EUR/USD
The Dexia story and HSBC China PMI started the slide for the Euro in Asia but the
German bond auction, which has been generally termed as a ‘disaster’ in the Press,
ensured that the European Equity Markets and the Euro were all pushed sharply
lower. The Bundesbank was forced to buy the surplus (35%) German bunds, to
ensure that the auction didn't fail altogether. The concern now is that the contagion
is actually spreading to the heart of Europe. Italy traded above 7% today and Spain
and other peripheral bonds are edging higher as well. Belgium touched 5.5%. Poor
EU PMI numbers did little to help. Neither did a Fitch warning on Frances Credit
Rating. After 18 months of bickering and indecision, things are beginning to move in
Europe and not in the right direction.
Technically the move through 1.3400/20 and then 1.3380 looks pretty ominous for
the Euro. However I would be a bit wary of being overly short down here though
and it would not surprise me to see a decent rebound by the middle of next week.
The building divergence is giving us an early warning of this, although the dailies are
still pointing lower.
Given that we are heading into Thanksgiving today, I think Asia may see a range, as
we await the next debacle from Europe, and then Asia gets another fresh turn
tomorrow. The short term oscillators are now oversold so the downside for the
session should be relatively limited, and although the trendline support of 1.3270 is
only 60 points away at present, I’d be very surprised to see Asia push it under here.
The topside looks covered for now by 1.3420, probably 1.3380.
If/when 1.3270 gives way, we can look towards 1.3130 as the next target. In the
meantime use 1.3270/1.3400 as a guide. This should easily cover it today and
further out, look for rallies to 1.3520, possibly 1.3620 to sell into for the next leg
lower
Today sees German IFO and GDP. Good luck, Happy Thanksgiving!
AUD/USD
Oh dear! The AUD has been one way traffic this week and looks very heavy,
currently trading below the 100 WMA (0.9743). Dexia and HSBC China started it
yesterday in Asia and the German auction saw equities and related risk markets
all pushed sharply lower, taking out various support levels along the way. From
the people I spoken to this week, there have been far too many trying to pick
the base and looking for a bounce that has yet to come. In short, not many
seem to be on this move lower and so it could well have more to come.
The next support level looks to be at 0.9625 and under here 0.9600 would
provide a psychological base. Further out a return to the 0.9385 looks
increasingly possible. To maintain the downtrend, bounces should now be
limited to 0.9900.The hourly charts are showing some divergence and a minor
bounce from around current levels would not surprise. Immediate resistance
would appear at 0.9765 and 0.9830 so leave room to allow for selling into
strength.
For today’s session bounces look to be fairly limited. Asian stocks are going to
take it on the chin again, given that the S+P is closing down 2.2% and risk
positions look as though they will again be out of favour. The S+P has broken
the major 1180 support and is now headed for the next target of 1150 – and
looking as though it wants to accelerate to the downside, with 1120 being the
next objective
Watch for RBA Governor Glen Stevens’s speech today to the Australian Business
Economists. With the chances of a 25bp and even a 50bp rate cut being
increasingly priced into the market, his slant on the subject will be keenly
awaited.
