EUR/USD: 1.2970Today has been pretty much a non event for the financial markets with most assets retreating a little, given that we still have no resolution to the talks over the Greek bailout package and the negotiations will continue again today. There is a chance of a deal to be announced in late Europe - the Asian morning - so be nimble, - or more likely, there will be no outcome and the interminable wait will continue.
Also weighing on markets are the ongoing discussions to find a compromise over the automatic tax rises and spending cuts that will otherwise come into play on Jan 1 in the US, if the lawmakers are unable to avoid the "fiscal cliff." No progress has been made so far and time is rapidly running out....35 days and counting!
Elsewhere, the Catalan elections resulted in a majority win by the pro-independence parties, although the Spanish government had already made clear that a referendum is unconstitutional and did little to help the Euro, which for its part is little changed, having spent the session in a tight 1.2944/84 range.
The 4 hour charts are now very overbought and look as though they want to roll over and unwind and there are sellers are lining up at 1.3000/25, while the bids are at 1.2900 and below. The possibility of a short term flag-type formation though may need a test of the higher-ground first and if we do get a positive result on the Greek deal, I would imagine a quick spike to the top of the range before the market begins to fade back into the range, but we shall see.
In the meantime the techincals remain unchanged. 1.3025 will be a difficult hurdle to overcome, being not only where the long term downtrend line currently resides but it is also the 76.4% retracement of the move down from 1.3139/12.660. Before then though, we need to get above 1.3000, which should be tricky, but a positive outcome on the Greek deal would presumably take us through here and onto the major resistance. Above this would suggest a move towards 1.3083 (22 Oct high) and then to the 17 Oct high at 1.3189, although the mometum indicators do not look as though they have the legs for this yet.
A return lower would target 1.2915 (23.6% of 1.2660/1.2990) and then 1.2865 (38.2%) although I would be doubtful of going below this in the coming session.
The market looks rather evenly poised and it could all be a little choppy again today but if pushed, I would favour a move up to take a look at the 1.3000 level before a retreat back into the range and probably going nowhere fast.
Economic data highlights will include:
T: US Durable Goods Orders, Ben Bernanke Speech, Richmond Fed Manufacturing Index, Beige Book
