EUR/USD: 1.2965The Euro fell today after soft PMI data reiterated concerns over world growth. The soft China Mfg PMI data was followed up by a very soft French composite PMI reading of 44.1, a 3 year low, and a pan EU reading of 45.9, down from 46.3 in August. Germany, as usual was the one light in Europe with a composite reading of 49.7, up from the previous 47.0.
Elsewhere, US data was equally soft, with US manufacturing data at 3 year lows and the US jobless claims holding steady, near 2 month highs.
The euphoria of the recent central bank action seems to have worn off all rather too quickly and the Euro was soft throughout much of the session, breaking though support at around 1.3000 and heading towards its 1.2919 low, stopping just ahead of the first Fibo support at 1.2908 (23.6% of 1.2042/1.3171.). A bit of a bounce has taken place later in the session although so far it looks rather unconvincing.
The 4 hour charts are still pointing lower and the dailies are now showing further signs of rolling over and turning lower, suggesting that the upside is going to be increasingly difficult to overcome.
In the short term the hourlies are recovering from being oversold, and so the session lows look as though they should hold for a while. A break of the Fibo support at 1.2908 though, would suggest further declines towards minor levels at 1.2855, 1.2815 and then to the 38.2% Fibo support at 1.2742, which also acted as the 20 June high and would be strong at the first attempt.
On the topside now, 1.3000 acts as initial resistance ahead of 1.3015 which is currently at the top of a minor descending channel that the Euro is trading in. Above here would see a return to 1.3085 and then back to levels above 1.3100 and the rally high at 1.3170, which looks increasingly unlikely.
It would appear that the choppy downside action is likely to continue, although if Spain were finally to ask for a bailout (possibly as early as next week according to the FT), it could well be that we do see a bit of a relief rally as the ECB commences to buy Spanish debt, lowering the borrowing costs in the process, but imposing increased austerity measures in the process, which wont be popular in Madrid.
Today is pretty quiet on the economic front and a session of 1.2900/1.3020 would not surprise, with a bias still to the downside.
Good luck/Good w/e.....
