FX Technical Outlook - Tuesday 14th February

Despite the initial enthusiasm from the markets following the passing of the austerity measures through the Greek parliament, yet more delays look likely before any bailout package is passed by the EU. It now looks like March 1, at the next EU summit, before any resolution will be seen. Merkel has made it very plain that there will be no changes to the bailout plan and EU Ministers meet on Wednesday to ratify that the terms of the package have been met. The German Bundestag then has to vote on the plan, and that won’t happen until Feb 27. On top of this the debt swap negotiations with private creditors has to be resolved. Until then we will apparently sit in limbo and trade is likely to be nervous and volatile.

Elsewhere, Obama has released his budget for 2012/13, where GDP is expected to grow at 2.7% (2012) and 3 % (2013) while Unemployment is expected to average 8.9 %( 2012) and 8.6 %( 2013).

Technically, the Euro topped out overnight at 1.3283 before retreating towards 1.3190 and has remained within the range since then. So, all in all not a lot has changed. The minor upchannel is intact, and will likely remain so through the Asia session at least. The base here is currently at 1.3165 – and rising – , but the 4 hour indicators continue to point lower and a test, sooner or later can be expected. If/when this happens, a break would lead to support at 1.3090 (7 Feb low) and then 1.3025 (6 Feb low), ahead of Fibo resistance – turned – support at 1.3005. The dailies though are not pointing to an immediate major move lower so I suspect the choppy conditions will continue for now.

To the topside, 1.3283 (today’s high) and the 1.3320 (9 Feb high) and above here 1.3420 (50% Fibo resistance of 1.4243/1.2623) will provide hurdles to be overcome.

For the time being it looks as though the strategy is to look for strength to sell into, and vice versa into weakness. The overall bias for now looks mildly to the downside, but really markets look likely to be dominated by whatever the latest headline is to come out of the EU.

Economic highlights today will be the German ZEW survey and later on US Retail Sales. Good luck

The Aud has recovered well following the Greek vote and has managed to hang on to most of the gains as it sits at 1.0740, having seen a high of 1.0777.

Given that the Greek problems, far from being solved, appear to be really only just beginning, the Aud has held up well. Decent selling today of Eur/Aud has helped the cause though and it has to be remembered that Australia is still AAA rated  and provides a decent yield as well, so it looks as though the Aud is going to continue to outperform as investors seek a safe haven to park surplus funds.Thus, dips look like meeting good demand.

Technically the major channel still provides us with our trading parameters. The base is now at 1.0620, while the topside is way off at 1.0910. As for today, short term resistance remains at 1.0780 and then at 1.0800. The downside support can be found at 1.0720 and then at 1.0670.

It looks like being a pretty directionless day, although the dailies do continue to hint that we may see slightly lower levels. I wouldn’t get too excited though as it looks rather quiet and rangebound for the upcoming session.

The assistant RBA governor is speaking at 8.30am on the European situation and its onflow effect on the domestic economy. Watch out for that.

NAB Business Confidence figures today.