EUR/USD: 1.2815The Euro is pretty much unchanged today, despite the fact that Moody's downgraded France's sovereign credit rating by one notch from AAA to Aa1, maintaining a negative outlook and citing "deteriorating economic prospects" due to "subdued domestic and external demand" and uncertainties in the fiscal outlook as reasons for the downgrade.
The EC meeting is underway in Brussels, with no results at this stage on whether Greece will receive the next tranche of the bailout package, but the Press are reporting that lengthening maturities on Greek debt and lowering rates on the country's bailout loans are the main options being discussed. Overall it looks as though the bailout will be approved and appears largely written in to the market, which is not to suggest that there won't be a bit of a relief rally if/when a positive outcome is announced, but I suspect any Euro strength will be rather short-lived.
Over in the US, Ben Bernanke told the Economics Club of New York that America could be pulled into recession unless politicians reach a deal over the expiring tax cuts and spending reductions that are due to hit in January. He urged a quick resolution on the subject of the fiscal cliff, although he retained a pretty neutral stance and had little effect on the markets, with the S+P trading a fairly quiet session. (S+P +0.7%). Any potential upside was capped though, when he said that the Fed doesn’t have the tools to deal with the full harm of going over the fiscal cliff.
In the meantime there is little change and the technicals remain the same. The Euro is still sitting at 1.2800, right on the 200DMA and the hourlies have now largely unwound their overbought conditions, seen this time yesterday. The 4 hour charts are still showing the potential for some further strength but look a little uninspiring, and thus a neutral stance is currently required.
If we do head a bit higher the points to watch remain at 1.2838 (38.2% of 1.3171/1.2660), followed by the descending trendline, now at 1.2842. Above this, sellers would be found at 1.2900 (50% of 1.3139/1.2660) and then at 1.2954 (61.8%)
On the downside, today’s session low has been1.2764, a break of which would head towards Fridays low at 1.2690 and then to last week’s base 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).
It could be a bit of a busy session in Asia, with direction depending on the press conference at the end of the EC meeting, but overall, with the indicators being rather mixed, I would think that the 200 DMA will continue to act as a bit of a magnate.
Conditions will begin to get a little thin later in the session as we approach the US Thanksgiving weekend.
EC Meeting, Rts/Michigan consumer sentiment index.
