EUR/USD: 1.2500The Euro has started the week pretty much as we thought it might, by doing precisely nothing ahead of Bernanke at Jackson Hole on Friday, despite a 4th straight fall in the German IFO index on business sentiment. The momentum for the EU economy is not looking all that positive, although in a typically confusing move,the DAX managed to close up 1.1%.
The Euro looks likely to remain underpinned for much of the week as the market lives in expectation that the Fed will finally announce the long awaited QE3. Fed Governor Evans did his bit to assist the sentiment today, by stating that economic stimulus needs to be commenced immediately.
On the other side of the coin, negative event risk for the Euro will cap the topside, and thus it looks as though we should expect more of the same in coming sessions.
Technically, nothing has changed from the weekend outlook.
Short term resistance is now to be found at today's high 1.2535, which will probably cap it through Asia. Above this, Fridays high will need to be overcome (1.2589), at which point we run into the 100 DMA at 1.2605. Above this, the long term channel resistance at 1.2655 and then we see longer term Fibo resistance at 1.2720 (23.6% of 1.4935/1.2042). These may get tested after Fridays speeches by Bernanke and Draghi, but not before I suspect.
The downside, has minor support in the 1.2480/90 area now, which has acted as a base Friday/today. Below this 1.2392 (50% pivot of 1.2742/1.2042) comes into play, above the channel base at 1.2340, which looks a long way off unless there is unforseen negative news out of the EU.
Today, look for another quiet session. The indicators, if anything point slightly lower and a move towards 1.2460 (1.2365 of 1.2742/1.2042 ) and possibly 1.2430 (22 Aug low) would not surprise, but overall I expect more of a drift and would looks for 1.2460/1.2540 to cover it.
Today sees German Consumer Confidence, Spain GDP, US Consumer Confidence, Case Schiller House Prices
