EUR/USD
Having broken through the SL at 1.3480 in Asia, the Euro continued to slide in early
Europe towards the 1.3420 support before finding a base and regaining most of the
sessions lost ground, albeit in a volatile manner as the Euro followed the Italian
Bond market around. The ECB was very busy today buying the Bonds without much
any effect on the yield, which traded either side of 7%. The bounce felt pretty
anaemic and has been eradicated in the last hour of US trading as the S+P came off
1.7% , although given the news coming from Europe and the finger pointing
amongst the participants, it did well to rally at all. Worries are increasing of an
Italian default, possibly Spain as well. France is worried about its AAA rating and
wants the ECB to get involved. Merkel says ‘’Nein!” Germany wants a “Robin Hood”
Financial Transactions Tax. Cameron says “No”! Across in Greece, although
Papademos won the vote of confidence, his unity government is at odds over the
austerity plans and has not signed off on the reforms required to receive the next
tranche of the EU bailout package. Italy now has a Government without a single
elected politician. That IS progress! Too much to keep up with, but all heading in the
same direction, and it won’t have a happy ending.
Technically the daily Euro charts continue to head lower. In the short term though,
the picture is not so clear and price action is erratic in the extreme. The weak close
in US equities has taken the risk trade, including the Euro down with it in the last
hour of trading. If I had to toss a coin I would shut my eyes and buy dips with a SL
under 1.3400 or a break of 1.3550 for a rally towards 1.3620. The 76.4% support of
the move up from the move up from 1.3138 to 1.4244 is at 1.3406, which should
provide a degree of support. Otherwise we are heading back towards the low. It is
very difficult though, so stay very flexible and trade session by session.
Today sees US Housing Starts, Jobless Claims and the Philly Mfg Index.
AUD/USD
The AUD declined further than anticipated yesterday before rallying as the Euro
bottomed out in a volatile session where everything followed the Italian Bond
market and the related actions of the ECB. The EU equity markets were
generally pretty flat; this has been followed by a steep selloff late in US markets
where the S+P has closed 1.7% after Fitch helpfully said that the EU situation
would have ramifications for US Banks. Someone definitely needs to have a
word with the Ratings Agencies
Technically the AUD still has a definite negative bias in the medium term. An
hour ago the AUD looked OK for a rally to test resistance at 1.0200. That has
been quickly wiped out and now the downside is again under real pressure. The
parameters to watch are 1.0040/60. If we go under here, I wouldn't try to
intervene to support the AUD as a quick rush through parity could well ensue.
The next decent level of support doesn't come in until 0.9905.
Immediate resistance now lies at 1.0125 and 1.0165. Fibo resistance levels
above here would are at 1.0240 and 1.0275. Asia is growing increasingly
reluctant to hold on to risk positions, so there are likely to be plenty of sellers
into any strength.
Stay flexible today, we could be in for a rocky ride.
