EUR/USD
Although we are at the same levels as yesterday, the Euro has had a volatile
session, trading to high of 1.3197 as optimism, triggered by strong bank
demand for cheap European Central Bank loans has faded. The ECB announced
that over 500 bank have borrowed EUR489 billion in cheap 3 year loans, in a
move aimed to ease the threat of a credit crunch and to encourage banks to
buy indebted nation’s sovereign government debt, thereby pushing down the
countries' borrowing costs. The enthusiasm did not last long though as doubts
emerged as to whether the banks would use the funds to buy the struggling
nations debt, and although the Equity markets initially rallied, the European
markets finished the day down 1% and the US S+P is now flat going into the last
30 minutes of trade
As we said on the weekend, rallies towards 1.3200 present selling opportunities
as we stay largely within the 1.30/1.32 range prior to Christmas. That largely
still stands and for today I would be looking to lighten up short positions on dips
to towards 1.3000. Given that tomorrow is the last day of trading before
Christmas, there is no real sense in being involved from here on, but I still think
that 130/1.32 should contain the range.
Further out the recent lows at 1.2945 and the major support at 1.2870 should
protect any downside break of 1.3000. On the topside, should we see a break of
1.32, which I doubt, 1.3245 acts as Fibo resistance, ahead of 1.3300, congestion.
As for Asia today I would look at 1.3020/1.3120 to cover it.
AUD/USD
The AUD has had a volatile ride in the last 24 hours, seeing a high of 1.0218, but
ending up where we were this time yesterday.
Having had a 3 cent rally from the lows of the week and sitting roughly in the
middle, and with little out to today to affect the AUD, I suspect we are now
looking at a reasonably quiet session ahead. I would be surprised to see a move
to levels much above 1.01, while the downside should see bids at around
1.0000/20 level. The indicators are conflicting and suggesting the possibility of
some sideways trade. I would therefore expect that 1.0020/1.0120 should cover
it today, with a mild bias to the downside, although not convinced.
