EUR/USD: 1.2400The northern hemisphere summer holidays ensured that this relatively quiet news day saw little movement in the currency markets through the session. The Euro remain at exactly yesterdays levels having traded a tight 65 point range.
The headlines were generally concentrated on economic performance today rather than politics. The main points of interest were that Italy remains in recession after Q2 GDP fell 0.7%qq and German June Factory Orders declined more than expected, by 1.7% qq,(-7.8% yy). Although the data was pretty awful, the market still seems to be focusing on Mario Draghi's statement of last Thursday and lives in hope that the ECB have something positive up their sleeve to assist the debt crisis.
Greece held a bond auction today, raising €812.5m in 6 month debt at an average yield of 4.68%, fractionally cheaper than the previous 4.7%. Spanish and Italian yields were slightly firmer today at 6.86% and 6.0% respectively.
Elsewhere Bernanke has been speaking in the US where he has repeated his previous statements that the EU crisis is slowing the US recovery.
None of this has hurt equity markets though, with the DAX finishing up 0.71%, EStoxx50+1.71% and the S+P just closed 0.5 % at 1401 (Futures 1397) and looking headed towards the 1420 objective
Technically for the Euro, nothing has changed today. It traded, again, to a high of 1.2442 before retreating to the relative comfort of the middle of the day's range.
The 4 hour charts are still in overbought territory and there are plenty of technical levels ahead where sellers will be lining up. The neckline is now at 1.2450, above which 61.8% of 1.2740/1.2042 is at 1.2470 and then 38.2% of 1.3282/1.2042 is at 1.2510. So pretty much as I said yesterday, if we do head higher, I suspect that the 1.2500 area should cap it for the time being. In the longer term, the dailies are still pointing north and look to be building upside momentum with the larger Fibo target remaining at 1.2707 (38.2% of 1.4935/1.2042). Thus for the time being, the strategy still appears to be one of looking for levels to buy dips. Support levels to look at are at 1.2350/60 (minor trendline) and then 1.2290 (38.2% of 1.2042/1.2442). Below this is the 50% pivot at 1.2242, of the move up from the lows. This looks unlikely to be bothered today but a break below here would neutralise the current bullish mood..
The strategy looks to be unchanged from yesterday and it would seem that bids will be eagerly sought.
Today sees German C/A, Trade Balance, IP.
