FX Technical Outlook - Friday 10th February

The Euro climbed mildly higher today, reaching 1.3320 at one stage, following the tentative agreement between the Greek coalition parties with regard to the austerity measures that need to be imposed in order for the EU to release the next tranche of the bailout package, which in turn would allow Greece to pay their debts and thus avoid default. Although things appear to be heading in the right direction, German Finance Minister Wolfgang Schauble has poured some cold water over it by suggesting that not all conditions appear to have been reached in order to release the required funds to the Greek government and that it is up to the government to convince the EU that the reforms can/will be carried out. Even if the conditions are passed, there will be little joy on the streets where another 48 hour strike has been called by the unions. The EU Finance Ministers meeting is currently underway but journalists have been told not to expect a result tonight. Elsewhere the ECB left rates unchanged and Draghi was mildly less dovish in his economic outlook for the EU.

Technically, the Euro continue to ratchet higher and the 4 hour indicators are still showing the possibility of further strength ahead, although they are beginning to show some divergence. A break above today’s 1.3320 high is required, in order to head towards the next target being around 1.3350 and with an interim hurdle at 1.3335(100DMA).  On the dailies,  the momentum indicators add to the view that we still have further upside potential with the major target here being Fibo resistance at  1.3438 (50% of 1.4243/1.2623).

The downside has seen the market hold onto the gains above 1.3270, so this is likely to act as a bit of a base in Asia today, but if it were to give way 1.3245 would provide short term trendline support. Beneath here, the previous channel top at 1.3190 and then Fibo support at 1.3115(23.6% of 1.2623/1.3167) will provide support above important 1.3005 Fibo level.

It looks like being another quiet Asian session as we continue to await a definitive answer on Greece and this will not happen today. As usual there will be the weekend statements and it looks likely to be Monday before we see any kind of a result

German CPI later today and Bernanke will again be speaking during the NY session, where further dovish commentary is likely. Also Rts/Michigan Consumer Sentiment Index, US Trade Balance. Good luck, Good w/e. Square up before the close in case of unexpected events ahead of Monday!!

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There is very little to add today in the Aud as it currently sits at 1.0800, having traded in consolidative fashion over the last 24 hours.

Technically nothing has changed, The channel still remains in place with the topside resistance now being at 1.0870 and it may well be that we continue to track the topside as we slowly ratchet towards 1.09. The downside may be the more interesting though, with the upward sloping wedge formation looking as though it is going to come to a resolution in the near future. The support has now lifted to 1.0755 and stops are likely to be seen on a break below here. If this were to happen, the next support is at 1.0700 and then at 1.0685, which will act as a pivot. If broken it would probably signal a near term top and would most likely head towards the Fibo support at 1.0610.

The daily indicators continue to remain somewhat overbought and are flattening out a little. Whether we are topping out here though, remains to be seen, but as for today I suspect a 1.0770/1.0825 should cover it. Until the wedge looks like breaking on the downside, and while the uptrend remains intact, there is no point in fighting it, so the most likely strategy appears to remain to buy dips towards 1.0760 with tight stop/reverse.

Today sees China Trade Balance data and RBA Monetary Policy statement, which may liven it up a little around lunch time, but otherwise expect it to be quiet.

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