Yesterday’s decision by ECB President Mario Draghi that there would be no further help in the near term for the European financial system was a blow to those who thought that in light of this week’s disappointing economic data that the ECB would hint at further help if the economic outlook continued to darken. It would appear that Mr Draghi intends to keep the pressure firmly on European governments to pursue the reform agenda in exchange for any future help.

Markets could get evidence of that as soon as today with final service sector PMI data for April from Italy, France, Germany and the Eurozone as a whole.
After this weeks awful manufacturing numbers expectations are low with Germany expected to be the only bright spot at 52.6.
Italy is expected to drop to 43.7, France 46.4, and the Eurozone 47.9, all solidly in contraction territory. If these services numbers go the same way as the manufacturing numbers seen earlier this week then concerns about a prolonged European recession will increase.
Eurozone retail sales figures for March aren’t expected to be any better with a year on year decline of 1.1% expected.

Irrespective of how today’s European economic data turns out this weekend’s events in France and Greece are more likely to dictate how the next stage of Europe’s crisis plays out as these countries go to the polls to elect new governments. While in Italy, Prime Minister Mario Monti is likely to find that his honeymoon is over when voters go to the polls in regional elections.

The headline event of the day though is the US employment report for April, especially after the disappointment of March’s big miss of 120k. The economic data since those figures has been somewhat mixed, pretty much as it has been all week. The ADP numbers on Wednesday pointed to a slowdown in private sector job growth, coming in as they did at 119k, and the worry is in the wake of yesterday’s disappointing April services numbers that April’s jobs numbers could miss as well.
Expectations are for a rise from the March numbers to 165k in April with the unemployment rate staying at 8.2%.
Given that the monthly average for jobs growth had, until the March numbers, been 200k+ there is a concern that a sharp drop in hiring could signal a false dawn for the recent US recovery, and prompt more strident calls for further stimulus from the Fed.
Even if that were to happen any further stimulus won’t happen before June as that is the earliest date for the next Fed meeting.

EURUSD – patience appears to be a virtue here. We remain in the range with trend line resistance now at 1.3270 from the March highs. A break through 1.3300 targets the 200 day MA at 1.3460.
With the lower line support on the triangle now at 1.3055, we need a break-out soon or the impulsive nature of the pattern will reduce.
The break of the triangle continues to remain the primary pattern and could well signal a 500 point move if it breaks out.
To open up the lows this year at 1.2630 we need to see a concerted break below 1.2975.

GBPUSD – another negative day for the pound but it continues to hold up above 1.6160.
The positive momentum remains intact but does appear to be waning given the proximity of the trend line resistance at 1.6320 from the 2011 highs at 1.6750.
This suggests we could see a downward test towards 1.6050 and the highs at the beginning of April.
Only a move below 1.6050 retargets the long term trend line support at 1.5945 from the January lows at 1.5235 which continues to act as support on the downside.

EURGBP – a Doji yesterday suggesting indecision but we did get a lower low at 0.8105, bringing us closer to the 2010 lows at 0.8065.
The long upper shadows on the daily candles do suggest downside pressure remains the primary driver. The momentum as such remains for a move towards the 2010 lows at 0.8065. A break here would be very negative for the euro, opening up levels last seen in October 2008, when it touched 0.7700.
Only above the resistance at 0.8220 would retarget the larger resistance at 0.8280 as well as trend line resistance at 0.8300 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.