EUR/USD
Markets have closed generally firmer today after Merkel and Sarkozy met and
promised treaty changes but not a great deal more at this stage. Member states
will face increased oversight to their budget, with greater sanctions for those
who break the rules. Greater detail will come on Friday, from the EU summit.
Italian bond yields have fallen back below 6pc as the Government approved
new austerity measures and the Equity markets are generally higher. DAX
finished +0.42%, CAC+1.15%, S+P +0.5%.
Technically there is not a lot to add, with the EUR being little changed, having
traded a surprisingly narrow 1.3398/1.3485.
S+P have just announced that Germany and other AAA rated sovereigns could
be downgraded. This has seen a swift drop in the Euro from mid 1.34 area to a
new daily low of 1.3374
We continue to move around in pretty neutral territory and activity will be
dominated by news flashes from the EU, and knee jerk spikes one way or the
other. Resistance at 1.3550 remains intact & above here 1.3610 (38.2) and
1.3730 (50%) act as Fibo resistance of the move down from 1.4247/1.3210.
Downside support is at 1.3325 and then at 1.3260 and 1.3210. The charts
continue to be too mixed to have a firm view, and although the 4 hour charts
are fairly neutral, the daily indicators are still pointing towards the possibility of
further strength. This though, could change very quickly on the first negative
word from the EU. Play it safe and leave tight SL.
Economic data, highlight today will be EU GDP and German Factory Orders.
AUD/USD
The AUD has traded within the 1.02/1.03 range today and is currently where it
was at the weeks opening price, yesterday. All eyes will now be on the RBA this
afternoon, with the market pretty much pricing in a 25 bp cut, although the
economists do not seem so sure. Given the action last week by the Central
Banks to ease liquidity and the fact that the RBA do not meet again until
February, a cut would not surprise, but until 2.30pm the market will be on hold.
Technically there is little to add from yesterday. We have seen a test of 1.0300,
although this area has been rejected near the NY close following the S+P
announcement on EU AAA ratings. Further tests are possible if the RBA leaves
rates unchanged. Beyond here, 1.0400 is a target, but 1.03/1.04 should be
difficult to overcome given the looming presence of the 100 DMA (1.0313) and
the 200DMA (1.0406).
The downside, for now, looks to be protected at 1.0150 (minor) and then
1.0075 (Fibo). It is still not really possible to hold a firm view one way or the
other at present and the best strategy is to take it session by session. Although
the dailies do point higher, the 4 hour charts continue to unwind from their
overbought situation following their strong run higher last week, so a drift
towards the 1.0150 support could well be on the cards. There will be bids down
here and these could get filled, given the possibility of a rate cut, but I think the
market is going to continue to be pretty choppy.
Until then, all will be on hold for the RBA
