EUR/USD
Having traded softly though the Asian session, the Euro turned around sharply in
Europe on the rumour that a positive outcome to the Greek debt deal could be
concluded as early as this week. That has yet to be seen, but positive economic
data, including EU manufacturing PMI rising to a 5 month high of 48.8 (which is still
actually contracting), German PMI of 51 and positive bond auctions from Germany
and Portugal, all helped to send the Euro sharply higher. Later on the US ISM was
slightly weaker than expected, as was the ADP unemployment number, although
still positive (+175k). Neither caused much directional movement to the Euro,
although it has retreated from its 1.3218 highs to current levels around 1.3160.
The European Equity markets closed at 6 month highs (Dax +2.44%, CAC+2.04%)
and the US markets are higher as well, partly driven by the excitement over the
Facebook float. All the teenagers are on the bid! (S+P, +1.05%).
Technically the Euro is in choppy territory but the medium term charts are pointing
to higher levels. For now though 1.3240 remains a barrier to be overcome. Should
we do so, the next port of call is likely to be 1.3335 (Channel top), and beyond here
1.3435 would attract (50% 1.4245/1.2623).
On the downside, 1.3090, as yesterday, remains the short term pivot. Back under
here and I would think we may have another leg down towards 1.3000 and possibly
lower towards 1.2925. The clue is to take it very much session by session while we
have this directionless volatility.
The 4 hour indicators have more or less unwound their overbought status and the
dailies do continue to point higher. I suspect therefore that for the next few days,
buying the dips will be the way to go as we look for a push towards 1.33 and
possibly higher. Finding the right levels will be key.
For Asia, don’t expect too much. 1.3140/1.3200 will probably cover it and later on
we have EU PPI and US Jobless Claims ahead of tomorrow’s NFP data
AUD/USD
Well we cannot complain about the lack of volatility. Having gyrated around
1.0600 before moving south to 1.0565 in late Asia, the Aud took off again in
Europe on the news of an imminent Greek deal and has not really looked back,
taking out the short term double top at 1.0685 and currently holding on above
1.0700, having had a peak at the major resistance with a session high of 1.0740.
Where to from here? Big question. 1.0750 is obviously very important. We
could take this out though and still be within the channel, the top of which is
currently around 1.0770. The 4 hour charts are pointing higher though, so a test
of this would not surprise. As I said yesterday, the stops are building all the way
up to 1.0800 and these could cause a pretty sharp move if they start to get set.
Above 1.0750, everyone is starting to talk of a return to the 1.1080 high. It is
too early to consider this yet, but if the game plan is changing and the offshore
investor demand for Australian bonds continues, dips are going to be well
supported. Australia’s AAA rating could end up being a curse for the currency
and Australian manufacturers are already screaming! It is beginning to look as
though the RBA will have little choice in cutting rates next week, if only to take
some of the steam out of the Aud.
Back to today, look for 1.0685/1.0750 to cover it in Asia. The hourlies are
overbought and pointing lower so I suspect we may see a mild downside test
first. From there, much depends on the Greek debt deal, which will have
reverberations for risk sentiment, and in turn, for the direction of the Aud.
There is also, of course, the Non Farms to look forward to tomorrow. Before
then though we have Building Permits and the Trade Balance to give us a guide.
