EUR/USD
Everything has gone on hold at present as the markets await the outcome of
the EU summit, currently underway in Brussels. The usual round of conflicting
statements have been doing the rounds and there is little point in speculating
on the final outcome.
An earlier bout of Euro selling took place on diminished hopes of a positive
outcome but it turned around after some solid data from the US lifted risk
appetite in the afternoon session.
Technically we are pretty much where we were yesterday. In between, the Euro
has spiked to 1.3975 around the NY open and then dipped equally quickly to
1.3797, where it met and rebounded from the uptrend support, back to 1.3900.
The direction from here will depend on the statements from Brussels over the
next few hours but just by looking at the charts there is some obvious
divergence building and somewhere along the line further dips/weakness can
be expected. Having said that, the dailies are still pointing higher, albeit less
aggressively than over previous sessions and so an assault on the first major Fib
resistance at 1.4005 still cannot be ruled out.
The best plan is to sit on your hands and take the lead from the outcome from
Europe over the next few hours. Current headlines are suggesting decent
headway has been made on the recapitalisation of banks. If they can come to
some sort of agreement, expect the Euro to continue to make some good gains
in what looks like a market that continues to trade from the short side. A press
conference is due later on. The equity markets appear to like what they see and
has just closed up 1.5% (S+P).
Plenty of data out today. Highlights will be German CPI, EU Economic
Confidence and US GDP and Jobless Claims. Tread carefully!
AUD/USD
The CPI figure did the damage yesterday, with the Aud gapping from 1.0430 to
1.0380 as the numbers were announced. A session low of 1.0320 was seen
before a recovery as risk sentiment improved over the course of the day. So the
Aud is back at 1.0400, and not too much harm has been done. We now await
the outcome of the EU meeting for an idea of further direction. The equity
markets are up 1.05% and appear hopeful of a decent outcome (at least in the
near term). Certainly, the dailies continue to point higher, albeit with slightly
less conviction than previously. Good resistance now appears at 1.0500 and
then above this there is not an awful lot before 1.0630. The downside sees
1.0320, 1.0290 and 1.0240 act as support.
One interesting report yesterday involved the iron ore price that has dropped
by 30% in the last 6 weeks, including a 7% fall yesterday. This is all being put
down to the fall in demand from China, whose exports are in turn affected by
the economic slowdown in Europe. This may be a temporary blip as inventories
are run down, but if it turns out to be longer term, demand for the Aud will
diminish from this sector, so worth monitoring.
As for today, anything could happen, but the early noises seem positive enough,
hinting that we may see further headway. For now 1.0350/1.0450 looks to
cover it, but stay nimble!
