Fundamental data out of the U.S. and Euro zone paint a very murky picture as of today, as concerns over financial regulation in the U.S. is put on center stage today with Goldman Sach’s CEOs testifying before congress in the U.S., while Greek unions declare they will strike May 5 against austerity, Germany continues to stall finalizing the aid package, and 10 year bonds spreads are up to a full 4 points today (U.S. 10 year bonds trade at 1/64th of a point for comparison).
EUR/USD continues to rally and then fade as more news from Germany weighed down the recent rally attempts. A German coalition member recommends a Greek debt restructuring in order to get aid. Not a crazy idea but it is a bit late in the game to change the whole program and discussions like these only delay the inevitable while making the politicians look strong in the eyes of their supporters. If they were truly serious about such talks, they should have proposed this three months ago. French FinMin Lagarde says “some” European governments are engaging in parliamentary debates for “posturing” to deal with public opinion. Time is of the essence in dealing with Greece, she says from New York, according to Reuters.
Data out of the euro zone was mixed today:
• German March import prices +1.7% m/m, +5.0%, stronger than median forecasts +1.1%, +4.2% respectively
• French April consumer confidence -37, down from -34 in March and worse than median forecast -33
• Italy April consumer confidence rises to 107.9 from 106.3 in March, better than median forecast of 106.6
• European stocks have followed their Asian counterparts lower.
• Oil off 3/4’s of a buck, gold lower etc
• Consumer confidence was up while home price indices were down in the U.S., but that data has been of little value to the dollar and was largely ignored.
Worries surrounding PIGS in general, and Greece in particular, just keep growing. Despite the facts though, the sell-off has met very strong rally attempts from the big boys as the BIS and central banks have all been seen buying around 1.3365 and other fresh lows. Asian sovereigns have also been reported buying in 1.3330/50 area and another sovereign labeled “top tier” seen around 1.3315. Stops next seen through 1.3280 along with S/L orders just below there and this is a key price level to watch for in the coming days.
As far as the charts go, last night’s rally which strangely began at the close of the NY session met resistance at the trendline I have drawn in on the hourly chart from 1.3585 from April 15th to 1.3523 on the 20th. This leads me to believe that this is a valid trendline for the near term rallies to meet continued resistance at, conversely it is also a good indicator if broken of a much greater rally perhaps into the 1.3700′s. As mentioned above, near-term support comes into play above 1.3280, and if price action can shove its way through that level, we will certainly see a renewed selloff perhaps below 1.3200. That is where the weekly S1 comes into play as well. My opinion is that the EUR is taking a harsher beating than it perhaps deserves, mostly due to the posturing from Germany as mentioned above, and that once the aid is fully realized, we will see investors willing to get on board at least temporarily and ride this currency pair back into the upper 1.3700′s. Watch your support/resistance levels and trendlines for clues as Wednesday and Thursday are the biggest days for new trends to take shape. Good luck to you all!
Most Popular Posts