EUR/USD: 1.3075The Euro is unchanged today, having traded a relatively narrow 1.3040/1.3100 range, despite concerns over the cautious comments regarding progress on the "fiscal cliff" issue that has seen a retreat in global equities.
Time is rapidly running out here, and with the market having apparently already forgotten about the FOMC decision to add an extra $45 bio per month to the US economy, focus today turned to the Speaker of the House John Boehner, who stated that "risk remains that all tax rates will rise" on Dec 31, given the lack of progress in negotiations with President Obama. The equity markets and the dollar will come under increasing pressure now as the deadline approaches and both will find it very difficult to make any substantial gains.
Elsewhere today, with the market watching the political scene in Italy, it appears that despite Mr Monti's resignation , he is being encouraged to run for the office of PM at the election, - which should he do so, and win - , would be a boost for the Euro. He is currently an appointed PM, but if elected, would have much more legitimacy to carry out the required reforms.
Also today, the Eurogroup has agreed to disburse a €34.4bn tranche of aid to Greece, which has been delayed since June, and the EU took another step towards banking union with the ECB being given responsibility for regulatory control of the Eurozone banks.
Technically, not too much has changed for the Euro, although the 4 hour charts, which yesterday had good positive momentum, are now running out of a little steam following today's rangebound session and we still need to get above 1.3100 , with the initial target being 1.3123 (5 Dec high). A break of this would most likely see the Euro head on to the 17 Oct high at 1.3139 and then to 1.3168 (14 Sept high). Beyond this, the medium term target would be the 1 May high at 1.3283, but wont be seen today
The dailies are remain pretty flat, so, as with yesterday, I do not think we should be getting too carried away on the topside, and although I can see the momentum carrying us a bit higher, it looks as though it may be a choppy ride. The 4 hour Stochastics and RSI’s though, have unwound some of their previous overbought status and therefore do have some room to move a bit higher should they choose to do so. As with yesterday, if we do head towards 1.3120/50 area, I would consider lightening up on any long positions, or at least raising stops in order to lock in profits.
A return to the downside would again see bids at the session low at 1.3040. In the short term I don’t think we are going too much under here but a break though would see a return to the minor Fibo support (38.2% 1.2875/1.3096) at 1.3013. If we go back below 1.3000 now, it would look as though a minor top may be in place and which would suggest a return towards the rising trendline, now at 1.2936 and then possibly lower, although this currently looks to be unlikely today.
For the coming session, use 1.3020/1.3120 as a guide.
Economic data highlights will include:
European Council meeting, EU Manufacturing/Services Flash PMI (Dec), EU CPI, US CPI.
