Euro : 1.2465
The Euro continues to sag beneath 1.2500 as the market remains pessimistic of any positive outcome from the EU Leaders summit beginning later on today. Divisions between Germany and the other EU nations appear to remain deep, with little apparent agreement on the way forward. Merkel has been meeting with the French President today, ahead of the summit, in an attempt to show a united front, but the views all seem rather polarised. The Spanish PM today has said that Spain will be unable to continue to fund itself for much longer at the current rates it is being forced to pay.
On the data front, US existing home sales gained 6% on the month, and on the lack of any other major economic release, the equity markets moved a little higher, taking the view that the worst of the US housing crisis may be behind us. The DAX finished up 1.5%, CAC+1.6% and the S+P +0.9%
There is little point in speculating the result or where the Euro will be by the end of the week, so when in doubt, go to the charts!
Unfortunately, they are really not telling us much either really. The Euro does look heavy, but is currently holding above 1.2440, the lows of the last 2 days trading. The 4 hour chart is a little oversold but there is room for futher downside and the support levels remain the same as yesterday. We currently sit at 1.2463 Fibo level, mentioned over the last couple of days, having traded down to 1.2445 earlier in the day and below this, 1.2430 provides minor support ahead of 1.2395 (76.4%1.2288/1.2747). A break here would then suggest a return to 1.2288 (1 June low), but I think it too early to look this far out.
The topside looks to 1.2500/20 to hold, but a break would see a continuation to 1.2570 and possibly 1.2630. This looks doubtful.
I don’t think we are going to see an awful lot in terms of direction today, but the euro will probably remain heavy as the negative headlines keep hitting the wires as the summit approaches. Previous EU summits always have had the same outcome and there does not appear to be anything very different this time around, so I therefore think we are in for a continuation of the slow grind lower for the Euro.
I suspect that it will be in Asia on Monday before we actually get to see the real outcome of anything directional from the Euro and until then I would play it pretty tight and on a session by session basis. The charts are not hinting of any major move one way or the other, so I would not be overly enthusiastic about the Euro moving too far from the current levels.
For today use 1.2435/1.2500 as an initial guide and keep stops tight.
German Unemployment, EU Consumer Confidence, US Personal Consumption, Jobless Claims and GDP today
