EUR/USD: 1.3000
Greece is firmly back in the centre of the action today following the election, with the Coalition Left Wing leader having declared the EU/IMF rescue package to be null and void. This has kept the pressure on the markets all day, although the Euro is currently not much lower than levels seen in the previous session, having been down to 1.2988 in Europe. With the talk now of another election (June 17?) and the possibility of a Greek exit from the Euro and possible default ahead, it is difficult to get enthusiastic about any of the markets.
Equities markets predictably took another hit. Greece is now down 11% so far this week. Today the DAX finished -1.9% (and technically, looks to me, as if it is going a lot lower - see weekend report), the CAC -2.8% and the S+P -0.43%.
Elsewhere the new French President, Francois Hollande is increasing the tension with Germany, having advocated a growth led approach to solving the EU crisis, as opposed to the Angela Merkel view of fiscal austerity, in order to cut the high levels of debt. She says the current EU package is not negotiable, which will keep the markets under pressure.
So the Euro remains heavy, but still holds above Mondays lows. 1.2988 becomes the immediate support and 1.2954 is 61.8% of the move from 1.2623/1.3485, as well as the Monday low. Below here, 1.2925 (25 Jan low) and 1.2868 (20 Jan low) act as support, ahead of the next Fibo level (76.4%) at 1.2825.
On the topside, the gap still needs to be fully filled at 1.3078, which is also 38.2% of the fall from 1.3283/1.2954. Above here, 1.3118 (50%) and 1.3156 (61.8%) will provide hurdles to be overcome.
The price action looks to me as though it will remain choppy and although it looks very heavy, the short term risk/reward looks to be mildly to the upside, at least to fill in the gap to 1.3080. The 4 hour momentum indicators are still oversold and look as though they are trying to turn a little higher, although it could be that the Euro just drifts around here, as they unwind. The dailies are pretty flat and could be making an attempt to head a little lower but the market is short, so just be a little careful of a squeeze. Eventually it is very difficult to see any real upside at all for the Euro, but right now, as it holds 1.3000, it feels to me that we may want to take a few of the weak shorts out of the market before we can make a serious attempt at the downside. If it does happen, it probably won’t be until later in the session.
Today we get German Trade Balance & Current Account. Later US Wholesale Inventories. With not a lot to go on, it looks as though politics will again dominate, today.
