EUR/USD: 1.2505The Euro has drifted a little lower but overall remains well within its recent range, as traders pared back expectations that Ben Bernanke will announce any major economic stimulus at Jackson Hole tomorrow. An increasing view is that he will want to wait until the next US employment data before making any adjustments at the next FOMC meeting on Sept 12 -13. Before then of course we have the ECB meeting on Sept 6 when all eyes will be on Mario Draghi to see what, if any, plan he has to commence a bond buying programme to reduce the debt repayments of Spain and Italy. The news was not good out of Spain today. The Spanish region of Valencia today went to Madrid for a Eur 5.5 bio loan, which follows on from Catalonia doing the same thing earlier in the week, and keeps the pressure well and truly on the ECB and for Mario Draghi to do something affirmative .
That all remains to be seen, but right now, there is very little interest with most players standing on the sidelines. It is likely to remain very thin until late Friday when Bernanke speaks, and even then, with a Labor Day Pubic holiday on Monday in the US, liquidity conditions may not improve too much, and once he has spoken, any moves could become somewhat exaggerated, so stay flexible. Even better be square! At least we will have got August behind us and the northern hemisphere will at last return to work!
Elsewhere in Europe, the economic data was not much better, as EU Business Confidence sank to its lowest level in 3 years. This helped keep the pressure on the downside but it did receive some support after comments from Wen Jaibao suggested that China would be prepared to buy more EU Government Bonds. Although it did have a dip to 1.2486, the Euro has again spent much of the day within the 1.25/1.26 range of the week, and we should not be going too far from here for much of the coming session.
Technically, on the downside, below today’s low, support should be found at 1.2460 (23.6% of 1.2042/1.2589). Below this 1.2392 (50% pivot of 1.2742/1.2042) comes into play, where the channel base also now lies.
On the topside, sellers will be seen as we approach 1.2550. More will be seen at the recent highs at 1.2573 and then at 1.2589 (23 August high), which is also now the 100 DMA. Greater resistance lies at the channel resistance currently at 1.2640, ahead of Fibo resistance at 1.2720 (23.6% of 1.4935/1.2042).
I would not be getting too excited right now. Bernanke will be speaking at 10.am NY time, about midnight AET and until then, find something else to do!
