EUR/USD
The Euro has had a tough day again, making another low at 1.2661 before a mild
bounce to current levels. The catalyst for the drop was supposedly a comment from
Fitch that the ECB needs to have more involvement in solving the EU crisis in order
to prevent a major collapse of the Euro. Added to this were more stories that S+P is
about to downgrade France, although as usual, nothing has happened. Someone
needs to have a chat to the ratings agencies; maybe Sarkozy, who would not be
amused to have a French downgrade ahead of the Presidential elections!
Elsewhere a German bond auction raised EUR 3.153bio of 5 year notes at 0.75%.
This is the lowest in the Euro era, but provided little support to the market. The
German economy shrank about 0.25% in Q4. Where does that leave the rest of
Europe? Recession? Full Year German growth was around 3%.
The market is choppy but remains heavy. Although the Euro has recovered from its
lows, the bounce is, so far, unconvincing, as it hangs on to 1.2700. There are
currently bids on approach to 1.2650 but stops placed below here, and these will
undoubtedly get taken out sooner or later. The base of the major (blue) channel on
the daily charts is currently at 1.2640, which should provide good support at the
first attempt. Below here, as previously stated the 1.2590 Fibo support will act as a
base, albeit temporary.
On the topside, 1.2760 is now the immediate barrier, followed by 1.2820. We are
unlikely to see this in the Asian session. Sellers were lining up at this level through
Europe and it should be a difficult area to overcome. Should we eventually do so we
should head towards 1.2915 Fibo resistance (61.8 of 1.3070/1.2660)
Today, use 1.2640/1.2760 as a guide. The downtrend is strong but we have good
support ahead of us.
We have the ECB later I/R decision later today, where no change is expected but
watch out for Draghi’s Press Conference. We will also see German CPI, China CPI,
PPI and then US Retail Sales and Industrial Production.
AUD/USD
The Aud received a boost in Europe when word went around that China was
busy buying Aud/Usd. This quickly sent it higher from around 1.0280 to 1.0320.
It has not moved very far since then, and has spent the session in the 1.0262/1.0327 range. The more major directional moves have been against the Eur and Gbp, both of which trend lower in line with the weakness in those two currencies.
Today sees China data – CPI,PPI – which may give the Aud some direction.
Technically, offers start at 1.0320 and continue up to around 1.0350.
Downtrend resistance is now seen at 1.0340. Above here the double top is still
in place at around 1.0385, ahead of 1.0410 (200DMA).
On the downside, support still lies in place at 1.0260 and below here at 1.0185.
The medium term range that we have mentioned over the last couple of weeks
between 1.0040 and 1.0385 looks as though it will continue to hold for the time
being, and that price action will remain choppy and directionless. The indicators
are all pretty flat suggesting further range trading, so the game maybe to sell
into strength and to buy into weakness, keeping stops tight but not looking for
too much in either direction.
Eur/Aud is still heading lower, making another record today at 1.2315. There is
strong channel support at 1.2290, so if short it may be worthwhile lightening up
at around these levels.
Wait for the China data.
