Euro : 1.2690
The Fed acted today by extending Operation Twist - the long term bond buying programme, in exchange for sales of short term duration paper, - beyond the original June expiry date, by US$267 bio. Ben Bernanke went on to say that he expects economic growth to remain very weak, largely due the situation in the EU and has slashed growth estimate for this year by 0.5%, expecting GDP to grow by a maximum of 2.4%, with the jobless rate to rise to 8.2%. This drained much of the enthusiasm today from the markets and most currencies, after a volatile ride, are largely unchanged on the day
The Euro which had spent much of the session around 1.2700, immediately dived to 1.2637, before spiking 100 points and then coming back to rest at the original level and currently trades at 1.2705
Elsewhere, Angela Merkel, earlier gave a vague hint that she may be easing here view on a Eurobond buying programme, although she has a long way to go before accepting that this is the likely outcome. This supported markets earlier in the session, and bond market yields eased a little on the news that a plan is being put together to buy up to Eur 750 bio of Italian and Spanish debt. Spanish 10 year yields fell to 6.66% and Italian Yields are at around 5.7%. In Greece, almost unnoticed as the market was focused elsewhere for direction today, a new Government has been formed, with Mr Samoras the unlucky man given the job of PM, and who now needs to lead Greece out of the mire! He has quickly reiterated that he wants to renegotiate the terms of the bailout package. Not a good start, given Merkel's stance.
So technically, there is not too much change from yesterday. 1.2740/50 now becomes quite important resistance. We have been up there twice now and failed, and it looks like the session is going to turn into a range trade of 1.2640/1.2740, while the market digests the Feds move and Bernanke’s comments. A break to the topside though would initially target 1.2785 (50% of 1.3283/1.2288).
The 4 hour charts have turned lower and look to be running out of steam a little, while the dailies, although still pointing higher, have more or less reached neutral territory as far as the MACDs are concerned. This all adds up to the likelihood of little directional movement and probably, some further consolidation at around current levels.
While 1.2640/740 looks likely for the next few hours, the short term pressure looks to be mildly to the downside and an eventual retest of the days low - 1.2637 would not surprise. The parameters of the channel that currently dominate trade are currently at 1.2585/1.2850 and this should amply cover the range for the next session or so.
Today sees the EU and US PMI data, Consumer Confidence and Current Account. The EU Finance Ministers meet today as well, but are unlikely to have any real market moving impact. Later in the day sees US Jobless Claims, Existing Home Sales and Philly Mfg Index.
Before all that we will see the HSBC Flash China Mfg PMI and I don’t think that before then we should expect too much, so wait for these and then take it from there.