EUR/USD: 1.2280
The Euro remained under pressure today following comments from Angela Merkel, who said that although she is "optimistic that the Euro will survive, the European project has not been shaped in such a way that we can be sure that everything will turn out well, we still have work to do". This was backed up by the ECBs Asmussen, who outlined the view that the North-South divide in Europe is the greatest that it has been in the last 10-15 years and needs to be overcome quickly. On top of this, the IMF report on Europe has stated that the European Central Bank could play a bigger role in fighting the debt crisis through more rate cuts and bond purchases.
Across in the US, both US treasury Secretary and Fed Governor Ben Bernanke have been adding their own dovish comments on the EU crisis, which has added to the pressure.
The Euro was sold down to its lows in Europe, but has since recovered as equity markets improved following some improved earnings results from both EU and US companies and in the ongoing hope that the Fed will eventually act in some way to stimulate the US economy. The DAX finished up 1.6%, EStoxx50 +1.5% and the S+P +0.6%.
In the bond markets, Spain's 10 Year yield widened, rising 15.9 basis points to 6.875%. Italy's traded to 6.045%. 10 Year German bunds continue to drive lower, today at 1.13%.
The Euro is really not too far removed today from where it has been for the last couple of session and technically little has changed.
The descending trendline is now at the previous resistance at 1.2290, above which is today's high at 1.2305, and then the minor level at 1.2335 remains intact (7 July high). A move above this area would suggest progress to1.2365 ( 38.2% of 1.2692/1.2162), and beyond there it is possible to go on to 1.2425, the 50% pivot.
The downside has minor support at 1.2215 and then a cluster of targets between 1.2162 and 1.2185, and again I am doubtful that we take on these in the current session. A break though would head towards 1.2100 and then on to 1.2000, below which is the target for the whole move at 1.1875.
With the hourly indicators giving little hint of any direction again, with price action likely to remain choppy and it might be another day to stand aside and let the market do the work. The 1 and 4 hourly charts are both pretty flat but point in different directions and the dailies still look as though they are reasonably well supported on dips, so all up don't expect too much excitement in the day ahead.
Today sees the ECB mid month meeting, US jobless claims, existing home sales and the Philly Mfg survey, but little else of note. Watch out for further negative comments coming out of the EU to keep the pressure on the Euro.
