Euro finally breaks lower respecting Draghi’s comments, Aussie strong

May 12, 2014

The big news for traders is the reversal of the Euro last week.

Even though there was a 24 hour time delay traders wandered into the office on Friday in a decidedly more bearish mood recognising that ECB boss Mario Draghi  had indeed signalled not only the start of it’s own round of quantitative easing but probably more tellingly that he had intervened up near 1.40 again.

So even with solid trendline support the path of least resistance near 1.40 seems to be down – at least for now.

Euro has now broken a 10 month uptrend on the dailies and the target is a test of the recent low at 1.3663 and below that the very big level of the 200 day moving average of 1.3613.

Of course readers know that I see no value in Euro up at these dizzy heights and not even in the 1.36’s – I have been waiting for some time for the turn based on fundamentals and now the technicals are tentatively signalling a coincidence of a turn in the technical back drop as well.

It has only been a few days so far but we’ll see how it goes from here. I’m short.

Anyway turning back to Friday night’s other moves and we see while the Euro fell the Dow submitted another peak closing at a new all-time high of 16,583.34 for a gain of 32 points or 0.2%. The Nasdaq rose 0.5% to 4,071 and the S&P 500 rose 0.15% or 3 points to 1,878. Big news from Apple with speculation it was buying Dr Dre’s Beats headphones company for $3.2 billion.

In Europe, stocks and the euro were under a little pressure on Friday after some weak corporate results. The FTSE fell 0.36% to 6814, the DAX dropped 0.27% to 9,581 and the CAC lost 0.66% to 4,477. In Milan and Madrid, Europe’s high beta markets stocks fell 1.56% and 0.98% respectively.

Australian markets will likely be quiet ahead of the NAB Business Survey which will give a window into Australia’s corporate health now and into the future. On Saturday, June SPI 200 Futures closed at 5455 bid, largely unchanged after a 28-point range Friday night.

Turning to the other Forex markets and the US found its mojo after the euro figured out a monetary easing is on the cards as noted above deeper pullbacks seem only a matter of time which could impact the Aussie, pound and yen. As it sits this morning, euro is at 1.3752, the pound is down at 1.6842 and USDJPY sits at 101.87. For the Aussie, it is still fairly strong, sitting at 0.9357. The Aussie might be impacted in the run up to the Budget tomorrow night and a retest of 93 cents seems likely.

GBP looks biased a little lower as well even though it is in a fundamentally different economic position to Europe.

Target 1.6795 and if that breaks 1.6702

On Commodity markets, Nymex crude closed just above $100 Bbl at $100.03, Gold is becalmed at $1289 oz and Copper is back at $3.10 for the first time in weeks. On the Ags, the excitement continued with Corn and Wheat down 1.61% and 1.75% respectively while Soybeans rose 1.81%.

On the data front, it is a lean day with Just the NAB Business survey, second tier Japanese data and the US budget balance.

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