EUR/USD: 1.3080
It did not take long for Europe to return from holiday before concerns over the EU resurfaced to pressure the Euro and global Equity lower as Spanish bond yields headed towards 6%, with apprehension increasing that Italy and Spain may become the next sources of contagion in the EU. The Dax finished down 2.5% and the CAC 3.00%, with the S+P 1.7% lower. The MIB in Italy was down 5%.
The Euro has had a choppy session within its 90 point range today. It is currently sitting near the bottom end of it, but still above the neckline of the daily head and shoulder formation that we have been focusing on in recent days.
Technically, little has changed from yesterday. The Euro still looks as though it is on the verge of a decent move, and right now it doesn't look as though it is going to be higher! That is what all other technical analysts are going to be thinking as well though, so caution is necessary! The Head/Shoulder formation is still holding above the neckline, but has more or less reached the point where it needs to go one way or the other. It has been much talked about though and until it gives way, I would be wary of jumping the gun in looking for a break lower. The neckline is at 1.3035 so we are only a few points away. A move below 1.3035 would be a different matter and would lend confidence for a move to the projected objective at 1.2523. Until then stay flexible.
In Asia today it looks as though 1.3035/1.3115 should cover it and until Europe arrive. On the topside, further short term resistance levels are at 1.3165, 1.3205 and at 1.3245. On the downside, a break below 1.3035 would see 1.3000 and then 1.2970 (16 Feb low)
Data later today includes the German Wholesale Price Index, and from the US we get the Beige Book as well as various Fed Board members speaking.
The US quarterly reporting season is also underway. Alcoa have just got the ball rolling and reported a small profit, against expectation of a small loss. Further reports will come out daily over the next couple of weeks.
