EUR/USD: 1.2560
The Euro was choppy, but ultimately made small gains over the session, reaching a high of 1.2625, after a very busy day of news headlines that had the market taking the Euro one way and then the other. The gains were not sustained and the Euro is currently at 1.2560.
Early on in the European session, Spain held a 10 Year bond auction that went off reasonably well. Demand was good, but yields were high at 6.044% for the Eur 2 billion that was successfully sold, albeit that this is a fraction of the amount needed to bail out the Spanish Banking system.
France also had a bond auction and even managed to sell some 50 Year debt at 3.27%! I'm not sure how that will be paid off. The chances of there being a Euro in 50 years look pretty slim!
Next up was the unexpected, 25bp interest rate cut in China. This was the first cut since 2009, to 6.31% and gave the markets a boost as risk sentiment improved, but is also seen as an acknowledgment that China is becoming more accommodative in its outlook because of the global slowdown. While on China, an article in the WSJ has stated that the China Investment Corp, the sovereign wealth fund, has cut its exposure to Europe drastically and sees a growing risk of a break-up of the EU.
The main event of the day was Bernanke’s testimony. He said that the Fed "has options it can consider" and that QE3 could be one of those, but it would have to be evaluated to see if it would lead to job creation. In other words, there is nothing new at this stage. Risk sentiment waned a little, and this took a further blow as Fitch downgraded Spain by 3 notches late in the European session and ensured that the market did not become over enthusiastic about buying the Euro.
Initial US jobless claims for the week were 377K, as expected. The S+P has just closed -0.01% on the day, losing its earlier gains, following earlier moves by the DAX, which finished +0.82%, CAC+0.42%.
Technically then, there is not a great deal of change from yesterday. We have reached and so far failed at the 1.2625 resistance. This may well hold, as the 4 hour charts are approaching overbought territory and the upside will become increasingly difficult. If we do manage to overcome this level, the next target should be 1.2640 and then the Fibo level at 1.2667(38.2% of 1.3283/1.2286).
The downside looks reasonably well protected - for the Asian session - at the rising trendline, currently at 1.2525. A break back below 1.2500, would most likely lead to a return to the pivot at 1.2455, and below here to 1.2470 , and below here would signal a return to 1.2410 and then onto 1.2360 and 1.2310.
There is not a whole lot out today apart from some German data, - Trade Balance, Current Account and then later from the US, Wholesale inventories and Trade Balance. Nothing to shake the market and a reasonably neutral stance is probably required as we head into the weekend, with news headlines likely to dominate the action..
Good luck, Good w/e.
