EUR/USD: 1.3515The Euro had the wind taken out of its sails and turned lower on Monday as EU political concerns returned to the fore, with Spanish PM Rajoy coming under increasing pressure to resign to due corruption reports over real estate deals, and in Italy, polls show that Berlusconi is gaining renewed popularity ahead of the Italian elections later in the month. On top of this, there are growing concerns that the Euro has risen too far too quickly and ahead of the ECB meeting on Thursday, some caution is warranted.
Further pressure on the Euro was seen through Spain’s unemployment hitting 26.02% and a lower than expected EU Sentix Investor Confidence Survey.
Equity markets got hit hard as well with both Spain and Italy down over 3.5%, the Dax down 2.5% and in the US the S+P has just closed down 0.92%.
Thus it looks that ahead of Thursday's meeting we may be in for some choppy trade, with direction largely to be dependent on the outcome of the wording of the Press Conference at the end of the ECB meeting, from Mr Draghi. The general view is that rates will remain unchanged at 0.75%.
Technically, with the Euro having declined a little lower, the 4 hourlies have turned around and now do not look quite as positive as they did at the end of the week. The dailies are also looking less positive and it looks now as though we could be in for some choppy trade in the 1.3470/1.3600 range for the next couple of days. The hourly charts are a bit oversold and I suspect that 1.3500 should hold for the first half of the session, where there are supposedly good bids. If not the rising trendline support is at 1.3470, below which would see further losses towards 1.3430 and possibly to 1.3400.
The topside looks a little limited in the short term and sellers will now appear at 1.3580, 1.3600 and with further sellers layered up to Fridays 1.3710 high.
Today sees EU Retail sales and Services PMI data as the economic highlights, but it looks as though it will be politics that really drives the markets so I suspect flexibility will be required and for the coming session it looks as though 1.3470/1.3570 may cover it.
Economic data highlights will include:
T: EU Retail Sales, Services PMI’s, ISM Non-Manufacturing PMI (Jan).
