EUR/USD: 1.2530
The focus changed from Greece and the EU crisis to economic data today, although the result was much the same.
PMI data in both services and manufacturing areas was soft throughout the Eurozone. Germany manufacturing data was at 45.0, while France was even worse at 44.4. Overall EU manufacturing PMI was worse than the expected 46.7, coming in at 45.9, the lowest reading in 3 years.
The German IFO reading on the business climate was no better really, the figure came in at 106.9, compared with the expected 109.4.
In the US, initial jobless claims were at 370k for the week ending May 19, while durable goods orders rose 0.2% in April, both were below expectation.
Elsewhere Citibank released a report for their clients, stating their belief that Greece will leave the EMU in early 2013. Further, they added at they believe Portugal and Ireland and Spain are all going to need further aid packages.
The Euro remains soft, despite being dragged up to 1.2620 earlier in the session on the back of buying in Eur/Chf after rumours did the rounds that the Swiss Government intend to impose a tax on franc-denominated deposits, in order to take the pressure off the Eur/Chf. The strength did not last long though and normal service was soon resumed as the Euro remained heavy in volatile trade.
Technically the Euro is holding on by the skin of its teeth above the trendline support at 1.2520. Good bids currently lie in the 1.2500/20 area, protecting a barrier option at 1.2500. It looks certain to be knocked out sooner or later, but this may be doubtful during the Asian session. The low has so far been 1.2514, and for the time being this may well hold. The levels to watch are pretty much the same as yesterday on either side of the market.
The next target, should we break from current level, would be the 13 July 2010 low at 1.2505. We then need to break 1.2500 in order to progress to the 61.8% of 1.4246 to 1.2625 from 1.3486 at 1.2484. In the bigger picture we could well be looking at a move back to 4 June low at 1.1875, and beyond there I am beginning to suspect a greater move towards parity, but that is one for the future.
Rallies to the topside should now meet good sellers on a return to 1.2620. Having acted as support for so long, the rally back to test this level in the current session was quickly rebuffed and there will be plenty of keen sellers if we are to revisit this level again. The first Fibo resistance is at 1.2717 (23.6% of 1.3282/1.2545) and trendline resistance is currently at 1.2745.
The dailies still point heavily lower, although the short term charts remain oversold. It may be that we need some more consolidation at these levels before making the next test to the downside. Above 1.2620/30, should we see it, may see a bit of a squeeze. Looks unlikely right now, but keep stops tight.
There is not a lot of data out today – German Consumer Confidence and Michigan Consumer sentiment Index.
Being a Friday, there may be a bit of risk aversion during the day, so the pressure is likely to remain in place and the US$ would continue to benefit. Good Luck good w/e.
