EUR/USD: 1.2885Having made an early low at 1.2802 in Asia, where the currencies mostly remained soft against the US Dollar after the release of Chinas PMI data (49.8)data, the Euro later recovered a little as the market digested Fridays Spanish banking stress test results, - which came in pretty much as expected - and then held its ground as the global manufacturing PMI results were released.
In Europe, the results were generally still very soft, although there were some improvements on previous months. The overall EU reading was at 46.1, up from Augusts 45.9, and both Germany (47.4 from 44.7) and even Spain rose (44.6 from 44.1). France was not so lucky and dived to 42.7 from 46.0,the lowest reading in 3 1/2 years. Overall, almost the whole of Europe remains well below 50 and thus in contraction mode, with the one exception being Ireland which returned a 51.8 reading and the 7th month of advances.
The US then had its turn and the ISM manufacturing PMI rose to 51.1 (previous 49.7), the first time in 5 months that the data showed a reading of above 50. Bernanke was also on tap today, emphasizing that rates will stay low, even after the economy begins to recover.
With the focus remaining on Spain, the upside for the Euro has been limited and the market is still awaiting Moody's to review its rating of Spanish sovereign debt. A cut to junk status could well be the catalyst for Spain to seek assistance from the EU and bizarrely could see the Euro move higher! Another ratings agency Fitch, has repeated that it may not downgrade Spain if it is does seek a full bailout , but added that the country needs to "demonstrate it can move forward" by bringing its budget deficit down.
Elsewhere the Troika have returned to Greece to continue the talks with the Greek government over the terms of the austerity package, with time running out for Greece to be able to continue to service its debts. A Greek draft budget has projected that the economy will shrink for the 6th successive year by 6.5% with 18.2% unemployment. (under 25's at a terrible 55.4%).
With the Euro pretty close to last week's closing level, the chart points remain pretty much unchanged.
The daily charts still point lower, but we need to break the 200 DMA (1.2820) on a sustained basis, and then see off the buyers at today's lows around 1.2800 in order to see an acceleration towards 1.2742 (38.2% of 1.2042/1.3171) and then on to the rising trendline support at 1.2660, ahead of the 50% pivot at 1.2607.
The shorter term charts though are a little mixed and not suggestive of any real directional move for the coming session. The topside will see sellers at around the day's high (1.2938) where 38.2% 1.3171/1.2802 currently lies at 1.2842. Beyond here the 50% pivot is at 1.2986 and 61.8% Fibo target is at 1.3029.
Today looks like a similar one to yesterday and a range of 1.2820/1.2920 could well cover it.
Economic data today includes:
T: EU PPI.
