EUR/USD: 1.3268The Dollar eased into the weekend as US Treasury yields continue to soften a little following the spike higher earlier in the week. The euro saw a three-week high at 1.3292 on Friday as concerns about a slowdown in the EU seemed to ease a little, although I am not really sure on what grounds, given Thursdays PMI data, but bond auctions in Italy and Spain will be watched closely this week, following the way that yields climbed again in recent sessions. Spanish 10 Year bonds reached almost 5.5% on Friday. Right now it feels as though we are in the middle of a typhoon where everything is nice and calm! Hang on tight though as it is a big week for data from Germany ahead, and we also have an EU Fin Min meeting this week (Fri, Copenhagen), where an increase in the size of the firewall to avert the possibility of a repeat of Greece is to be discussed. With a supposed rescue fund of around Eur 700 bio, which wont please Germany, this will quickly put to good use when Portugal, Spain, Italy , Ireland (or Greece-again!) or any combination of the above, all fall over and come running for help!
Technically there is not a whole lot to add from previous posts. The Euro currently remains within the 1.30/1.33 range as it has done all week, and this could well remain the case in sessions to come, with a very mild bias higher on the shorter term charts. The daily charts are running flat and the 4 hourlies are making a half hearted attempt to drag themselves towards 1.33. From what I hear though there are plenty of keen sellers in the 1.3300/30 range and this will take some effort if we are to make further ground towards the recent 1.3485 high. The 4 hourlies are actually showing very mild divergence, given that we made a weekly high on Friday, so it maybe that we run out of steam again on an approach to 1.3300.
Of more interest is the potential Head – Shoulder formation that looks to be building. The neckline for this is at 1.3000 and the right hand shoulder looks pretty mature to me. Maybe another day or two of chopping around here, but if we are going to get any action, it ought to arrive this week. An eventual target would be 1.2515 (1.3485-1.3000 =.00485. 1.3000-0.0485=1.2515), so it is worth keeping an eye out for. It should be noted though that the DXY Index is not supportive right now of a much stronger dollar so there is a good chance that S-H-S will not come about.
Next week we get:
German IFO, Draghi, Bernanke speeches, US Pending Home Sales. (Mon)
German/ US Consumer Confidence, Case Schiller Home Price Index, more Bernanke (Tues).
German CPI, US Durable Goods (Wed)
German Unemployment, US GDP, Jobless Claims, yet more Bernanke (Thur).
German Retail Sales, EU Fin Min Meeting, EU CPI, US Personal Consumption Expenditure (Friday).
Should keep us on our toes! It looks like a busy one. Have a good week.
