EUR/USD
Weaker December EU CPI figures today (estimate 2.8%, down from 3%), heralding
the possibility of a rate cut, and a German bond auction that sold EUR 5.28b 10 year
bonds with yield down to 1.93%, albeit with a take up of only 1.27 times, were seen
as indications of weakening sentiment in Europe today and sent the Euro slightly
lower.
Further concerns were seen in the health of Italian and Spanish banks, while
Frances AAA rating again came under scrutiny, although no move has yet been
made by any of the agencies but there was nothing here to assist the Euro.
Equity markets also moved lower in Europe, down around 1% by the close, with the
S+P currently flat as the market now awaits the outcome of the Non Farm Payroll
numbers on Friday, where expectations are for an increase of 150K.
Technically, the Euro has reversed the strength that we saw 24 hours ago and
unable to rise above 1.3070. It headed lower throughout the day following the data,
to a low of 1.2897, before recovering somewhat in late NY trading to current levels.
It looks to me as though we are in for some more choppy conditions ahead. While
last week’s low of 1.2858 continues to hold, I suspect we will see this act as a base,
with the topside limited for now at 1.3070 – yesterdays high. A break of either side
should give us our next directional move: either towards 1.32 or perhaps towards
1.26, albeit unlikely at this stage
The daily indicators are still recovering from an oversold nature, so I continue to
suspect that even if we do go lower, the downside might be limited and the price
action choppy.
For the time being use the 1.285/1.31 range as a guide but be flexible as it looks
rather messy at present.
Today we get bits and pieces, including German Retail Sales, US ADP and ISM Non
Mfg numbers but the market is likely to be on hold for the US employment figures
tomorrow.
AUD/USD
The AUD/USD has so far reached a high of 1.0385 and remains firm, while at the
same time being unable to break this resistance. It currently sits in the middle
of the day’s range of 1.0303/85 and could well remain pretty much range bound
ahead of the US data tomorrow.
US equities are pretty flat today so I would not be expecting too much action in
the coming session.
A move above 1.0385 would target 1.0440 and then 1.0495 (76.4% of
1.0750/0.9660). On the downside, intraday support should be seen at 1.0300
and then at 1.0270, which doesn't look likely in the coming session. Further out,
Fibo support from the move up from 0.9660 currently comes in at 1.0260 and
then at 1.0185.
The longer term indicators are mixed, with the 4 hour charts unwinding their
mildly overbought condition while the dailies point higher, so while the overall
bias is for mildly higher levels later this/early next week, I don't think we should
read too much into it and still think that 1.00/1.05 should hold in the bigger
picture.
One thing to keep an eye on is the continued move lower in EUR/AUD which has
now reached a low of 1.2484. The dailies are becoming extremely oversold, so
beware a reaction – although it is difficult to tell whether that would come
through a stronger Euro or a weaker AUD.
