Hello. Welcome to this edition of CantosCharts. This is Ashraf Laidi from CMC Markets.

We are going to look at two things today. We are going to assess or examine the deterioration in the eurozone and the EUR, but not really look via the EUR/USD chart. But looking at the Spanish index, the Idbex. It's an Ibdex 35 weekly and also at the EUR/GBP which we covered actually some two months ago. We warned about important support and now we broke, so we're going to look at that in a minute.

But let's just start with this, this is the main Spanish equity index benchmark - 35 shares. Basically, what is important ladies and gentlemen is this. This looks kind of similar to the S&P 500 and to the Dow, but we start from the October 2007 high.

Okay, this level here which is around 16,000. So we drop here and we basically go all the way here in March '09. What is interesting is that we failed the 200 week moving average like the S&P did, like the Dow did. We failed the 200 week moving average in April. I believe that was April 22nd. But we care about this. We care about this.

Here is the thing. Not only do you have lower highs, but we are looking at the retracement levels. Now, so what do we do? We do two retracement levels. We do a retracement from this March 2009 low to this April high and we go this and then as we retrace this move, well you look at the lines that start from here and this basically, the retracement, the support ladies and gentlemen is 8,817 and that is the 61.8 per cent retracement. That means the market has retraced two-thirds of the rally from the March '09 lows to the April '10 highs.

So we retraced 61.8 per cent retracement of that and we are coming down. Actually, two weeks ago we stopped there, but this week we are falling way below it because we went all the way to actually below 8,000. So if we are going to have a weekly close below this retracement, that would be quite bearish.

But now let's look at a bigger retracement which is we are actually doing the decline from the October '07 high to this low in March '09 and as we basically retrace, when we retrace this and this, we basically get to this 23 per cent retracement. It's not a major retracement.

But basically, as you combine 8,920 for the 23 per cent retracement of the decline, and as you combine this 61.8 per cent retracement of the rally, you will get some sort of a confluence retracement.

You are combining both of these levels and you are talking about 8,817 and 8,900, so basically you're talking about around 80 points, or around 8,880 which is a major support.

So if we close below, if we close this week below 8,820, or even below 8,800, that would be very, very bearish for the market and the next level in the Spanish index will be 8,021, which is a 76 per cent retracement of the rally from the March '09 to the April '10 high. That's actually at 12 months. 76 percent and that will be 8,000.

So basically what we're showing you here, we are showing you we are examining the deterioration in Spain. If you remember in yesterday's edition we showed you the spread of the 10-year Spanish spreads over Germany and how they went high all the way to 2.14, but they have much to go to 2.5, even 3. So that's very important. So really, you would call here the floor is falling gradually. 8,800 very important level.

Last but not least, something different, EUR/GBP. Many of you who have seen our presentation in EUR/GBP, (I believe it was earlier this year. I think it was around March) when we were here. We were here. What happened here is basically do you see this? This is the triangle here and there was a big support right here. A big support at around 85 and change. But the major support ladies and gentlemen was at around 84.40.

84.40 was not the triangle but it was basically the retracement. So we went here. I'm sorry, 84.40 was this level. This low here and this low here from August '09 and look at the market. When it breaks below 84.40, after it broke 85.40 in the base of the triangle, after it broke the retracement here, we went into 84.40. Once we broke that we went all the way down to around 82.80. The next level here is likely to be 81.60 okay.

81.60 which is the 50 per cent retracement of the rally in the EUR/GBP from the 65p low in February '07 to the high in 2009 here which is basically almost parity. So again we are hovering around 83.20. We are hovering around 83.

But it looks like the immediate support is around 82.70 but right below it is a major support of 81.60 and we could go into the fundamentals, but that's why you have to follow us at CMC or at ashraflaidi.com. We can talk about the fundamental rationale for this decline. But these are important levels to watch out for.

Ladies and gentlemen, this is Ashraf Laidi from CMC Markets and we hope you enjoyed this edition of CantosCharts.