EUR/USD: 1.2715
The selloff in the financial markets seems to have largely exhausted itself for the time being as most assets remain largely at levels seen this time yesterday. The Euro, apart from a brief spike down to the day’s low at 1.2680, has spent most of the day consolidating around current levels.
Greece remains the main point of focus in the markets and an election has now been called for March 17. That was the only point of clarity. Otherwise it still looks as though Greece is still heading for the exit door and that the Greek population now have a direct choice of either to accept the austerity package, in order to stay in the Euro, or to leave it altogether and go back to the Drachma. Merkel and Hollande have been talking up the necessity of Greece staying in the EU, but in reality it still does not look like happening and today the ECB withheld funding for some Greek banks that have not been recapitalised, and are seeing deposits being withdrawn, which saw European equity markets close near their lows.
Also weighing on markets were the minutes from the US FOMC meeting which showed several members of the bank's board had indicated that additional monetary policy accommodation could still be necessary
The Dax finished -.03%, the CAC40 +0.3% and the S+P -0.4%.
Technically we have been down to the base of the channel and rebounded to levels seen this time yesterday and a continuation of the short term consolidation through the Asian session looks likely. The daily charts very definitely point to lower though and the move down is not done with yet. However, the 4 hour charts, as can be seen below, are oversold and look to be trying to point a little higher, so we ought to be prepared for a mild correction before the decline resumes. If we do see a bounce the levels to watch are at 1.2760 – the day’s high, 1.2820 (23.6% of 1.3282/1.2680), and 1.2870, although this looks unlikely right now. On the downside, a break of the channel base -1.2675 – would see the 1.2623 (Jan 13 low) come under pressure, below which 1.2565 (23 Aug 2010 low) would be the target.
Be a little nimble down here. As we said yesterday, the slightest bit of positive news from Europe could easily trigger some heavy short covering, given the weight of shorts in the market.
Today we see US Jobless Claims, and the Philly Mfg Index, but not a lot else. It is the Ascension Day holiday in much of Europe, including Germany, so I am not expecting an awful lot of action, unless some politician says something ridiculous – which, of course, should never be discounted!
