EUR/USD
Risk aversion began to set in yesterday after the slightly weaker Chinese GDP,
with Asian equities closing lower (-2%/-4%). The downside then accelerated in
Europe on poor ZEW data and a Moody’s warning that it may place France on a
negative credit outlook, which would be hugely problematic for the EU rescue.
Several Italian banks were downgraded by S+P. Things turned around for the
better once the US got going as today’s quarterly profit results saw a good BOA
figure (+6.6bio) lead the market higher with the S+P closing +2%. Bernanke said
nothing of note at the Boston Fed.
The Euro, having reached a low 1.3651 in Europe, followed the equity markets
lead and rebounded.
The UK press has just reported that Germany and France have reached an
agreement as to the structure of the EFSF. This has seen the Euro shoot up to a
high so far of 1.3816 at time of writing. It has since reverted to 1.3750, in what
has been a very volatile day.
http://www.guardian.co.uk/business/2011/oct/18/france-and-germany-
move-towards-2tn-euro-fund
Technically the Euro has taken out yesterdays high at 1.3785, trading up to
1.3816. If we are to head higher again, 1.3840 will be tough to crack today
Further out the indicators are mixed suggesting some directionless but choppy
price action. I am doubtful that we will see the Eur trade above 1.4000 although
the dailies still point higher, but the 4 hourly charts are indicating that rallies
will meet selling pressure if we see levels above 1.39 (Mondays high). The
downside now sees good support between 1.3600/50 and it looks likely to hold
for the time being. In short be prepared for a few days action in 1.36/1.39 area
as we head towards the EU summit on the weekend, but be flexible as it looks
like being very choppy.
Today’s data EU Current Acc and then the US CPI
AUD/USD
The AUDhaving more or less shrugged off the Chinese GDP figures, in a whippy
but directionless session around 1.02, slipped through support to trade down to
1.0117 before bouncing strongly through the session, in line with other risk
assets, to reach 1.0326 following the UK press reports on the EFSF.
This follows more or less our idea from yesterday that a few days of 1.01/1.04
directionless trading is likely, and this remains the case.
The hourly indicators are trying to turn higher but the price is all over the place
in 1.0260/1.0310 range at the moment and apart from ample opportunity to
lose money, I don't think that we are going anywhere directionally for the time
being, so stick with 1.01/1.04 for now and stay out of the short term noise.
Today, look out for Westpac Leading Indicators Index.
