EUR/USD: 1.2565
The Euro is a little firmer this morning as the result of some pre weekend short covering, ahead of the weekend Greek election.
The US$ came under a little pressure following some softer US data in both Retail Sales and PPI, reiterating that the US economy still has plenty of issues of its own and that the possibility of an announcement of QE3 could lie ahead at the upcoming FOMC.
That apart it has been a day, fairly light on news headlines. Spanish bond yields have retreated a little from yesterday’s highs, trading today up to 6.7% and US Treasuries fell to 1.63% on safe haven buying, ahead of the weekend. Stocks are all mildly weaker today with the DAX – 0.14%, CAC,-0.55%. The S&P closed -0.7%, not happy with the US data, and concerned about the weekend election outcome.
Overall though the Euro remains largely within its recent range, having been up to the 1.2610 resistance, where it has so far failed, but with the 4 hour indicator momentum pointing mildly higher we may see it retested at some stage during the session. Right now this looks unlikely though as the hourlies have once again turned lower, so we could well end up going nowhere. If we do see higher levels though, a break of today's high would lead on to 1.2667 (Monday’s high/38.2% of 1.3283/1.2288). This looks likely to contain it, if indeed we reach it, but a break would lead us on to 1.2720 and 1.2783 (50%).
The downside sees plenty of support down at the 1.2500/20 congestion and then at 1.2475 minor rising uptrend line. A break would see a decline towards 1.2450 and then to 1.2380, which looks unlikely to be pressured today.
All up, I don't think we are going anywhere too far and it looks to me as though 1.2520/1.2620 should cover it. Most traders appear to have headed for the sidelines ahead of the weekend and the market is being driven by mild Euro short covering. With the hourly charts looking as though they have currently topped out, the topside might be limited to today’s 1.2610 high, so it maybe that we just drift sideways for the next few hours.
Later in the day all eyes will be on Angela Merkel who will be outlining the stance that Germany will be taking at next week’s G20 meeting. Also of interest will be the ECB Monthly Report and EU CPI..
NB Moody's has just cut Spain by 3 notches and Cyprus by 1.
