Euro: 1.2895The Euro has remained broadly unchanged but remains under pressure after the IMF upped the ante yesterday, in warning that the EU is exposed to a “downward spiral of capital flight, breakup fears and economic decline”. It added that the risks to financial stability have increased since April as “confidence in the global financial system has become very fragile”.
Spain and Greece, as usual remain very much in focus and with the unrest continuing in Athens following Angela Merkel’s visit, Greek Unions have called for another strike to protest against the austerity measures; this to be held on Oct 18 to coincide with the next EU summit.
In Spain, the bailout standoff continues and it looks as though nothing will happen before the EU meeting. It would appear that Spain will wait until bond yields are pushed higher by the market forces before going to the EU for the bailout that is required. Unfortunately by then, much of the positive momentum generated by the ECB and the EU will have dissipated.
Strong selling today has been seen on all the Euro crosses, and the session has seen it make a low against the dollar at 1.2834 before a mild bounce as the session wore on.
Technically, given the reasonably tight range, there is not too much change.
Below today’s 1.2834 low would see the Euro head towards last week’s lows at 1.2802. Support here should be strong, but a break would suggest further declines to rising trendline support, now at 1.2760 and then to 1.2740 (38.2% of 1.2042/1.3171). 1.2740 should prove very strong at the first attempt, but a break would suggest a steeper decline to the low 1.2600 level where 1.2610/40 area would act as a target.
The upside has seen the Euro squeeze to 1.2912, and the short term downtrend resistance (chart) may well hold this, at least for the next few hours. A break would see a move towards 1.2923 (38.2% of 1.3171/1.2834) and then on to 1.2980 (61.8%), ahead of 1.3000, which looks unlikely to come under pressure in the next few hours.
The 4 hour indicators have flattened out a little but the dailies still point lower and it would seem that for the time being, rallies will be sold into, looking for another leg lower to 1.2800. Overall though, the consolidation will persist and the Euro will remain broadly under pressure while the standoff between the EU and Spain continues, which looks likely for at least another week until the EU meeting.
The Beige Book has just been released, stating that the economy is growing modestly in most areas. It has had zero effect on the market.
Today is a big one for data, with China New Loans due out in Asia, to be followed by German CPI. the ECB Monthly Report and US Jobless Claims, so hopefully we will see something to wake us from the doldrums.
