Euro : 1.2550
Poor global economic data has dragged all markets lower today. Soft China and EU PMI’s did not help but the Spanish bond auction met good demand and the Euro held up reasonably well early in the European session. The Spanish bank audit, which suggests that the system might need Eur 62 bio in assistance as soon as this weekend and continuing soft US data, led today by the Fed Philly manufacturing index, along with an expected bank downgrade by Moody’s, have all combined to see the Euro drop 200 points from the weeks high, to currently sit at 1.2540. The relative lack of action from the FOMC has not helped risk sentiment and for the time being at least, the short squeeze in the Euro seems to be complete.
There is currently talk of a Moody’s downgrade of up to 15 major banks which is not helping the risk markets in all asset classes. This has yet to happen, but equity markets are already lower in anticipation with the S+P lower by 2%. The US$ is acting as a safe haven and most currencies are well off their recent highs.
The short term charts are all telling us that there are lower levels ahead, although the dailies are yet to turn around, so it looks to me as though we may have some choppy trade, as the downside bias for the Euro reasserts itself. The hourlies are rather oversold following the selloff so don’t expect too much through Asia, as usual, but the 4 hourlies are suggesting that the pressure remains lower once Europe gets going.
It looks to me as though we should expect to see 1.2520 hold for now, with the possibility of a bounce to 1.2585. However a break of 1.2520 should see the chance of a continuation to 1.2430 and then 1.2380. This looks unlikely yet but could well be seen later in the session once thin Friday afternoon NY conditions rule the market.
If wrong, a bounce above 1.2585 would see a return to 1.2635, but right now this looks pretty doubtful.
Today’s data will be highlighted by the German IFO and we may be in for a session of consolidation, but the momentum remains lower. Later on we have the EU Fin Min meeting so look out for any major statements from there.