EUR/USD: 1.2905Today seems to have been an almost complete non event with regards to volatility, as markets have for some reason ignored much of the days news and most currencies are sitting at virtually the same levels as yesterday, having generally traded within tight ranges. The Euro did not even make it to either side of our expected range of 1.2880/1.2980 having only seen 1.2885/1.2970.
Mario Draghi has been talking up the Euro today in Berlin, where he has been meeting Angela Merkel. They came out with the usual supportive rhetoric for the EU, which helped the Euro towards its highs, but it has since come back under pressure following the Feds Plosser stating his opposition to the open ended QE programme. The huge and violent protests that are currently taking place in Madrid, ahead of Thursdays budget that will unveil further austerity cuts, are keeping the pressure on the Euro.
The spat between the Bundesbank and the ECB over the proposed bond buying programme looks as though it will also limit the upside for the Euro and the story going around that the Buba is considering taking the ECB to court over the legality of any bond purchases all looks very messy.
Elsewhere today the US data generally all showed some improvement. Consumer Confidence jumped to 70.3, the highest level in 7 months. Case Schiller Home Prices rose 1.2% in July and the Richmond Fed index rises to +4 in September from -9 in August. None of this did the equity markets any good, and the S+P has just closed down 1.05% on concerns over the unrest in Spain. European equity markets won't look very pretty tomorrow, having closed mildly higher today (Dax+0.16%, CAC+0.36%, ESTOXX50+0.41%).
Given the limited price action, little has changed technically and the hourly indicators are virtually flat, so I don't think that for the time being we are going too far in either direction. The 4 hour and daily charts are pointing in opposite directions so it would seem that the consolidation is likely to continue, probably until Thursdays Spanish budget is out of the way. In the shorter term the upside for the Euro looks a little limited and although we may sit around here, and possibly even squeeze a few points higher in Asia, a bit of a selloff once Europe get in would not really surprise.
Below today's 1.2885 low, bids will congregate at 1.2851 (13 Sept low), 1.2835 (50% pivot of 1.2498/1.3171) and at 1.2755 (61.8%) and 1.2741 (38.2% of 1.2042/1.3171).
The points to watch on the topside, are at 1.2955 (23.6% of 1.3171/1.2042) and then today's 1.2970 high, followed by 1.2996 (38.2%). Above Fridays 1.3047 high will be 1.3084 (19 Aug high), and then the recent rally high of 1.3171.
We are currently trading in a small descending channel from the 1.3171 high and another day of doing so would not surprise. The parameters here are currently at 1.2815/1.2973 and, if pushed, I would think that we may get an initial mild test higher once again today as weak shorts get squeezed, before further weakness commences, possibly for a test of the channel base, but really it doesn't look to have too much in it one way or the other for the next few hours.
For Asia, look for 1.2880/1.2930 to cover it.
Economic data today includes German Retail Sales, CPI , US New Home sales
