Last night’s reversal in fortunes for the Dow shows once again how susceptible the markets are to a quick change in luck.  In the last hour of trading, US markets gave up their gains and suffered losses that completely eradicated what started to look like a rally from recent lows.

The aggressive sell-off followed through to Asian trade overnight, and the Europeans are suffering as a result too.  The headlines have not been conducive of investing in shares over the last few days and traders are wary of the next possible leg down, but for now at least the 5000 area is propping up the FTSE, and the same can be said for the Dow, which is finding support from the psychological 10000 level.

Earlier weakness seems to have subsided for now and if the bulls do get the upper-hand, we could see a retest of resistance around 5200 and even 5250 could be a possibility.  Such a move will bring us back over the 20-day moving average that has proved too much of the FTSE recently, but a retest of this area and a few closes above might be enough to persuade investors that the market still offers value at these levels.  To the downside, the recent low around 4900 is key and a break below here could open up further losses to 4800.

BP’s woes continue, as analysts desperately attempt to calculate the cost of the spill so far and the potential liabilities going forward.  After yesterday’s big hit for the share price, BP’s share are a little lower again this morning with news of the US investigation, and would probably be even lower if it wasn’t for some support coming from the prospect of a takeover.  But with so much negativity and so many unknowns surrounding the stock, a take over approach at this time would be mad.

On the economic data front, we have UK mortgage approvals released this morning followed by some EU inflationary data and then the US-pending home sales number rounds of the day at lunchtime.  Things get more exciting on the economic numbers front as we end the week, with employment numbers coming out tomorrow and then ending with the finale of non-farm payrolls on Friday.

Dollar weakness is allowing a small bounce for the euro and sterling this morning, but sterling once again has the edge over the euro and EUR/GBP is now at 0.8300, meaning GBP/EUR is back over the 1.2000 mark, a level not seen for one-and-a-half years since the cross rate made its first big break out move from the 1.2200 area back in November 2008 and commenced its run towards parity with the euro.  At least for those going to the continent this summer, things will be a little cheaper than they’ve been for the last couple of years when you’d only get a euro for your pound from the foreign exchange dealers!

EUR/USD is sitting above 1.2200 for now at 1.2240 at the time of writing.  Around these lows, it’s not surprising to see a bit of support for the single currency, but the overwhelming trend is still rather negative for the euro.  Some bears project 1.1600 and then 1.1300 as the next targets, but currency markets have a habit of snapping back in the opposite direction and so to the upside 1.3000 will be the target for the bulls.

Gold is a little softer as risky assets are being sold off this morning.  Around the 1220 level at the time of writing we’re on the upward trend line when looking at the hourly chart, so support could be seen around this level and bulls will be looking for a test of 1237, but if we break lower than here support is expected around 1211.

Crude has a volatile session yesterday and seems content to hover just above $72 this morning.  Support is seen around the $72 area and for now oil prices seem to have stopped the sell-off that commenced at the beginning of May.