EUR/USD: 1.3360A choppy session saw the Euro weaken early on, as local Spanish election results added doubts as to whether the government would have to delay the ruling party's austerity plans. Better than expected German IFO results put a base on the Euro’s slide though, before US Fed Governor Bernanke’s dovish comments on the US job market spurred hopes for more Quantative Easing ahead as monetary policy remains accommodative for a while yet. Coming on top of soft housing data, the US$ gave up ground quickly against the Euro and in doing so took out the important resistance of recent sessions in the 1.3290/1.3320 area. ECB Governor Draghi, has been speaking late in the session, commenting on what he sees as the stabilisation of the situation in Europe, generally talking up the outlook, which has done the Euro no harm today. Lastly, Angela Merkel appeared to drop German opposition to combining the EU bailout funds with the make-up looking to be about Eur 700 bio. This is more than Germany previously wanted. Merkel has to be very careful though about upsetting the German voter, who wont be happy with this outcome.
Equities joined in the rally with the DAX up 1.2%, CAC,+0.8% and the S+P is up 1.1%.
Technically it would appear that having taken out the previously mentioned resistance, we are now in a position to move higher. Further headway will not be easy though so flexibility will be required. In the short term 1.3290 should act as support, and given the developing overbought situation of the hourly charts, it could be that we may drift off a little as these correct. Below here would see a return to short term Fib support at 1.3210 and then at 1.3170, 1.3130.
To the topside, the first resistance is at 1.3370 and this may provide a short term cap (76.4% of 1.3485/1.3002). (We are just seeing a run-up to this level now, from 1.3330 a few minutes ago). A break above here would suggest an advance to 1.3420 and then on to 1.3485. The charts get a little messy up here though, so should we move higher, it is likely to be a little choppy as we work our way through the resistance.
Today we get US Consumer Confidence, Case Schiller Home Price Index and more from Bernanke, which will be eagerly anticipated for further hints of any easing.
Today in Asia use 1.3290/1.3365 as a guide but it looks as though dips will see good demand. It should be said that the dailies are not particularly supportive of this Euro rally and it could turn out to be a fairly short term affair, so be nimble. Keep SL tight under 1.3290
