EUR/USD
The Euro was doing ok today, following a successful Spanish bond action but
Angela Merkel was reported as saying that there is no chance of raising the cap
on the ESM which is currently at EUR 500 bln. The Euro dropped like a stone,
taking out the important support at 1.3145 and heading to a 1.3050/1.3100
range until the Fed left rates unchanged and noted that there was concern of
apparent slowing in global growth, but gave no hint of QE3. The markets were
left disappointed; with US equities dropping from territory of +0.5% to a post
Fed level of about -0.25%. Commodities have dropped too and the Euro has just
seen session lows of 1.3022 which, as can be seen on the chart, is the bottom of
the channel and may well be supported here through Asia.
1.3052 is 61.8% of 1.1875/1.4940 and will not give way easily so Asia may see a
range trade around this level. Below 1.3000 though, 1.2960 and 1.2870 will
provide a supportive base – for a while at least!.
On the topside resistance is now at 1.3100, 1.3145 and 1.3200.
The market is nervous and volatile though so be flexible as bounces will be
painful as the market gets itself short again down here. Ultimately though it
appears that bounces are only likely to provide selling opportunities, so be
careful of selling into troughs.
AUD/USD
The AUD held up comparatively well over the course of the session, following
yesterday’s low of 1.0030 and recovery from there to a European/NY short
squeeze up to a high of 1.0161.
The charts are not looking so rosy though and I suspect all the rally has achieved
is to cut out the weak shorts and to provide the opportunity to sell into rallies
as the indicators unwind their short term O/S status.
Yesterday’s lows are 20 points away and may hold on the day, but oscillators
are all beginning to point lower, suggesting a test of parity may not be too far
away. The downside, continues to see immediate support at 1.0025 (50% of
0.9660/1.0380), and should we break parity, sees the next level of support at
the Fibo level of 0.9940 (61.8%) and then at 0.9915.
The topside will have short term resistance at 1.0100 and then at 1.0160 and
1.0200, but I think the strategy of selling rallies remains unchanged.
One point to note is that Eur/AUD (1.29 75) is approaching important support
levels at around 1.2915. If we go under here there could well be some
supportive action for AUD/USD as S/L are set off in the cross (ie sell Eur/buy
AUD).
The Fed have just kept rates unchanged and markets don't like it. The AUD is
at the day’s lows at 1.0000 and looks in imminent danger of heading lower,
although 1.0000/30 may hold for a while. Gold just fell $20oz, which does not
bode well.
