EUR/USD
The Euro has had a relatively stable night despite the never ending saga going on in
Athens and Rome.
Berlusconi managed to survive the vote on the public accounts but has been
advised by his ruling coalition ruling partner to resign. Needless to say, he hasn't yet
and wants to face a confidence vote. Bond yields have hit yet another new high at
6.74% as the drama continues. While Italy has a PM that they can’t get rid of,
Greece can’t find one at all! The search goes on, and while an announcement is
apparently due at any moment, nothing has been broadcast at this point.
All of this indecision has led to the market largely standing aside, not knowing
which way to turn. The Euro range of 1.3723/1.3843 tells its own story.
News is just breaking that Berlusconi will resign within the week. This has caused
the Euro to jump to the top end of the day’s range and, of course, equity markets
like the news. The Euro currently trades at 1.3825. The S&P is currently up 1%.
Technically there is not a lot to add from yesterday and the 1.36/1.39 range that we
said on Sunday should dominate trade, continues to hold. The upside may come
under some pressure if it appears that solid progress is to be made on the political
front in Italy and Greece.
Greece needs to find a new PM in a hurry in order to get the next tranche of the
bailout package, having signed up to the austerity measures. If this doesn't happen,
then the whole deal goes back to square one.
Today 1.3850 will provide initial Fibo resistance (38.2% of 1.4245/1.3605). Above
here 1.3870 and then 1.3900 should provide topside barriers, while the base now
looks protected at 1.3750 and below here at 1.3700. Be flexible and await further
political manoeuvrings.
Today’s main event will be the Chinese CPI, PPI and Bernanke will be speaking later
on.
AUD/USD
The AUD session was an action replay of the day before, dipping to 1.0280
before recovering to the mid 1.0300 area for most of the session and then
finding some legs to move towards 1.0400 as news came through of
Berlusconi’s imminent resignation.
Today’s main event will be the numbers coming out of China. (CPI, PPI, Retail
Sales, Industrial Production). These will all add up to provide direction for the
Aud in particular and the rest of the market in general. CPI has been slowing
from its July high of 6.5% and the market will be looking for a continuation of
this trend and until then we are likely to be on hold, barring further press
releases to the EU.
Locally we get the WBC Consumer Confidence Index and Australian Home Loan
numbers.
Technically the Aud remains range bound in 1.0280/1.0450 and looks
reasonably comfortable. The indicators are mixed and suggest little in the way
of direction at present. The S&P is now up 1% so dips on the day look as though
they well be reasonably well supported and a test of 1.0400 would not surprise.
