EUR/USD: 1.3105
Equity markets and the Euro attempted a rebound today following comments from an ECB board member that has the option to resume its asset purchase program to provide assistance to indebted sovereign states, with Spain and Italy currently being closely watched by the market. Yields in both nations eased slightly today, following defiant comments from the Spanish PM about Spain's ability to recover from its current situation, while the Dax closed +1% and the CAC +0.7%. The S+P finished +0.75%. The Euro's gains did not last long and having seen 1.3155, the US session has seen it drift back to close to 1.3100, once Europe closed.
It appears that the choppy conditions are going to continue and in view of the upcoming Greek (May 6) and French elections it is difficult to get too bullish on the Euro, given the political uncertainty ahead. Nervousness over Spain and Italy will also dampen any upside ambition.
On the other side of the Atlantic, the NFP numbers of last week have sent a shiver through the market, giving it a quick reminder that any upturn in the US economy is going to be a long and slow process, as the Beige Book today showed. This in turn will dampen enthusiasm to buy the US$ and should keep a lid on Treasury Yields.
Technically, things are little changed from yesterday. We are still confined within the 1.3150/1.3035 range as we bounce around between the 38.2% and 50% Fibo support and resistance levels of the move from 1.2623/1.3485. The 4 hour charts are suggesting that we may see further tests again of the high side but I am not sure that this will amount to much more than further sideways choppy trade. Further resistance lies at 1.3165 (38.2% of 1.3380/1.3030) so for today, look for a possible retest of today’s highs, but probably not much more. Any strength looks to me to be corrective and short term in nature before the downside resumes. The support remains at the Head/Shoulder neckline at 1.3035, with further levels being 1.3000 and 1.2970. Below there 1.2520 is the S/H/S objective.
Today sees the ECB Monthly report, EU Industrial production and then a bit from the US, including Jobless Claims, PPI, Trade Balance (Feb). Various FED Board members will be speaking.
