EUR/USD: 1.2745There is little to report on the Euro into the end of the week as it stuck within its recent 1.27-1.28 range and is looking ominously as though Christmas, for the Euro at least, may have arrived very early. The upside remains limited, given the ongoing concerns over Greece and Spain, while the downside looks equally well supported below 1.2700 and unfortunately it would appear that we have yet more of a sideways drift ahead of us, particularly as the US participation will become increasingly thin as we approach the Thanksgiving long weekend holiday on Thursday.
The market is pretty exhausted with the never ending focus on the political stalemate in Europe, as well as the approaching "fiscal cliff" issue in the US, and it will take some kind of resolve of either of those issues to awaken the market from its slumber. The European Council meeting will take place on Thursday/Friday, at which the next tranche of the Greek bailout package will be discussed and probably passed, and which may result in a bit of a blip higher in the Euro, although suspect, that if seen it may be rather short term and probably fairly shallow.
Technically, the market is pretty stagnant, with the levels pretty much unchanged from a week ago.
On the topside, beyond 1.2800 (and the 200DMA at 1.2806), 1.2838 (38.2% of 1.3171/1.2660) is going to be the first port of call, followed by the descending trendline, now at 1.2865. Above this further sellers would be found at 1.2900 (50% of 1.3139/1.2660) and then at 1.2954 (61.8%), but they look a long way off to me, given the rather neutral state of the indicators.
To the downside, having traded down to, and bounced from 1.2690 on Friday, this becomes the first, minor support, ahead of last week's low at 1.2660. Below this, would head towards the 100 DMA, now at 1.2637, with the next support at around 1.2607 (50% of 1.2042/1.3171) and it would not surprise to see much of the week bracketed by the 100/200 DMA's (1.2638/1.2800).
There is a fair bit of data out over the week ahead, which may provide some short term volatility, although traders will remain focused on the major political events and I would not be surprised to see the dollar move too far away from where we are, but with a bias to possibly see what lies below 1.2700 and possibly down to the 1.2640 area.
The increasing tension in the Middle East may become more of a positive for the dollar as funds flow in on safe-haven grounds. The lack of any outcome on the fiscal cliff negotiations is being touted as a further reason to buy dollars - safe-haven demand etc - although for the life of me, I cannot see anything positive for the dollar in the absence of any compromise. - The equity markets certainly don't see anything constructive for what is currently going on, and have one eye on the growing possibility of a US recession, which the FX markets don't seem to have picked up on yet. Time will tell.
Of other note this week, Ben Bernanke will be speaking on Tuesday at the Economic Club in New York and will be closely watched further hints on the Fed’s next steps for monetary policy.
Stay flexible.
Economic data highlights will include:
M: EU Construction Output, US Existing Home Sales
T: EU Economic Fin Min meeting, German PPI
W: US Housing Starts, Building Permits, Manufacturing PMI (Flash) Reuters/Michigan Consumer Sentiment Index
T: European Council meeting, US Thanksgiving Day, EU Services, Composite, Manufacturing PMI 's (Flash), Consumer Confidence
F: European Council Meeting, EU GDP, German IFO
