EUR/USD
The Euro traded nicely to the 1.3570 support we discussed yesterday, making a 1.3565
low before returning to the upper end of the arrange below resistance at 1.3690 (high
1.3683). Another big a and varied news day has included the EU, IMF, ECB approving the
next tranche of the bailout package, probably by early November (but with plenty of
criticism of the Greek Government), Slovakia delaying its vote on approving the expansion of the EFSF bailout fund due to the minor need for a vote of confidence in the
Government before it is able to do so, and Fitch and S+P downgrading some Spanish
banks. On top of this Trichet has been speaking and sounding very downbeat, using
words like “systemic” to describe the EU crisis. There is so much to take in every day it is
becoming difficult to know what to make of it all and tempting to turn off the news
monitor altogether and to just rely on the charts.
These are giving a clearer picture and for the day ahead we should see a similar range to
yesterday as we consolidate after Mondays move higher. 1.3570/ 1.3690 should
continue to provide a range in Asia. The 4 hourly charts are overbought and I would be
surprised to see 1.3700 taken out in the short term, but if it is, expect fresh buying
interest to propel us towards the 27 Sept high at 1.3795. Equally having taken a look at
the downside in Europe and rebounded one would expect more bids to appear in the
1.3570/1.3600 area. Ahead of the Slovak vote which looks to be delayed until later
today, possibly Friday, the market may just go on hold as the element of doubt as to
whether it will be passed, seeps through the market. A negative vote leads us back to
square one as all 17 EU countries need a positive vote in order to approve the expanded
EFSF. That would ensure this Euro rally is very short lived. At this time the charts are not
suggesting a major reversal.
Slovakia just rejected the vote – Not a lot of reaction so far. The Euro is 20
points lower but it will remain nervous now until Europe get in.
AUD/USD
The AUD sits in much the same position as yesterday having seen an overnight
dip to 0.9905. The market has more or less gone on hold, waiting for Slovakia to
vote one way or the other to approve the expansion of the EFSF. The outcome
of this will provide the direction for all asset classes in the next few sessions –
the AUDbeing no exception.
The 4 hourly charts remain overbought, but it looks increasingly as though the
market wants to take a look at the other side of parity and to test the neckline
of the Head/Shoulder formation. If 1.0040 and then 1.0065 can be taken out,
then look for fresh buying to come into play as we ought to head quickly
towards 1.0150.
In the meantime I am holding onto the view that 1.0040 will hold before we see
a turn lower again towards 0.9875 level that previously acted as resistance.
Note that Equities have had a quiet session but the S+P continues to toy with
the 1200 level. It feels as though we might want to look at 1220/1235 which
should provide decent resistance. Watch for corrections from that level –
should we see it
