EUR/USD: 1.2980The Euro traded a choppy session on Friday and having tested the major downtrend resistance at 1.3025 (high 1.3027), headed a bit lower to finish pretty much unchanged on the day.
The Euro was not helped by the German Retail Sales and the record-high unemployment for the Euro-zone. Late in the day, Moody's downgraded the credit ratings on the European Stability Mechanism (ESM) and the European Financial Stability Fund (EFSF) which further capped any gains.
Elsewhere on Friday, Germany voted to approve the release of the funds for the Greek bailout package, while in the US, the negotiations over the budget package continue, without making any apparent progress. The Jan 1 deadline here is now fast approaching and every day that goes by is going to have investors becoming increasingly nervous and as we saw last weeks, statements from the politicians are going to cause some nasty spikes.
With all the uncertainty, neither the Euro nor the dollar can really make any gains and it looks as though we are going to chop around current levels, at least early in the week. Europe have not yet had a chance to digest the Moody's downgrade and it could be that it will come under a bit of pressure when the European session begins today.
China released its Manufacturing PMI over the weekend with a 7 month high at 50.6, and which will provide a bit of support for the risk associated currencies, including the Euro.
Technically, there is little change to the last few days.
Having tested and failed to overcome the major 1.3025 resistance at the first attempt, it remains intact and could well continue to cap the topside. Despite making slightly new highs at the end of the week, the 4 hour MACDs are not really supportive of further strength and I would therefore suspect that we may be in for yet more 1.2900/1.3000 early in the week. The dailies do look mildly positive though, and therefore an eventual drive higher to target the large stops that will be lying above 1.3025 would not surprise, with the next upside target lying at 1.3083 (22 Oct high) and the 17 Oct high at 1.3189.
On the downside, the support levels are now at 1.2940 (minor), below which lies 1.2900 (minor) and then 1.2887 (38.2 % of 1.2660/1.3027), 1.2844 (50%) and 1.2800 (61.8%).
There is plenty of data out in the week ahead, including the ECB rate decision to keep an eye on and while I suspect the coming sessions will remain choppy, a test of the higher ground to target the stops, could eventually be on the cards, with the real direction probably to be guided by the Non Farm Payrolls on Friday and of course the potential for further Quantative Easing.
Economic data highlights will include:
M: EU Manufacturing PMI (Nov), US ISM Manufacturing PMI (Nov), Construction Spending (MoM) (Oct)
T: EcoFin Meeting, PPI,
W: EU Composite, Services PMI (Nov), retail sales, US ADP employment, Factory Orders, ISM Non- Mfg PMI
T: EU GDP, German Factory Orders, ECB IR Decision/Press Conference
F: NFP Unemployment, Reuters/Michigan Consumer Sentiment Index (Dec)
