EUR/USD: 1.2935The Euro opened the week in nervous fashion and lower after the Italian PM Monti announced his intention to resign, once his budget has been passed and elections now look likely to be held in February, with Silvio Berlusconi announcing his intention to stand for office. Italian Bond yields headed higher and once again the market became concerned about the possibility of contagion on to Spanish borrowing costs, keeping a lid on the Euro for much of the session. Having seen an early low of 1.2885 it has since slowly regained the lost ground after the favourite to win the election, Bersani, pledged to stand by the budget reforms, and it now sits pretty much unchanged from Fridays close. Attention will now turn to Wednesdays FOMC meeting, with many analysts holding the view that the Fed will again add liquidity into the economy in order to bring down unemployment, and which, if seen would do little to assist the dollar.
Elsewhere, Fiscal Cliff negotiations: Going nowhere fast... 20 days and counting......
From a technical perspective, little has really changed today. The previous Fibo support-turned- resistance at 1.2950 remains intact on the topside and this will be the first hurdle to overcome. The 4 hour charts though have turned mildly higher and a squeeze would see the Euro drift up towards 1.2970 (23.6% of 1.3126/1.2875) and 1.3000 where the minor downtrend resistance lies. Above this would push towards 1.3030 (61.8%) and 1.3066 (76.4%) but looks a little too far off to be seen today.
The downside would see a return to the session low and below this to Fridays 1.2875 low, with the rising trend support currently at 1.2840 and which should be strong, given that it is where the rising trendline from 1.2660 coincides with the 61.8% Fibo level of the move from 1.2660/1.3126.
I cannot really see too much action today and suspect another session of 1.29/1.30 may be in store. The session will be light on data with the German ZEW Survey being the only real point of note on the economic front.
Economic data highlights will include:
German ZEW Survey – Economic Sentiment (Nov), Trade Balance (Oct)
