EUR/USD
The Euro has held its nerve in thin conditions early in the week, in a session that
is a US Public holiday and where trading has been very thin. A French bill
auction went off today with little negative reaction (yields actually fell!) to the
weekend downgrade and although S&P has downgraded the EFSF by one notch,
1.2665 still holds.
Remarkably the equity markets showed little reaction to the downgrade and
the CAC actually finished up 0.89%, while the DAX was up 1.25%. US markets
are closed.
ECB Chairman Draghi has been speaking and sounds as though he is warning
the market of the possibility of a Greek default. Nothing has happened here –
yet – but he has cautioned that Greece is not living up to the austerity program.
Although the market is fully aware that this is the likely outcome, we will have
to wait and see whether it is actually priced in. I think not.
Technically there is little change from yesterday and we will probably need a full
session from the US markets to see where we stand. The Euro is sitting on the
bottom of the major channel and the 1.2590(Fibo)/1.2625(Friday low) area
continues to act as major support. Monitor this closely, and as long as it holds
there is the chance of a decent rebound. The oscillators are diverging, and with
the market being so short of EUR, a corrective bounce within the overall
downtrend would not surprise me.
Major support below 1.2590 comes in at 1.2460 the July 2010 low, but I don't
think this is likely in the next couple of sessions.
On the topside 1.2730 is the first hurdle, followed by 1.2800 and 1.2880. Asia is
likely to be reasonably quiet, at least until the China GDP later in the day which
may provide us with some direction. Until then 1.2625/ 1.2700 should cover it.
Later on we get EU CPI and the German/EU ZEW Survey
AUD/USD
The Aud has consolidated over the session and regained the ground above
1.0300, closing the gap to 1.0320 from Fridays close, seeing a high of 1.0336.
Little of interest looks likely to occur until the China GDP later in the day, which
will provide direction.
There is no change in the technical outlook. On the topside, 1.0380 and then
1.0410(200 DMA will provide initial resistance, with further levels seen at
1.0460 – downtrend line - and at 1.0500.
Support below Fridays 1.2030 low is at 1.0180 and 1.0150 – trendline – then at
1.0040, the previous low.
The market is looking for a slowing of the Chinese GDP to 8.7% from 9.1%. This
will provide a guideline as to the direction.
