EUR/USD: 1.2970The markets saw a drift back into the US dollar today, in quiet conditions given the holidays in both the US and Japan, with the Euro opening a little lower in Asia from Fridays close, and drifting down throughout the session, reaching a 1.2940 low.
Safe haven demand came back into focus on concern over the situation in Spain on the day that the new EU bailout, the ESM was officially launched in Luxembourg, capable of lending up to Eur 500 bio to indebted countries. Spain is still holding off from asking for assistance and today saw its stance defended, with claims by German Finance Minister Scheuble that it does not need and help, which will only serve to drive its bond yields back up and will continue to keep pressure on the Euro.
Elsewhere the World Bank cut back its expectation of Chinese economic growth this year from 8.2% to 7.75% and on developing East Asia & Pacific in 2012 to 7.2% from the previous 7.6% and in 2013 to 7.6% from 8.0%.
Looking ahead, Angela Merkel will be in Athens today where large scale protests are likely, as she continues her discussions with the Greek PM, on whether Greece has made enough spending cuts to warrant the release of the next tranche of its bailout package, €11.5bn. Without the funds, Greece faces bankruptcy within the next month.
Technically, we should probably expect further consolidation while the arguing goes on in Europe, although the market now has one eye on the upcoming US corporate reporting season, starting tomorrow with the release of Alcoa's earnings, with analysts expecting an overall 2%-2.5% fall on earnings in comparison with 12 months ago, and which would hamper the upside for the equities markets.
The initial support comes in at the first Fibo support at today's 1.2937 low and then 1.2906 (23.6% of 1.2042/1.3171). Below this lies the recent 1.2802 low and then the Fibo support (38.2% of 1.2042/1.3171) at 1.2740, where the rising trendline currently intersects it.
On the topside, 1.3000 will now see sellers, above which lies 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.
There is little economic data out today, with the main action taking place in Athens so expect a further range trade session, given that the oscillators are all a bit mixed, and look for 1.2920/1.3020 as an initial guide.
There is also an EU Fin Min meeting in Luxembourg today.
