As we head into an extended weekend with Monday as a holiday in several markets, markets are lacking any sense of conviction and direction. As an illustration of the scarcity of any catalysts to move FX and equities there was some effort to rally the euro in Asian trading based on releases that the Chinese were looking at supporting the EZ’s financial stability facility - the EFSF. The only problem with this story is that it is really old news and the PBOC has shown on a number of occasions that it wants to support the EZ and the euro. As the largest holder of liquid reserves - including a huge amount of euro denominated paper - it would be foolhardy for them to say anything other than that they support the EZ and its currency.

The SP 500 futures are struggling at the 1320 level but my intuition is that there was too much zeal in selling risk on assets on Monday - that was the day that EUR/USD was pushed to the $1.40 precipice - and that the slow and grinding short covering could continue into to the weekend, providing a neutral to positive environment for US equities. However, I say that without much conviction. To move to something on which I have more conviction - no matter what the short-term direction in EUR/USD, the trend in EUR/CHF remains decidedly bearish for the EZ currency against the Swiss franc, as new historic lows for the pair continue to be registered.



GBP/USD has rallied in harmony with the EUR/USD short covering already alluded to, and is now in the zone between $1.6280 - $1.6330 where I am looking to sell further rallies.



The daily chart for AGG, an ETF which tracks investment grade corporate bonds, is revealing negative divergences close to a multi-period high.



It has not been a favorable environment recently for EM investors, and the chart for Vietnamese equities suggests that embryonic EM markets should still be categorized as "very high risk".



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market.