Anyone would be amazed to see the rally in equities this morning after having read the headlines of most newspapers today.  

Full of doom and gloom and the possible cost of a eurozone break up to the British economy investors are brushing that risk aside and pushing the indices higher as the Christmas rally looks to be getting underway in earnest.

Fund managers who have had a tough ride this year will not wish to be missing out on any potential upside and even though the macro economic picture still looks shaky and uncertain, to many people equities look cheap from a historical earnings perspective.

There is also the chance that European leaders do actually get somewhere before the year end too as the situation is getting evermore serious.  There are hints that expectations of a resolution to the crisis are rising following the big drop in ten year government bond yields for the likes of Italy and Spain this week, the continued bounce in equities and the fact that they simply have to do something otherwise the eurozone in its current form is doomed and a break up with have ramifications beyond what most people can possibly predict.

This morning’s strength seen so far from the FTSE has taken not only clients by surprise, but us as well since we were calling the index to open higher by some 30 points and gradually as we approached the open quotes were bid higher and so now were sitting comfortably in the black with an almost 1.5% jump to 5565.

The move higher in the last few days has caught quite a few bears off guard and as markets continue to march higher over the short term things are starting to look even more bullish from a technical point of view.  For the FTSE levels around 5600 are now in view, with resistance near term seen around 5615/50.  The 5650 area is a really major resistance level over the medium term too as that’s where the 200 day moving average is where many European indices failed when they last got there.  The Dow is now back above its 200 day moving average so this might be a case of European indices simply catching up with their US counterparts.

All eyes on the non-farm payroll number where analysts rushed to readjust their forecasts higher following Wednesday’s bumper private ADP payroll number.  Expectations are for a figure of 125k due to initial jobless claims that have been trending lower recently, although yesterday’s number bucked that trend, but there are signs that the US’s services sector is healthy and recruiting.

FX traders are still in risk-on mode, and safer currencies like the yen and dollar might see their biggest weekly loss against the euro in over a month.  Despite the ongoing threat of a eurozone meltdown, US data has been positive recently and encouraging traders to look less at safe haven assets.  However, today could be a big day for currency movement on the release of NFP.  If the figures are good, is it likely we’ll see equities move higher and in turn a fall in the dollar.  EUR/USD is trading at 1.3475 and sees support at 1.3460 and resistance at 1.3530.

Gold seems to have found a bit of a ceiling around the 1750 level having gone sideways for the last couple of days and it doesn’t seem to be benefiting from the continued bullishness in equity markets.  At 1747 at the time of writing levels to watch over the near term are 1755/70/78 to the upside and 1735/25/11 to the downside.