EUR/USD
he Euro was virtually dead through Asia and early Europe, despite the EU’s Jean Claude
Juncker doing his best to talk up the outcome of Fridays EU summit, whether it involve
all 27 or only 15 of the interested nations.
The ECB then cut rates by 25bp – as expected – which saw the EUR/USD up to 1.3458 on
increased appetite for riskier investments, helped along by improved US Initial Jobless
Claims which fell to 381K against exp of 404k.
This enthusiasm swiftly turned around at the Press Conference when Mario Draghi
denied that any major bond purchase program was planned, suggesting that previous
comments had been misinterpreted. He went on to say that ECB lending to the IMF,
who would then on-lend back to troubled governments is not within the EU treaty. That
took the wind out of the markets, which all turned sharply lower and saw the Euro drop
sharply to 1.3289, before recovering somewhat to current levels.
European stocks closed sharply lower (DAX – 2%, CAC – 2.5%), sovereign bonds blew
out again and Commodities had a rough ride (generally down 2%-3%) and we now wait
with increased trepidation the outcome of today’s EU Summit. S+P just closed - 2.10%.
Sarkozy and Merkel have both been out appealing for unity. It sounded like they are
beginning to look for the panic button and it is warming up for a busy Christmas period!
Technically though, we are currently only 80 points lower than the previous few
sessions, although the sentiment has changed dramatically after the Press Conference.
Really there is not a lot of point attempting to predict too much ahead of the Summit,
although selling rallies would appear to be the way to go, and 1.3450 and 1.3550
resistance remains intact. The 4 Hour indicators are pretty flat at present and the dailies
are still attempting to point a little higher. For today’s Asian session I would imagine it
will be pretty tight and 1.3280/1.3380 should cover it. Keep it very tight as its going to
be a very busy couple of days. If 1.3145 - 4th Oct low - is taken out , then look for a move
to 1.3050 (61.8% of 1.1875/1.4945), and beyond here 1.2870 (10 Jan low) but t hat
won’t happen yet – we hope!
Before the summit, we do get China CPI and PPI which may provide some action .
Good luck and good we
AUD/USD
The AUD has been well and truly whiplashed in Europe and the US. The initial
“risk on” move following the ECB rate cut saw a spike up, taking out Stops to
1.0380. This was followed by a drop of even more impressive proportions on
account of Mario Draghi’s post rate cut Press Conference. Risk Sentiment
turned sharply lower and the AUD fell like a stone to 1.0152 where support
currently holds but with the indicators pointing lower, one wonders for how
long? At least until the China data I would have thought. We will see the CPI,
PPI, Retail Sales and Fixed Asset Investment later today, so there is plenty of
opportunity for some volatility in the Asian afternoon session.
For the start of the day I would imagine 1.0150/00 will cover it with the
possibility of further downside if the Chinese data comes in softer than
expected. After that, along with everything else we will have to wait for the
details of whatever comes out of Europe.
There is little point on speculating on direction as it will all be event driven
today. We are still within the range and as a preference I would prefer to join
offers into strength, but until we see a clearer outcome will sit on my hands
