EURO: 1.3050The Euro had some positive momentum today and eventually broke higher to trade up to 1.3060 on increasing speculation that Spain will eventually apply for a bailout to ease its borrowing concerns. There is little thought of any package being announced at the upcoming EU summit and it now appears likely that it will be in November before any agreement will take place. Bloomberg reports that Germany would be open to a precautionary line of credit for Spain to draw down from and to allow the ECB to begin its bond buying program. Equity markets liked what they saw, headed by Spain which finished up 3.5% (DAX +1.5%, CAC +2.4%).
Elsewhere, the German ZEW economic sentiment survey improved more than expected to -11.5 in October (exp -15), although over half of those surveyed expect the economy to remain roughly at current levels over the next 6 months.
Angela Merkel has been talking up the EU today, ahead of the EU summit, stating that Germany wants to maintain the Euro and that progress is slowly being made in the debt crisis, particularly in Greece, but that the issues will not be solved over night. – Nothing earth-shattering but pointing in the right direction as far as the indebted EU nations are concerned.
Technically, the Euro has broken up and out of its recent range, although it has yet to make it to the 1.3071 high (5 Oct). It needs to break above this in order to progress on to the major downtrend resistance, currently at 1.3150. There is a bit of congestion in the 1.3085/1.3140 area, so I would be doubtful of too much positive momentum to take us much beyond 1.3100 ahead of the EU Summit unless there are some developments regarding Greece/Spain, which looks doubtful. If and when we do go above 1.3150 and daily indicators are currently showing no thought of doing so, then we would look at a swift run towards 1.3280, but that remains some way off – if at all.
The downside now sees bids at 1.3000 and below here at 1.2950, a break of which would suggest a return towards the weeks low at 1.2890 and then down towards major support in the 1.2800/20 area but which looks out of reach for now.
Use 1.3020/70 as an initial guide and wait for statements from the EU for further guidance. The hourlies are becoming a little overbought, although the 4 hours still point higher so I suspect we will have an underlying bid tone today, without actually going anywhere too far ahead of the EU meeting.
Today sees little of importance from Europe, economically but there is some housing data from the US, although most eyes will be on the Presidential debate to see if Obama can improve on his previous effort.
