EUR/USD
Despite a lot of noise as we approach the EU Summit on the weekend, the Euro
has ended up more or less where we were yesterday, remaining within its
recent 1.36/1.39 range, and looking as though we are likely to continue to do so
for the time being.
Denials of yesterdays UK press reports regarding a Franco/German agreement
have been doing the rounds and Sarkozy and Merkel have been together in
Frankfurt to find a way out of the hole that they find themselves in. The hole
just seems to be getting deeper.
The US beige book painted a gloomy picture of the economy today and saw
stocks come off, closing down 1.25% ,dragging the risk trade with it. The Euro
which had earlier made a high of 1.3868 continued to trade lower to current
levels.
Technically it looks to me like a case of what cannot go up must go down. The
hourly momentum indicators are pointing lower and a retest of the week’s lows
at 1.3650 may be on the cards. Beyond here though, I would not be so
confident and in the sessions to come it appears that 1.36/1.39 is going to
continue to dominate as we head into the weekend. Today I would use
1.3650/1.3800 as a guide and it doesn't look to me as though we are likely to
move too far beyond here in the coming session, barring some unexpected
announcement. Rallies should see decent selling interest as confidence
dissipates as to a positive outcome from the weekend summit.
Today sees German PPI and EU Consumer Confidence, while from the US we get
Jobless Claims, Home Sales and the Philly Manufacturing Index
AUD/USD
The AUDmade a high of 1.0352 in early Europe as stops were triggered above
1.0300, and has spent the rest of the session drifting back to previous ground as
equities finish the US session with a soft tone. The S&P is closing down 1.25%.
More range trading in the 1.01/1.04 area looks the most likely probability in the
sessions ahead. Commodities have also taken a bit of a hit, with Copper down
around 3.5% and Oil off 2.5%, suggesting the upside for the Aud will be limited
for now.
Today look for support at 1.0200, and if that gives way expect a move toward
1.0170, possibly 1.0125. The topside should be covered by 1.0260. In short
expect some directionless trading with only the NAB Business Confidence
numbers to provide some inspiration ahead of Europe. Indicators suggest that
we may want to move mildly lower during the session, but not convinced,
although as confidence wanes in the likelihood of a decent outcome from the
EU summit, risk trades will be abandoned which would send the Aud lower.
Watch the potential Head shoulder formation…if it works, the target will be
somewhere around the 50% Fibo support level at 0.9875.
