EUR/USD: 1.3020Risk markets initially moved higher after Fridays US Unemployment data surprisingly fell to 7.8% - a 4 year low -, with the NFP coming in at pretty much on expectations at 114K. The markets were mostly unable to hang on to their gains and ended up pretty much where we started the session, and thus focus will now revert to the never ending saga in Europe and whether Spain will/won't have to ask for a bailout and whether Greece will/won't receive the next tranche of its own bailout package.Not a lot looks like changing in the next couple of days and so it would appear that the market will remain in limbo, presumably meaning that the Euro will hang around not too far away from either side of 1.3000.
The Spanish PM commented on Friday that Spain has not yet taken a decision on a possible bailout, and this saw the Euro come off its highs, but one gets the feeling that the longer they hold off, the more priced-in any eventual request will be, suggesting that the Euro will remain under pressure. If Spain does nothing, the market will take the bond yields back above 6% and that will eventually force the Government to go to the EU, with any Euro relief rally likely to be rather short lived.
Over the weekend ECB board member Joerg Asmussen has said that Greece cannot have more time to repay its debt to the ECB as it would be illegal and "illogical", and this has helped to ensure that the Euro starts the week on a mildly softer note, currently at 1.3020.
Technically there is not an awful lot to add from last week and immediate resistance is now found at Fridays 1.3071 high, above which would see a move towards 1.3083 (61.8% of 1.3171/1.2802). Beyond this lies the major resistance at 1.3145 where there is both Fibo (38.2% of 1.4938/1.2042) and major descending trendline resistance and which should prove strong. A break would target the recent 1.3171 high (17 Sept) , above which 1.3283 (1 May high) would attract.
The downside will see bids at bids back below 1.3000, commencing at 1.2960 (minor) and then at 1.2900. Below here would suggest that we head back to last week’s 1.2802 low and then onto Fibo support (38.2% of 1.2042/1.3171) at 1.2740.
Early in the week, it looks to me as though rallies towards 1.3100 will continue to attract sellers, looking for a leg lower towards 1.2900, but progress looks likely to be slow in either direction, with sellers a bit wary of Spain actually doing something affirmative that could cause a possible spike higher in the Euro.
Monday looks like being a quiet 1.2960/1.3060 range with the chances of breaking a little lower. It is a US holiday, so don't expect too much action.
Data this week includes:
M: EU Sentix Investor Confidence, German IP, Trade Balance, US Columbus Day holiday.
T: Merkel/Samaras Meeting
W: US Beige Book
T: German CPI, ECB Monthly Report, US Trade Balance
F: IMF Meeting, EU IP, US PPI, Rts/Michigan Consumer Sentiment Index
