EUR/USD
The surprise resignation today of the head of the SNB, Philip Hildenbrand, on the back of
his wife’s indiscretions in the currency markets stole the show, even though Merkel and
Sarkozy have been meeting in Berlin. At the press conference they said that negotiations on an EU treaty will be finished in the next few days and signed by March 1. They also put the Tobin tax on Financial Transactions back in the spotlight, which won’t please the UK government, as well as the usual rhetoric about economic growth and job creation. In other words, nothing new, and negative sentiment still rules, as Greece, Italy and Hungary all remain immediate issues.
Germany held a bond auction that ended with them paying negative interest rates. They
sold €4bn in 6 month bills at an average yield of -0.0122%. It goes to show how worried
the market is about lending back into the banking system that they are prepared to lend
at negative yields to get trustworthy credit.
The Euro survived all this, despite an early dip in Asia to just above the support
mentioned yesterday at 1.2658. The low of 1.2665 came early in the day, before a short
covering rally to 1.2785 and then settling relatively quietly back into the range, in what
has been a generally quiet NY session as the US prepares for the start of the Q4
reporting season, when Alcoa kicks things off once the market has closed in an hour’s
time.
From here, not an awful lot has changed since yesterday, although the 4 hour charts are
continuing to unwind their oversold status. The immediate resistance is at 1.2785 and
then 1.2815 and 1.2855, which is unlikely to be seen early in the session. The downside
today should be supported by 1.2700 and below here at yesterday’s lows at 1.2665. For
now use 1.27/1.28 as a guide.
Further out, choppy conditions look set to continue. The market is very short and dips
along the way down should see good support. The 1.2590 Fibo support remains the
eventual downside target, while rallies towards trendline resistance at 1.2970 are
possible. Be flexible and watch Alcoa.
China GDP today but little else, economic wise.
AUD/USD
The AUD did pretty much as expected with a dip towards the 1.0140 support,
care of the weak Retail Sales figures yesterday, before regaining its ground
towards the weekly closing levels, as the choppy trade continues. Don't expect
too much change today, although we do get local Building Permits and then,
more importantly Chinas Trade Balance Figures to provide some direction.
For today look at 1.0185/1.0260 to cover it until the China data and take the
lead from there. Expectations are for a general slowing and it is possible that
any rallies will see good selling interest ahead of the possibility of further rate
cuts from the RBA when they meet in February as the domestic economy slows.
The same technical levels apply yesterday as today so take a guide from these
and assume for the time being that the 1.0040/1.0385 range is likely to hold.
The Alcoa report in an hour or so may provide some short term direction as the
US equity markets react. A major move up/down from here, depending on the
result may impact on short term risk sentiment and therefore the AUD.
