The rejection of the lows at 1.3140 has continued as the Euro gained further ground to
sit just under session highs at 1.3345. Confidence has been helped all round as stocks
make further gains, with European equities up by 3% -5%, the S&P gaining 1.8% and
the CRB up by 1.5%. All this new found confidence comes about after EU finance
ministers agreed to coordinated action to recapitalize Europe's banks, a plan which has
been backed up by supportive comments from Merkel. A restructuring of Dexia, the
Franco-Belgian bank, with Government backing, has been seen as a positive, hopefully
limiting any effect on the rest of the banking sector and fuelled optimism. The market
now awaits the ECB rate decision / Trichet comment later today, to be followed by US
Non-Farms & Unemployment, Friday. Given the higher inflation number last week, the
chances of a 50bp cut appear to be diminishing and no cut at all could see the Euro rise
sharply as the shorts run for cover.
Technically we are sitting below supposed heavy offers in the 1.3375/85 area, having
filled in the chart gap from Mondays lower open in Asia. The indicators are generally
supportive of a continued move higher, with the first target being the 23.6% Fibo
resistance of the recent move lower from 1.4547 to 1.3141 at 1.3468. Above here
down-trend resistance is currently at 1.3510 and then there is not an awful lot to stand
in the way of a move to 38.2% Fibo resistance at 1.3675, which if seen would be a
formidable barrier.
On the downside we now see support at 1.3290 and then at 1.3235. A strong move in
either direction though is unlikely to be seen as we consolidate ahead of the ECB
