EUR/USD
The Euro is pretty much unchanged from this time yesterday although it has
been a volatile session, squeezing up to 1.3062 followed by a drop to 1.2953
and then rallying to current levels. The IMF have sharply dropped their outlook
for global growth to 3.3% from their last update of 4%, with some of the worst
effects expected to be in Europe, Italy and Spain in particular. (China was cut to
8.2% from 9%). With this and the continued wrangling over Greece it is
surprising to see the Euro still at these levels. S+P have said that they will most
likely place Greece on selective default (ie on some, but not all assets) as EU
finance ministers rejected private investor's proposal on the debt swap deal. It
looks as though the Euro is still in for some pretty choppy conditions and taking
it one session at a time is the only way to go for now.
Technically the Euro has bounced nicely off trendline support at 1.2953. This
will remain a short term base, but should we move lower, Fibo support at
1.2895 and then at 1.2840 and 1.2790 will provide levels to watch.
The topside looks to be at the overnight European spike high at 1.3062. If we do
get above here further good resistance is at 1.3070/80 congestion, so this
1.3060/80 area may be tricky to overcome. Should we do so the trendline
resistance at 1.3120 will provide the next hurdle, which also happens to be the
top of the larger downchannel and, if seen, will be strong.
The oscillators are conflicting. While the hourlies have now unwound their
overbought conditions, the 4 hourlies are still overbought and the dailies are
pointing higher. This all points to continued choppy trade, so for now I would
use the 1.2950/1.3060 range with tight stops on either side.
Later we get the German IFO survey to provide direction and then late in the
session the FOMC, at which no change is expected but at which they will give
the market a guide as to their future thinking. Use the range until then.
AUD/USD
The Aud did as we hoped and topped out at around 1.0570 and has moved back
into the range. An overnight low of 1.0427 was seen before the bounce back to
current levels and all is now on hold until the CPI number later in the morning
AEST. The expectation of 3.3% should give the RBA room to move on rates with
the market pricing in about an 80% possibility of a February cut.
1.0450/1.0500 should hold it until then. After that all depends on the number
but should we see a break of 1.0570 (doubtful – we would need a reading
above 3.5% for this to occur) we should expect to see 1.0610 and then 1.0670.
One the downside, below 1.0425 should see progress towards the bottom of
the channel at around 1.0360.
With conditions being thin due to the holidays in Asia, moves may be
exaggerated so stay nimble!
