EUR/USD
The Euro moved lower today despite a well received Italian bond auction, following
Fitch’s Friday downgrading of Italy. With the EU summit still in session as I write and
no resolve yet on any Greek debt deal the market went on the defensive and
generally sold risk assets. German/Greek wrangling over the control of Greek
budget has not helped, causing European Equity markets to slide lower (DAX-1.04%,
CAC-1.6%). French bank stocks in particular, were not helped by Sarkozy’s
announcement of an impending Financial Transactions Tax. The weak European
markets have been followed up in the US where the S+P is down 0.45% with 15
minutes of trade left.
Technically, as can be seen, the Euro has moved back to short term support above
1.3100 and while that holds we may see further attempts to the upside. However
the 4 hour charts are suggesting that further moves towards 1.3060 are possible. So
for the time being stay neutral and trade the range. I doubt we are going anywhere
too far in the coming session and 1.3060/1.3180 is likely to cover it.
Further out the dailies are still suggesting further upside potential, with the first
resistance being around the 1.3240 Fibo level(38.2% of 1.4240/1.2623), and above
here 1.3275 provides a minor target, but the next major point of resistance is not
seen until 1.3350.
On the downside, should we go below 1.3060, the next support should be at
1.3005, which previously acted as resistance on the way up.
There are going to be all sorts of statements once the EU summit winds up, so until
then stand aside, or keep stops tight. Later on we see the EU/German unemployment numbers, as well as the Case Schiller Home Price Index and
Consumer Confidence from the US to provide direction.
Keep an eye on news from Portugal where 10-year bonds today hit a euro-era
record of 16.45 percent.
AUD/USD
The Aud had the wind taken out of its sails yesterday when Fitch placed the big
4 Australian Banks on negative credit watch due to their reliance on offshore
funding. This came on top of China leaving the RRR unchanged and helped push
the Aud to as low as 1.0525. It has recovered pretty well though and currently
sits just under 1.0600.
Continue to use the channel as a guideline – parameters are currently
1.0428/1.0735. Nearer the mark it looks as though 1.0550/1.0650 should cover
it. The 1 hour and 4 hour indicators are pointing in opposite directions and it
therefore looks as though trade might be somewhat directionless in the coming
session. Weaker base metals and international equities will probably weigh
somewhat on the ASX, which in turn may cap the currency.
Further out the dailies are getting a little overbought and showing early signs of
rolling over. This is not to say that we will not have a test of 1.0700, but the
topside looks to be somewhat tricky without some sort of correction before
hand.
Today sees Private sector Credit and NAB Business Confidence Data. Before
then it looks like a range trade day.
