EUR/USD
Solid data out of China, followed by weaker PMI numbers in the EU left the markets
initially consolidating around Fridays closing levels. Once the US session commenced
though, sentiment turned higher again, assisted by a positive tone on Wall St and
following comments from various EU officials suggesting progress toward a broad debt
plan is being made, amid stories that the EFSF may be levered to €1 trillion. This has all
combined to result in a solid session for risk assets, led by equities, after Caterpillar
reported better than expected figures, where the S+P is continuing its march towards
the important 1265 resistance, closing the day up 1.4% at 1254, with oil, up to
$91.30pb.
As for the Euro, it has taken out some important levels, initially heading lower before
rebounding, trading between 1.3820 and 1.3953 and sitting currently near its highs,
having broken the neck line (red line) of a potential reverses Head Shoulder formation.
Technically the medium term momentum continues to point higher towards the first
resistance at 1.4005, 61.8% of 1.4545/1.3138. A break here would see a move towards
the 200DMA at 1.4116 and then to 1.4210 (76.4% of the same move).
Short term support should now be seen at 1.3850 and then at 1.3800. More medium
term downside assistance should come in at the uptrend/Fibo level of 1.3765.
If we are to head higher it is not going to be an easy ride. Aside from the possibility of a
misplaced comment from any one of the many EU officials that could easily force a
retracement in a nervous market, the short term charts are beginning to show some
mild divergence as we head higher, so set backs are highly likely.
As for today, it looks to me as though the market will be looking to buy dips before
taking a glance at the 1.4000 level. The dailies continue to point higher, the 4 hour indicators are gaining momentum and the hourly’s, although slightly overbought are not suggesting
much weakness, at least for the next few hours.
Today sees German/US Consumer Confidence, Case/Schiller House Prices and Richmond Fed Mfg Index.
AUD/USD
The Chinese PMI Data, yesterday, lit the fuse under Commodities and although
momentum was slow to build, this has helped to propel that Aud to 1.0500 in
the overnight session with Europe and the US being strong buyers.
The important resistance levels around 1.04 were taken out and the Aud has
not looked back. If 1.0500 can be conquered, there is not an awful lot of
resistance until 1.0675 where the 76.4% Fibo level of the 1.1080/0.9385 move
exists.
A word of caution though, while the indicators, particularly the dailies are
pointing higher, the 4 hourly charts are suggesting a hint of divergence
suggesting that we may see some decent pullbacks along the way.
Today it would appear that dips will find good support as shorts continue to be
squeezed and 1.0400 would appear to provide a base. Below here, uptrend
support is currently at 1.0300.
Today use 1.04/1.05 as parameters with the hourly’s suggesting that we may
ease off a little in the first half of the day, but as I already said, the dailies are
telling us that we are not finished with the upside yet. Of course this could all
turn around very quickly in the event of EU leaders being unable to come up
with a workable plan in the next couple of days – which is easily possible – so
stay flexible.
