EUR/USD: 1.3220
The Euro squeezed a little higher in Europe ahead of the FOMC on hopes of a continuation of the dovish stance by the Fed, reaching a high of 1.3236. It was capped by the German Bond auction which sold Eur 2.405 bln of 30 Year Bunds, yield at 2.41% (from 2.62%), with take up ratio of 1.1 (from 2.1). The market was not overly impressed and saw the Euro come off its highs.
When the Fed announced its decision to leave rates unchanged, while noting that the economy is growing, albeit very slowly, Bernanke made it quite clear that QE3 is not on the agenda for the time being. The Euro spiked lower to 1.3172 before an equally aggressive move back to current levels. All up we have ended up going nowhere on the day and the market continues to jostle for position, and in my opinion is best left alone for the time being.
Elsewhere the Dutch PM has been asked to dissolve parliament so that elections can be held on Sept 12th. In France, Francois Hollande stated that the euro treaty on budget controls won't be ratified by France if he is elected, and that he would seek a renegotiation. We will have to wait until May 6th to see the outcome of this, but it should ensure that the Euro has limited upside between now and then.
Technically little has changed. We have been to the 1.3235 resistance during the current session, and it could well be that this continues to contain it. Further resistance is to be found at 1.3275 and major trendline/Fibo Resistance at 1.3290, (76.4% of 1.3384/1.2994). There are reputedly some decent size barrier options being protected at 1.3250, so there will be plenty of sellers before then and we are unlikely to see this – at least in Asia, where it looks like being another quiet session.
The downside has support at the overnight low, 1.3172 and then at 1.3150 (minor), ahead of 1.3082 (61.8% of 1.2994/1.3226) and then 1.3050 (Head/Shoulder neckline). Beneath here will be plenty of bids between 1.2970/1.3000.
