EUR/USD: 1.2575
The Euro has rallied today along with the other currencies and commodities, ahead of Ben Bernanke’s testimony later on, with hopes rising that he may signal some sort of stimulus for the US economy. Earlier the ECB left rates unchanged at 1%, although no hint of any boost to liquidity was made. The most that anyone could glean from the press conference was that downside risks continue and that the ECB stands to act, if necessary.
It was a choppy session for the Euro though, with Spanish banking concerns continuing to worry the market.
Having said that, there was some optimism that some sort of bailout package might be in the pipeline, which helped to underpin the Euro. I don't think we should get too excited yet.
Early, in the European session, Moody’s downgraded Commerzbank amongst 6 other banks in Germany, and generally the news headlines coming out of Europe were no better than usual, although there was nothing to give the market any real impetus in either direction.
The market now seems to have convinced itself that Bernanke is going to say something. Certainly Equity markets put on a head of steam with the DAX+2.1%, CAC2.4% S+P +2.30%. One can’t help feeling that if QE3 gets no mention, it may get a bit ugly on the downside, and with the Beige book having just been released, describing economic growth as moderate, I don't really see what has changed to make the Fed suddenly change their mind and suddenly decide to introduce new stimulus. The sharp reversal of the earlier rally in the Gold price, suggests that the hopes for any mention of QE today, may be somewhat overblown. We shall see.
On the charts, the Euro has now broken above the 1.2525 resistance/neckline that we have previously mentioned.
It looks as though it could struggle up here a little, in the short term, but the indicators do have some positive momentum and we have to allow for further gains. There is short term resistance at the day’s highs at 1.2582. Above here 1.2600 & 1.2625 will act as a hurdle, ahead of 1.2667, (38.2% of 1.3283/1.2286).
The downside looks reasonably well protected at 1.2525 previous resistance, and then 1.2470 for the time being, but a break of this would signal a return to 1.2410 and then onto 1.2360 and 1.2310.
For the time being, I suspect we are in for a range of 1.2525/1.2585. A break would probably see us trade up to 1.2600 although I don't think this is too likely in Asia, and we may just tread water for a few hours.
Everyone is waiting for Bernanke, and with little else out today, Jobless Claims aside, it could be fairly rangebound before the fireworks begin!
