EUR/USD: 1.2820The Dollar finished the week with some good gains and sent the Euro back towards its recent lows, just holding onto the 200DMA support at 1.2830 and above the 1st Oct low at 1.2802, but looking fragile.
With the Non Farm payroll number, (+171K/Unemployment 7.9%) above expectations of 125K, short dollar and long equity positions were cut ahead of the election on Tuesday and it maybe that we sit and consolidate until the result of that is known. A Romney win would probably be dollar positive, given his business friendly stance and would attract foreign investors back into US equities. An Obama win would probably reflect more of the same as previously seen and possibly be mildly dollar negative in the short term, but ultimately unlikely to be going anywhere fast, with the existing ranges likely to persist.
Although the Euro currently looks a bit weak, the dollar is unlikely to have everything its own way as we head towards Christmas. The issue of the "fiscal cliff" of higher taxes/spending cuts in the US is looming early in the New Year and if Congress is unable to reach any compromise, any dollar strength looks as though it will be a hard won affair.
The Euro does look heavy though, and it was not helped on Friday with the 15th consecutive monthly contraction in the EU manufacturing PMI data. Elsewhere in the EU, Greece and Spain, as always, are the points of focus. The Euro remains under pressure from last week's Greek court ruling that pension reform to raise the retirement age may be unconstitutional. This has not eased the concerns of foreign lenders and raises doubts as to Greece's ability to implement the austerity measures needed to secure the next tranche of the projected bailout funds.
Technically, as I have said we are sitting at important support. There are bound to be stops under 1.2800 and it doesn't take Einstein to suggest that at some stage the market will drive towards them. There is not a lot immediately below 1.2800 to hold it, but further bids will be seen at around 1.2745 (18 June high at 1.2747) and Fibo support at 1.2741 ( 38.2% of 12042/1.3171) , below which lies 1.2692, the 29 June high.
The topside should now be contained at 1.2885 and then at 1.2910 and 1.2975, all of which look a bit doubtful early in the week.
I still prefer the downside, but as usual the ranges may well hold it, so I would not go overboard. If we do take out the stops sub 1.2800, the 1.2740 area may well hold for another rally back into the range. Until the US election result is known, don't get too excited either way.
Economic data this week will include:
M: EU Sentix Investor Confidence Index, US ISM Non Mfg PMI
T: US Election, EU Services PMI's, EU PPI, German Factory Orders.
W: EU Retail Sales, German IP,
T: German Trade Balance, Greek Unemployment, ECB Meeting/Interest Rate Decision/Press Conference, US Trade Balance
F: German CPI, Reuters Michigan Consumer Sentiment Index, US Wholesale Inventories.
