EUR/USD: 1.2930The Euro came under early pressure today, falling to 1.2879 on concerns that the Greek debt bailout deal lacked clarity over exactly how it might be implemented. Added to this was the growing apprehension that there is no progress in the US, with time beginning to run out for the talks to resolve the issues of the "fiscal cliff".
Risk markets turned around later on when the House Speaker John Boehner suggested that Republicans could agree a deal to avoid the fiscal cliff and that Republicans are willing to raise revenues if Democrats agree to spending cuts. Obama joined in by saying he was confident that a deal could be reached by Christmas. This has had a positive effect on risk markets in general and seen the Euro rise back to levels, pretty much unchanged from this time yesterday.
Late in the session the US beige book has been released and paints a rather cautious outlook on the US economy, and which is being seen by the market as a possible prelude to the introduction of a QE4 programme to replace Operation Twist when that runs out next month, and which has been generally supportive of risk assets.
Technically the Euro has done pretty much exactly as we expected yesterday, in hoping for a dip towards 1.2875 (low 1.2479) before a bounce in order to make another attempt on 1.3000. We have so far made a session high of 1.2945 and, although progress to the higher ground may yet be seen, it looks like it will be rather slow progress and further 1.2900/1.3000 looks the most likely outcome for today.
The hourlies do point higher and short term dips today look to be supported but the 4 hour charts are pointing in the other direction, although they are flattening out somewhat. The dailies are pretty non-committal and therefore would not expect too much in directional movement in the coming session, and as I say, I think 1.2900/1.3000 may cover it.
The points to watch remain largely unchanged.
On the topside, 1.3000/1.3025 remains the initial area to overcome and I would be surprised to see it break out above this in the next 24 hours, although if/when we do so, the target would be 1.3083 (22 Oct high) and the 17 Oct high at 1.3189.
Support levels are at 1.2900 (minor) and then 1.2875 (38.2 % of 1.2660/1.3008), 1.2835 (50%) and 1.2795 (61.8%).
I suspect following the same strategy today in buying the dips towards 1.2875 - if we see them - is probably the way to go. At the same time, rallies to levels above 1.3000 probably offer short term selling opportunities and I suspect that we won't be too far from here this time tomorrow, although there is a fair bit of data out today that could provide some choppy action later in the session and a good result from the German Unemployment/US GDP could see the Euro rally continue towards the 1.3000 area
Economic data highlights will include:
T: German Unemployment Change, EU Consumer Confidence, Business Climate, US Gross Domestic Product Annualized, Personal Consumption Expenditures Prices, Pending Home Sales, Initial Jobless Claims
