EUR/USD: 1.3137 It has been a been a relatively steady session as the market waits to find out whether the take-up of the private sector debt swap deal reaches the required level in order to prevent the Greek government from triggering the Collective Action Clause, and thus going into default. It looks like it will be a pretty close run thing, if the 75% threshold is going to be the target that we are looking to cross, but the market is growing more comfortable that it will be reached. We shall have to wait and see and will find out later in the session. It will probably be tomorrow before this is a definitive result, but it appears that the numbers are slowly falling into place, and if this continues a short term relief rally can probably be expected in the Euro and in equity markets.
The US ADP employment figures were better than expected and pointed to an increase in the Non Farms tomorrow of around 200K+. Equities liked what they saw and, what with the improved sentiment in Europe steadied yesterday’s decline with a rise of around 0.5% (Dax + 0.57%, CAC + 0.89%, S+P +0.6%).
Technically the Euro looks as though it is somewhat oversold and may want to turn a little higher. The MACDs on the 4 hourlies, as can be seen, are suggesting that dips should find decent bids on dips. These look as though they should be limited for the time being to 1.3055, this being the 50% Fibo level of 1.2623/1.3485 as well as short term channel support. The longer term, dailies though, still point strongly lower though, suggesting that rallies will only provide opportunities where sellers will be lining up. Immediate resistance is at 1.3160 and then 1.3185 and 1.3240. These are unlikely to be disturbed in Asia but may come under pressure if the numbers start to stack up on the Greek swap.
In the longer term, with the oscillators pointing lower, if 1.3055 does give way, a decline to the previous low at 1.2970 can be expected. Although this looks pretty unlikely today, further out the charts are suggesting that it is only a matter of time.
Today, look for 1.3100/50 to cover it for the next few hours. Beyond there a squeeze towards 1.3250 would not surprise, but the outcome and reaction of the debt swap deal will decide that. It looks as though rallies will provide opportunities for those looking to get short for the next leg lower.
ECB Interest rate decision today. No change expected
