EUR/USD
Despite the denial of the breaking story in early Asia yesterday that the IMF was putting
together an assistance package for Italy, further rumours of discussions an “elite bond”
involving Germany and the stronger EU nations, have ensured that it has been a strong
session on Monday. Risk sentiment returned, with the European equity indices up 4.5%-
5.5%, and the US S&P +2.9%. Much of the action took place in Asia and early Europe,
and pretty much topped out at the US open. The OECD dampened the party somewhat
by suggesting that 2012 European Growth will slow from 1.6% to 0.2% and that China
should decline from 9.3% to 8.5%. Moody’s also issued a warning that all EU nations
credit ratings are now at risk. Elsewhere, US Housing Sales rose 1.3%.
This all meant that the Euro rallied sharply from its lows to within 2 points of the
resistance at 1.3400 before retreating into the range. This leaves the picture somewhat
mixed for now. The 4 hour charts are telling us that the potential exists for another test
of 1.34. A break would see a move towards 1.3450 and possibly as high as 1.3600.
Ultimately though the dailies continue to point lower and rallies look to offer selling
opportunities.
On the downside, there is now a gap on the hourly charts between Fridays’ close of
1.3240 and yesterdays lows at 1.3270. Ultimately this will be filled in and I suspect we
will see a retest of last week’s 1.3210 low and then eventually we ought to take a look at
the 4th Oct low at 1.3145.
For the next couple of sessions, prepare for some choppy conditions and for Asia today
look to 1.3270/1.3400 to cover it. With the 4 hour charts continuing to point higher, but
the hourly’s pointing lower after topping out at 1.3400, I suspect the next few hours are
likely to be somewhat directionless, although later in the day we get German Retail
Sales and both EU and US Consumer Confidence figures, as well as the Case-Schiller
House Price Index.
Obama has been meeting with EU officials. Nothing earth shattering has come from that
apart from the usual platitudes of support
AUD/USD
The Aud and the Kiwi were the hardest hit currencies last week, so it only made
sense that they were the strongest performers on a rebound. The Aud traded to
0.9975 before reverting to the middle of the day’s range, and a day of
somewhat directionless trade looks to lie ahead.
The OECD was relatively upbeat with regard to Australian growth, predicting it
will bounce to 4% next year on the back of the mining boom, - a pretty robust
figure -, having slowed to 1.8% following the QLD floods, but the currency will
ultimately be driven by events off shore, and the OECD was not nearly so
positive about Europe or the US.
Technically, today looks likely to trade within a range of 0.9825/0.9925. The
charts are fairly non committal today after the strong rally of yesterday. While
the 4 Hour charts continue to unwind from their O/S situation, the hourlies and
the dailies both point lower.
I suspect the strategy is to sell into strength, although a flexible stance is
required. It could be that the Aud wants to check out what lies above parity as
there will undoubtedly be SL lying above this area. I am doubtful though, that if
seen, we are likely to trade above 1.0070.
On the downside, a chart gap exists between Fridays high of 0.9775 and the low
of yesterday at 0.7790. This will eventually be filled in and eventually I suspect a
retest of the 0.9660 recent low will be seen, but it looks to lie a bit further off
than it did on Friday!
