EUR/USD
Having seen a high of 1.3816 in early Asia yesterday, that was it for the Euro, as
it first consolidated and then headed lower as the weekend feel-good factor
over Greece and Italy, quickly dissipated. The Italian bond auction went off
poorly at 6.29%, EU industrial production data was worse than expected,
contracting by 2% (mom) and Spanish bond yields rose above 6% for the first
time – 6 days before the election. Merkel joined in by stating the obvious, that
Europe is facing its most difficult period since WW2 and the OECD has warned
that their Indicators point to a slowdown in all major economies.
Needless to say the Euro has found it pretty hard to hang on to Fridays gains,
and right now we are looking at the possibility of another weekly Asia Monday
high, although it is too early to be confident of this yet. Equities have acted in a
similar vein with European bourses closing 1-1.5%lower, while the S+P is down
0.95%
Technically, the Euro is still in reasonably neutral territory at 1.3630, although it
isn’t looking particularly healthy and the 4 hour indicators have begun to look
lower again. For the coming session 1.3605 offers Fibo support, being 61.8% of
the move up from 1.3484 to 1.3816. Below here the 76.4% level is at 1.3560
which should hold – at least through Asia. On the topside today 1.3670 should
initially cover it and beyond here, 1.3750 is trendline resistance
Further out the 1.36/1.39 range may continue to hold although the downside
looks pretty precarious at present. All in all , my bearish stance on the Euro
remains but prefer to sell rallies and if we are to go lower, it looks as though it
will be a messy affair. Below 1.3560, last week’s low around 1.3480 will offer
support.
We have plenty of data out today though to keep us on our toes,
including the EU/German ZEW survey, German GDP, US Retail Sales and PPI and
the NY Empire State Mfg Survey
AUD/USD
The AUD tried to make the 1.0400 target, falling short at 1.0351 in early
Australian trade yesterday, before turning around and not looking back as it
bore the brunt of the risk aversion on the poor news coming out of Europe. So it
has given up all the gains of late Friday’s session having taken out a lot of the
shorts along the way and looks heavy as the US Equity markets approach the
close, down 1.2%(S+P).
Today’s session should see support around current levels hold. I’d be surprised
to see a move under 1.0160, at least until we see the RBA minutes and beyond
there, intraday support should be seen at 1.0140 and 1.0100. The topside
should run into trouble around 1.0210 this morning and above here 1.0245
should cover it.
Further out, the downside is still the way to go, and building into a short
position by continuing to use rallies to sell into is, I think, the correct strategy. If
I am right, we are building for a move towards 1.000 and lower, but it doesn't
look as though it is going to be easy – if it happens at all – we are after all
talking about the AUD!
Aside from the RBA, today also sees Motor Vehicle sales, but the ZEW survey is
likely to be of greater importance out of the EU as the AUD reacts to the usual
risk on/off scenarios.
