EUR/USD
Having made a low in Asia at 1.3672, the Euro surged on the announcement during the
European morning that the EFSF will be allowed to buy bonds under certain conditions
to support the EU zone. SL’s were taken out along the way, to trade up to 1.3842 and it
then spent much of the day sliding, to take out the day’s lows and bottom out at 1.3655
before rebounding to current levels. It has therefore done much as we thought
yesterday, ranging in a 1.3650/1.38, but the market is finding it very difficult to get a
handle on all this directionless volatility, with conflicting opinions and statements
causing constant confusion. The pressure returned to the Euro when the German Press
issued an article that the German Government hasn't ruled out delaying the outcome of
the weekend summit. The latest word from the EU is that the meeting will conclude on
Sunday and be implemented by Wednesday. Don't hold your breath, but if they are
serious (doubtful) we could see one almighty short covering rally.
Technically there is nothing to add from yesterday. For today continue with 1.3650/1.38
as a guide. The hourly’s are showing some short term divergence following the session
low and suggest the immediate pressure may be to the upside, putting 1.3800 under
threat and possibly heading towards Wednesdays high at 1.3865 and potentially 1.3915.
I would not see this level before the weekend though and more choppy, directionless
trading looks likely. The downside looks to be pretty well protected today at the 1.3655
lows and beyond here 1.3625 is strong.
Further out the 4 hourly indicators are pretty flat, in line with the directionless trade of
the week and the dailies which have been pointing higher are losing some momentum.
This is suggesting that we may be in for more of the same as the endless bickering goes
on and on. It may be that the politicians just are not able to come to grips with any of
this until either a bank or a sovereign actually falls over, setting off the dominoes that
will surely follow, which will presumably focus their attention at long last.
Be flexible, or even better, be square going into the weekend.
Today we see German IFO figures but that is about it of significance.
AUD/USD
The volatility continues to make life very difficult but at the end of the day the
1.01/1.04 range that we have been harping on about all week has continued to
hold, and looks to continue to do so going into the weekend. The overnight
range has been 1.0297/1.0162, moving in line with the other currencies on the
conflicting news headlines. I don't think conditions are likely to become much
easier as the politicians dither and bicker over what they intend to do about the
EU situation.
The base metals have had a rough session with Copper down about 6.6% at one
stage before a mild recovery. The Equity markets though have had an ok session
in the US with the S+P closing up 0.5% at 1216. European markets got
hammered with the Dax and Cac40 down around 2.5%.
It is pointless having too much of a view for early next week, but if anything the
daily charts continue to show potential for some more upside. The 200DMA is
at 1.0407 which should provide potential resistance, if seen. The downside
looks to be well protected at 1.0100 for now. Good luck
