Euro : 1.2435
Far from being a quiet session that I expected, ahead of the ECB Leaders summit, the Euro has had a volatile 24 hours, firstly squeezing up to the 1.2520 resistance that we have previously mentioned, and then later falling sharply to a session low of 1.2406. The Summit has now commenced but with no major news yet, the markets are reluctant to sell the Euro too far down in case there is a positive move of some sort that would ensure a sharp squeeze of the shorts.
Additional pressure on risk assets has today come from the equity markets where bank shares have taken a big hit following the fine on Barclays (-15%) for market manipulation of LIBOR rates, and the word is, that other banks will be investigated. JP Morgan’s recent trading losses are reportedly as high as US$9 bio, as opposed to the reported US2bio and saw JPM lose 4%. The DAX fell 1.27%, CAC -0.37% and the S+P made a late comeback to close -0.21%.
In the short term the market has to wait and see what – if anything – comes out of the summit but technically things are not looking all that rosy.
For the time being we are holding on to 1.2400 and the Fibo support at 1.2397 (76.4% of 1.2288/1.2746). A break would lead us quite sharply lower I think, as there does not appear too much support before 1.2300 and then the June 6 low at 1.2288. As I have said in recent weeks the eventual target for this run lower is 1.1875 (4 June 10 low).
On the topside, the short term resistance is now at 1.2465, which previously acted as Fibo support. A break would probably entail a squeeze back to 1.2520, above which would see a return to 1.2570 and then possibly on to 1.2630, although this looks highly unlikely right now.
The market is nervous and conditions are thin. With many of the major players sitting on the sidelines the markets are going to see spikes in either direction, reliant on the headlines coming from the summit. It is hard to see too much of a positive slant for the Euro, but it is probably safest to stand aside for the time being.
Today sees German Retail Sales, US Personal Income/Expenditure, Chicago PMI and Consumer Sentiment Index.
One other thing. Keep an eye on the close of the DXY later today. We need an end of month close above 81.80, (100 Month MA) to maintain our view that this may be the beginning of a major Dollar move over the coming 12 months. Right now we are at 82.69, so looking good. More on that over the w/e..
