Vantage FX | Euro Under Pressure | 10th December 2012

December 10, 2012

US nonfarm payrolls were surprisingly strong Friday night rising 146,000. Were it not for the fiscal cliff worries and comments from Republican House Leader Boehner saying that President Obama had wasted another week stocks would have been much higher.

But in all likelihood Asia is going to have a positive day given the Chinese data that was out over the weekend. Growth in factory output was up 10.1% year on year at an 8 month high in November. Retail Sales were also out and showed a 14.9% rise from a year ago.

Remember last week we noted that Chinese growth expectations were being revised higher for 2013 – this will reinforce that notion.

Indeed Reuters reported Merrill Lynch said in a note that,

 “The Chinese economy is now in a sweet spot and can stay in the sweet spot through the first half of 2013,” said Ting Lu, an economist at Bank of America-Merrill Lynch. “Beijing will be happy to sustain the current policy stance.”

China is drifting in for a soft landing and CPI data also out over the weekend showed just a 2% rise in prices year on year. So it’s growth without inflation.

This is also a positive for the AUD which continues to threaten to break higher and remains well supported.

In Europe, it is a different story however with the Bundesbank downgrading the outlook for German growth and the Technocratic government of Mario Monti under pressure. Even though Greece is said to have almost completed its 30 billion Euro worth of debt buy backs the Euro will remain under pressure as it was on Friday night.

Stocks

At the close US markets were higher with the Dow up more than 80 points or 0.62%, The Standard & Poor’s 500 Index added 4.13 points, or 0.29 percent, to 1,418.07 while the Nasdaq fell 0.38 percent, to 2,978.04. Stocks in Europe were broadly higher withe the FTSEurofirst 300 index up 0.07%.

FX

As noted above Euro was under pressure trading down to a low of 1.2878. As I have noted recently my overriding belief is the Euro should be lower and the failed break higher and sharp reversal cost my trend following systems a little coin but reinforced this bias.

The chart above of the daily candles from my Vantage mobile platform shows the failed move higher and subsequent reversal. Could Euro have a tripe top and thus a full retracement back toward 1.26? I think so.

For the AUD it is a very different story as it slowly grinds higher from the 1.0150 low a couple of months back.

The AUD remains well supported and while it continues to have solid overhead resistance in the 1.0525/35 region it seems biased higher into years end.

Commodities

Crude fell 33 cents Bbl to 85.93 while Spot gold inched up 0.2 percent to $1,702 an ounce, bouncing back from a one-month low of $1,683.79.

Thoughts, comments, queries together with frank and fearless feedback all welcome. I’m happy to answer questions or comments on the comment stream wherever I can

NB: Please note all references to rates above are approximate and should not be used for trade reference.

Catch me on Twitter @gregorymckenna or @FX_Global

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