EUR/USD: 1.3120
After a snail like drift lower in Asia, President Sarkozy and the IMFs Lagarde woke the market from its slumbers, with both making Euro-bearish comments. Sarkozy suggested that the strong Euro is hurting exporters, while Lagarde hinted that there is scope for an easing from the ECB. Further pressure came on worries about the Spanish banking system (Non Performing loans have increased from 1% to 8% since 2008) and on news that Spanish real estate has collapsed by 20pc since 2007 – 2008, with many economists suggesting 30% is a more realistic figure, and saw the Spanish stock market fall 3.99%. (DAX -1%, CAC -1.5%, S+P -0.45%) This (and Eur/Gbp selling) all combined to take the Euro to a session low of 1.3057, before a fragile recovery to current levels and leaves the Euro in neutral territory ahead of today’s important Spanish bond auction at which the government will attempt to sell Eur2.5bio of 2 and 10 Year bonds. The outcome of the auction has kept the Euro under pressure in the last couple of sessions, and if it does not go off well, the Euro will see the supports between 1.2970 and 1.3030 severely tested.
Technically, there is not a lot to add from yesterdays update. Having tested and recovered from the lows, the immediate support at around 1.3035 remains intact. Below here good buyers will again be found between 1.2970/1.2990. Below here though there will be some decent sized stops and a swift move lower could well be seen, with the first likely target to come in at 1.2858(10 Jan 11 low)/1.2850 (22 Dec low 11).
If the Euro ends up reacting well to the bond auction, we could see a sharp rally to take out the downtrend resistance at 1.3145, towards the recent highs at 1.3210 (12 April) and above there to 1.3240 (4 April).
We shall have to wait and see on the outcome of this, and with the chart indicators being more or less completely flat the need remains to be flexible, so keep stops tight.
Todays data is light but includes EU Consumer Confidence, US Jobless Claims and Housing Starts.
