EUR/USD: 1.3155The Euro has been remarkably steady today, given all that has been going on, trading in an 80 point band. After an initial dip lower, it has squeezed slowly higher again, awaiting the outcome of the EU ministers meeting, currently going on in Brussels. While the meeting will rubberstamp the approval of the bailout package, the market is already looking forward to what may happen next. The potential for another bailout for Greece is being widely discussed, as is the possibility that other countries may need assistance down the track. Portugal leads the field here, but Spain is also on the agenda at today’s EU meeting following their failure to adhere to the agreed EU 2012 budget deficit figure of 4.4%, announcing their own target of 5.8%. Portuguese 10 year yields rose today to 13.12% and German Finance minister Scheuble has already warned that a 3
rd bailout for Greece should not be ruled out
Ahead of the outcome of the meeting, little is likely to happen and most likely before the FOMC in 24 hours time, it could well be that the Euro holds its current ground.
Elsewhere, poor Italian data confirmed that Q4 GDP grew at -0.7% q/q. Y/Y revised upwards fractionally to -0.4% from -0.5%, confirming that the country is in recession.
Technically there is not a huge amount of change from yesterday. The Euro has taken a brief look at the bottom end of the channel, just ahead of the 50% support level at 1.3053 (50% of 1.2623/1.3485), before a mild bounce towards the top end of the day’s range at 1.3156. The 4 hour charts look as though there may be a little more upside, given the divergence appearing on the 4 hour chart. The hourlies are also indicating some upward momentum and a return towards 1.3230 (38.2% of 1.3485/1.3078) may be possible. It looks as though it is going to be very slow though and any rally may well run out of steam before we reach that level. Above 1.3290 would return to a more neutral stance.
The support on the downside at 1.3050 is quite strong and I am doubtful of going below here in the coming session. If we do though, expect a test of the previous 1.2970 low. For the coming session, use 1.3080/1.3180 as a guide, with some short term upside pressure. Ahead of the FOMC it looks as though there will be little action. No change is generally expected and also no further bond buying programme (QE) is thought to be in the pipeline at this meeting.
Today also sees US Retail Sales and EU ZEW Survey.
