Fx commentary EUR/USD January 26, 2012
It sure is looking like the move to 1.3200 is likely. As I mentioned yesterday if the break was convincing and it was with a nice rejection seen on the daily chart. Now it has closed on its highs above the 1.3080 level resistance. I can say I expected the rise but was a bit surprised by the 100 pip drop during the London session. The short missed my entry by about a pip.
The fundamentals backing this I assume was the Bernake speech when he admitted that QE3 is still on the table. This naturally created a risk appetite for the markets but if history tells us anything it wont do much for the real economy. However stocks do look better in the short term and I do expect this to continue.
There were also signs from the ECB that helped this rally. There seems to be some lightening of the weight for the ECB to take the hair cut on the Greek bonds it holds. Germany and France are totally against the idea but the fact that the ECB is considering the option is big. Dont get me wrong they have rejected the idea many times but should it actually come to fruition then it will be a major step to making Greek debt sustainable in the future. It seems now they are seeing the light on the issue and may not have a choice. I have seen many reports from economists stating that even a 100% PSI involvement will not make the debt sustainable and I agree with the math. There was also talk that other European Central Banks may join in the hit also. So far it was only the Greek CB that was going to be in with the hair cut from what I have read. this will all be very helpful for Greece if it does in fact happen. At that point its entirely possible to see 1.3500 for the Eur/Usd in the near future.
News today is light again for the EZ with just more consumer climate data. however there are some biggies for the US with durable goods, unemployment claims and new home purchases. Any surprise to the upside with these releases and risk will be full on most likely and the euro will rise again. The wild card is the unemployment numbers. If that one is a disappointment then risk may be subdued.
Now to the charts. I have already mentioned the bullishness on the daily so that leaves the 15 minute to discuss. I do expect a bit of a retrace during Asia but both Australia an Chinese banks are closed today so movement will most likely be slow and range bound. I will be looking for a small stop run at the open of London session and intent to drive it north. Then a pullback and take the long.
Happy trading all