies mentioned above also offer tax free* spread betting on a range of other financial markets such as stock market indices, commodities and forex.

For more information about:

• Where to trade, read Spread Betting Companies
• Shares trading, read Spread Bet on FTSE 250 Shares

Bumi Spread Trading Example

On Friday, the price of the Bumi Rolling Daily market was 433.8p – 436.8p with companies such as FinancialSpreads.

Like most large cap equities listed on the leading stock exchanges, you can bet on the Bumi shares to go up or go down in value. With this Bumi Rolling Daily market, an investor can speculate on:

a) Bumi shares to move higher than 436.8p, or
b) Bumi shares to move lower than 433.8p.

Note that with the Bumi shares spread betting market you trade in £X per penny, where a penny is 1p of Bumi share movement. As a quick example, if you had a stake of £10 per penny and the Bumi shares move 5p then that would make a difference to your P&L of £50.

Bumi Equities Spread Betting Example

As a brief example, let’s say you see the live price on a spread betting website and it gives a spread of 433.8p – 436.8p. So, after your analysis of the markets, you come to feel that the Bumi shares is going to move higher than 436.8p. This implies:

1. You believe that the Bumi share price will go up
2. Therefore, you decide you want to go long of the market at 436.8p and you bet £5 per penny
3. The market rises with the market changing to 456.5p – 459.5p
4. With the new price you might choose to guarantee a profit and close your position. You would do this by selling at 456.5p
5. You initially bought the spread bet at 436.8p
6. Profits (or losses) = (Final Price – Initial Price) x stake
7. Profits (or losses) = (456.5p – 436.8p) x £5 per penny
8. Profits (or losses) = 19.7p x £5 per penny
9. Profits (or losses) = £98.50 profit

Spread trading does not always go to plan. Had the market failed to move as forecast, and had the Bumi share price decreased, with the spread dropping to 419.3p – 422.3p, then you could choose to close your bet and prevent further losses. To do this you would sell at 419.3p.

5. You bought the spread bet at 436.8p
6. Profits (or losses) = (Final Price – Initial Price) x stake
7. Profits (or losses) = (419.3p – 436.8p) x £5 per penny
8. Profits (or losses) = -17.5p x £5 per penny
9. Profits (or losses) = -£87.50 loss

If you Roll a bet over to the following day you might incur a charge or income for each day that the trade is still open. For more information please see: Rolling Daily Spread Betting Charges.

(Financial spread trading prices quoted: 11-May-12)

Latest Financial Spread Betting Accounts and Offers

If you are considering spread trading as a part of your portfolio then for more details on:

• The newest financial spread betting offers, read Spread Betting Offers
• Financial spread betting accounts, as well as a comparison of spread betting companies, read Spread Betting Account

 
Important Note: Spread betting is a leveraged investment product, it involves a high degree of risk to your funds and can result in you losing more than your initial stake. Ensure that it fits your investment requirements as it might not be suitable for all types of investor. Before you trade, make sure you are fully aware of the risks. Only speculate with funds that you can afford to lose. Where necessary seek independent financial advice.

* As per current UK and Irish tax law, this may change/differ depending on your own situation.

This comes after Democratic Left leader Kouvelis backed the idea of an ecumenical administration committed to remaining in the euro, but on the condition of the gradual disengagement from the bailout agreement.

Whether this will be enough to circumvent new elections and keep EU leaders onside is highly debateable. The EU has stated that the bailout terms are non negotiable, except around the fringes, in moving a comma or “a tiny tweak” then there might be some room for manoeuvre.

It would appear that given an apparent surge in support for Syriza leader Alex Tsipras since the election, both Samaras and Venizelos appear to be desperate to avoid another election.

This is in case they lose even more support at a second vote and this appears to be an attempt to avoid that possibility.

In Spain, it appears the government may have gained more time to bring down their budget deficit but they would have to agree to an independent auditing of their bank restructuring plans, which have been shown to be inadequate in the past. This would probably not make pleasant reading.

They would also insist that Spain exercise more fiscal control of its regions. It remains to be seen whether Spain will accept the offer.

The government is expected to announce the full details of a new bank restructuring plan which would include requiring banks to increase the amount of funds set aside against bad loans, by €30bn to around €120bn.

Later this morning the EU Commission is set to announce its latest economic growth forecasts for the euro area and they aren’t expected to make comfortable reading.

The only question will be how much they are cut by as deficit targets look set to be missed across the board, not what leaders or index spread betting investors want to hear when countries are struggling to pass stringent budgets.

In Germany, the latest CPI figures for April are expected to come in at 2.2 percent, with the monthly figure set to rise 0.2 percent, unchanged from March.

Any reaction to these figures could be significant given comments by German finance minister Schauble yesterday that Germany might be more flexible about its commitment on inflation.

In any case, it’s difficult to read too much into a single comment given the historical concerns about letting the inflation genie out of its bottle.

In the UK, producer prices for April are expected to drop back sharply with input prices set to fall by over half from 5.8 percent to 2.1 percent year on year.

Output prices are also expected to have declined from 2.5 percent to 1.9 percent, strengthening the hand of those MPC members who expect inflation to start falling back.

EURUSD

 
In FX spread betting, downside pressure continues to be the dominant theme here and for now the single currency continues to struggle just below 1.3000 and as such further losses look likely.

As we head in to the weekend, headline risk could prompt a short squeeze back towards 1.3060, but while below the gap at 1.3085, downside pressure prevails for a move towards 1.2630.

Only a move back above the gap at 1.3085 has the potential to stabilise in the short term and target a retest of 1.3200.

GBPUSD

 
The pound continues to find interest to buy on dips below the 1.6100 level and as such continues to remain fairly resilient.

While above the support at this week’s low and the 1.6050 area the pound will remain susceptible to short covering.

Only below 1.6050 argues for a test towards the trend line support at 1.5995 from the January lows at 1.5235.

Below that and we could see 1.5770 which is 50 percent retracement of the entire up move from 1.5235 to 1.6305.

Primary resistance remains at the trend line resistance at 1.6315 from the 2011 highs at 1.6750, as well as 1.6200, the highs this week.

EURGBP

 
Another new low as the single currency tried to breach the psychologically important 0.8000 support level. The downtrend remains intact though while below the 0.8100 level.

A close below 0.8010/20 targets the risk of further losses towards 0.7700 over the medium term.

There remains a risk of short squeeze to fill the gap between Fridays low and the highs this week, towards the 0.8100 level.

However, to stabilise we would need to see a move back above 0.8140, to retarget resistance at 0.8220 and trend line resistance at 0.8260 from the February highs at 0.8505.

USDJPY

 
A sharp pullback in US bond yields kept a floor under the dollar yesterday but the downward pressure remains a concern if we can’t close above the 80.42 cloud resistance.

It certainly keeps the risk skewed to the downside.

The risk remains for a move towards 79.20 initially on the way to 78.35 and the 200 day MA.

The 80.42 cloud line should now act as a resistance level and for the dollar to stabilise we would need to see a close back above this key level.

Equity market calls

 
FTSE100 is expected to open 24 points lower at 5,520.

DAX is expected to open 21 points lower at 6,497.

CAC 40 is expected to open 22 points lower at 3,108.

FTSEMib is expected to open 73 points lower at 13,932.

Spread betting carries a high level of risk to your capital and it is possible to lose more than your initial investment. Spread betting may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Forex trading news by Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, register no. 173730.

Any CMC Markets research and charting tools are indicative, they are provided for information purposes, they must not be relied upon as investment advice. CMC Markets provide an execution-only service.

The above content should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The content is not a recommendation. You should seek independent advice as to 1) your suitability to speculate in any related markets 2) your ability to assume the associated risks 3) the tax, legal and accounting consequences of any transaction.

Talk that Eurozone governments were looking at withholding a €5.2bn aid payment due today because of on-going political uncertainty within the country saw markets hold their breath.

The reticence is certainly understandable in the current climate with no guarantees that the money would be returned if Greece were to leave the euro.

Due to these concerns only €4.2bn has been released, with the other €1bn withheld until there is more certainty. The tone from Germany in particular was uncompromising, leave if you wish but there will be no renegotiation and no more money.

The game certainly does appear to be changing with talk of a Greek exit now being openly discussed something that would have been unheard of a year ago. For now, new elections look the mostly likely outcome, as the baton moves to PASOK to try and form a government.

In Madrid, fears about Spain’s banks were manifested in a sharp rise in Spanish bond yields to dangerous levels yesterday, which reflect spread betting investors’ concern about the solvency of the Spanish banking system.

In an attempt to restore confidence the Spanish government last night took a 45 percent stake in Bankia, by way of its bank bailout fund.

On Friday, the government is expected to ask banks to set aside an extra €30bn of capital against their property assets, however, there is a concern this may be nowhere near enough given the amount of distressed loans could be as much as €180bn.

This sounds all very laudable but one wonders how they expect to do that when the Spanish economy is shrinking and unemployment continues to rise. The risk is that the sovereign takes on the liabilities, and with that the solvency of the sovereign then comes in to question.

Putting concerns about Spain, Greece and Europe as a whole to one side today the focus shifts towards the UK and the Bank of England rate meeting today as well as the March industrial and manufacturing production figures.

Yesterday’s sharp fall in BRC retail sales for April showed an annual decline of 3.3 percent, wiping out the rise of 1.3 percent in March, and has raised concerns about the strength of the UK economy, and the retail sector especially.

It is important to remember that this decline does have to be set into the context of the timing of last year’s Royal Wedding as well as a late Easter, and this April’s rather wet weather, with the comparatives being very unfavourable.

Even so there is an expectation in some quarters that the Bank of England could well announce an extra £25bn of asset purchases today.

This come in light of the poor Q1 GDP numbers a couple of weeks ago as well as the likely disappointing March manufacturing and industrial production figures due to be announced earlier this morning.

Expectations are for manufacturing to rise 0.5 percent and industrial production to slip 0.3 percent.

We’ve already seen widespread scepticism about these numbers given the fairly robust PMI data seen from both these sectors throughout the quarter.

We also saw from the latest minutes from the last Bank of England meeting that Adam Posen reversed his call for additional QE and he has been for quite some time the most dovish member of the MPC.

It would be a surprise if he were to change his mind so quickly, given the current risks with respect to the stickiness in inflation.

It would seem more likely that the Bank of England will hold fire for now, until after next week’s quarterly inflation report, especially given what is happening in Europe at the moment.

EURUSD

 
Yesterday’s drop through 1.2960 and close below 1.3000 reinforces the risk for further losses towards the lows this year at 1.2630.

For the move lower to unfold as expected we need to see the single currency stay below the triangle pullback line at 1.3060.

Only a move back above the gap at 1.3085 has the potential to stabilise in the short term and target a retest of 1.3200.

GBPUSD

 
The pound slid back yesterdays forex spread betting session but has so far managed to hold above the support above the 1.6050 level mentioned in yesterday’s note, rebounding from 1.6070.

Only below 1.6050 argues for a test towards the trend line support at 1.5990 from the January lows at 1.5235.

Below that and we could see 1.5770 which is 50 percent retracement of the entire up move from 1.5235 to 1.6305.

Primary resistance remains at the trend line resistance at 1.6320 from the 2011 highs at 1.6750, as well as 1.6200, the highs this week.

EURGBP

 
The single currency continues to drift lower as the pound continues to benefit from the euros woes, though we did get a squeeze back to the 0.8060 level before heading towards the support area which lies between the 0.8010/20 area.

A close below 0.8010/20 targets the risk of further losses towards 0.7700 over the medium term.

There remains a risk of short squeeze to fill the gap between Fridays low and the highs this week, towards the 0.8100 level.

However, to stabilise, we would need to see a move back above 0.8140, to retarget resistance at 0.8220 and trend line resistance at 0.8260 from the February highs at 0.8505.

USDJPY

 
Falling US bond yields continues to keep the downside pressure on the dollar here and looks like we might have to throw the bullish US dollar scenario out of the window if we can’t close above the 80.42 cloud resistance.

It certainly keeps the risk skewed to the downside.

Yesterday’s break below 79.70 now targets 79.20 initially on the way to 78.35 and the 200 day MA.

The 80.42 cloud line should now act as a resistance level and for the dollar to stabilise we would need to see a close back above this key level.

Equity market calls

 
FTSE 100 is expected to open 4 points higher at 5,534.

DAX is expected to open 14 points higher at 6,489.

CAC 40 is expected to open 7 points lower at 3,111.

FTSEMib is expected to open 29 points higher at 13,801.

Spread betting carries a high level of risk to your capital and it is possible to lose more than your initial investment. Spread betting may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Forex trading news by Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, register no. 173730.

Any CMC Markets research and charting tools are indicative, they are provided for information purposes, they must not be relied upon as investment advice. CMC Markets provide an execution-only service.

The above content should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The content is not a recommendation. You should seek independent advice as to 1) your suitability to speculate in any related markets 2) your ability to assume the associated risks 3) the tax, legal and accounting consequences of any transaction.

In Greece, the game of high stakes poker between the various politicians striving to form a government and the EU continues to play out in the full glare of the markets gaze.

Financial spread betting markets have come to know a new player on the Greek political scene in the name of Alexi Tsipras, leader of the left wing Syriza party, who is trying to form a government in the wake of the weekend elections.

He has pledged to tear up the bailout agreement declaring it “null and void”, while also insisting that Samaras and Venizelos revoke their pledges to the EU with respect to the bailout agreement. Neither leader seems inclined to do this.

Tsipras has another two days to try and form a working government. While he is unlikely to succeed, the fact that his party finished second in the polling shows the discontent within Greece at this moment as austerity measures continue to crush the economy.

On the other side of the debate, ECB board member Asmussen told Greece that they could not renegotiate the deal if it wants to keep the euro.

Ratings agency Fitch already appears to be laying the ground for a Greek exit by saying that a Greece exit would be “bearable”.

The next steps then boil down to who blinks first in this Mexican stand-off. Whatever the outcome it will in all likelihood not be good for Europe.

If that wasn’t enough for investors to fret about, the likelihood of a spat between Germany and France continues to grow with German Chancellor Angela Merkel ruling out a renegotiation of the fiscal compact.

Given Francois Hollande’s socialist background he would appear to have little in common with Angela Merkel, but they will have to find some compromise to ensure that the new French President is able to claim some form of progress after being elected on an anti-austerity platform.

The prospects of more stress in the European banking sector looks set to increase.

This is mostly due to rising concerns about the solvency of Spanish banks in the wake of the Bankia story and the impending likelihood that ratings agency Moody’s could start cutting credit ratings on a raft of European financial institutions.

Moody’s said in mid April that it would look at more downgrades in May, with a review of Italian banks before moving on to Spain and the rest of Europe.

EURUSD

 
Pullbacks from the 1.2960 lows this week seem to be running into selling pressure at the 1.3060 level which is the triangle pullback resistance level.

It needs a close below the February lows at 1.2975 which has the potential to open up the lows this year at 1.2630.

Only a move back above the gap at 1.3085 has the potential to stabilise in the short term and target a retest of 1.3200.

The break of the triangle now suggests we could well signal a 500 point move as a minimum price objective, which targets 1.2630 we need to see a concerted break below 1.2975.

GBPUSD

 
The pound continues to resist the pull of downward pressure that is weighing on the single currency though it did slide below 1.6160.

This could see it slip towards support at 1.6050 which if broken would then argue for a test towards the trend line support at 1.5960 from the January lows at 1.5235.

Resistance remains at the trend line resistance at 1.6320 from the 2011 highs at 1.6750.

EURGBP

 
The single currency continues to hold above the interim support above the 0.8020 level which also corresponds to the June and July 2008 peaks.

There is a risk of short squeeze to fill the gap between Fridays low and the highs this week, towards the 0.8100 level.

However, to stabilise, we would need to see a move back above 0.8140, to retarget resistance at 0.8220 and trend line resistance at 0.8260 from the February highs at 0.8505.

Below 0.8020 targets the risk of further losses towards 0.7700 over the medium term.

USDJPY

 
The USD/JPY spread betting pair continue to find support around 79.70, but the failure to get back above 80.45 is a concern and this keeps the risk skewed to the downside.

A failure to get above the weekly cloud resistance keeps the current momentum skewed towards the downside.

A break below 79.70 would then target 79.20 initially on the way to 78.35 and the 200 day MA.

The 80.42 cloud line should now act as a resistance level and for the dollar to stabilise we would need to see a close back above this key level.

Equity market calls

 
FTSE 100 is expected to open unchanged at 5,555.

DAX is expected to open 7 points higher at 6,452.

CAC 40 is expected to open 4 points higher at 3,129.

FTSEMib is expected to open 52 points higher at 13,989.

Spread betting carries a high level of risk to your capital and it is possible to lose more than your initial investment. Spread betting may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Forex trading news by Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, register no. 173730.

Any CMC Markets research and charting tools are indicative, they are provided for information purposes, they must not be relied upon as investment advice. CMC Markets provide an execution-only service.

The above content should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The content is not a recommendation. You should seek independent advice as to 1) your suitability to speculate in any related markets 2) your ability to assume the associated risks 3) the tax, legal and accounting consequences of any transaction.

This weekend’s events in Greece, France as well as Germany should have dispelled that notion once and for all, as voters delivered a bloody nose to the incumbent governments.

Moreover, it also brings closer the prospect of a clash between the German approach to how Europe should go in the future, and pretty much everyone else’s.

There was a sense that EU leaders knew what was coming when EU commissioner Olli Rehn suggested at the end of last week, in a departure from the most recent rhetoric, that the EU had scope to ease its tough fiscal rules.

“The stability and growth pact is not stupid” he stated, going on to say that there remained “considerable scope for judgment when it comes to its application”.

Be that as it may, there appears to be considerable scope for further uncertainty going forward in Greece especially, where forming a stable government looks a massive ask and the likelihood of another election in a month or so looks fairly certain.

Irrespective of what happens in the coming weeks, it looks increasingly impossible that Greece will be able to implement the types of reforms asked of it in the face of such voter opposition, increasing the likelihood that the country will have to leave the euro.

The backlash against austerity also brought in a new French President, Francois Hollande, who wants a more growth friendly approach to Europe as well as a renegotiation of the fiscal compact.

Even so, he may not be able to deliver on a lot of his election promises if recent comments by outgoing Eurogroup President Jean Claude Juncker are anything to go by.

Last night he stated that Paris cannot renegotiate the fiscal compact, potentially putting the new French President on a collision course with both the EU and Germany.

German chancellor Angela Merkel has steadfastly refused to countenance a renegotiation of the fiscal compact. She will be even less inclined to do so in the face of her party’s setback in a regional election at the weekend, especially with another election in North Rhineland and Westphalia due next week.

Meanwhile in Spain it would appear that confidence in the banking system continues to deteriorate as the Spanish government looks set to look again at the creation of the “bad bank” idea.

As the costs of distressed loans rises, there is talk that Bankia could see billions of euros injected into it to stave off a collapse.

The reality remains that, behind all the rhetoric about austerity and a more growth friendly approach, Europe has entered another phase of political fudge and uncertainty.

EURUSD

 
In EUR/USD spread betting, we finally got the break we were looking for towards the downside with the break of the 1.3055 triangle support.

A close below the February lows at 1.2975 has the potential to open up the lows this year at 1.2630.

Only a move back above the gap at 1.3085 has the potential to stabilise in the short term and target a retest of 1.3200.

The break of the triangle now suggests we could well signal a 500 point move as a minimum price objective, which targets 1.2630 we need to see a concerted break below 1.2975.

GBPUSD

 
Also in forex trading, the pound continues to resist the pull of downward pressure that is weighing on the single currency though it did slide below 1.6160, which could see it slip towards support at 1.6050

If broken would then argue for a test towards the trend line support at 1.5960 from the January lows at 1.5235.

Resistance remains at the trend line resistance at 1.6320 from the 2011 highs at 1.6750.

EURGBP

 
The break below the 2010 lows at 0.8065 reinforces the negative outlook for the single currency and now opens up the risk of further losses towards 0.7700 over the medium term.

In the short term expect further choppiness with interim support around the 0.8020 level which equates the June and July 2008 peaks.

To stabilise we would need to see a move back above 0.8140, to retarget resistance at 0.8220 and trend line resistance at 0.8260 from the February highs at 0.8505.

USDJPY

 
The dollar does appear to be carving out a base around 79.70, however the failure to get back above 80.45 is a concern and this keeps the risk skewed to the downside.

A failure to get above the weekly cloud resistance keeps the current momentum skewed towards the downside.

A break below 79.70 would then target 79.20 initially on the way to 78.35 and the 200 day MA.

The 80.42 cloud line should now act as a resistance level and for the dollar to stabilise we would need to see a close back above this key level.

Equity market calls

 
FTSE100 is expected to open 7 points lower at 5,648.

DAX is expected to open 24 points higher at 6,593.

FTSEMib is expected to open 24 points lower at 14,251.

Spread betting carries a high level of risk to your capital and it is possible to lose more than your initial investment. Spread betting may not be suitable for all investors. Ensure you understand the risks involved and seek independent advice if and where necessary.

Forex trading news by Michael Hewson, Analyst, CMC Markets.

CMC Markets is authorised and regulated in the UK by the Financial Services Authority, register no. 173730.

Any CMC Markets research and charting tools are indicative, they are provided for information purposes, they must not be relied upon as investment advice. CMC Markets provide an execution-only service.

The above content should not be construed as a recommendation or offer to buy or offer to sell or solicitation of any offer to buy any security or other financial instrument by CMC Markets. The content is not a recommendation. You should seek independent advice as to 1) your suitability to speculate in any related markets 2) your ability to assume the associated risks 3) the tax, legal and accounting consequences of any transaction.