Euro slips back in Asia
Date: Monday 24 May 2010Having seen the Euro rally strongly late last week and post its first weekly gain in six it would be tempting to think that the single currency has found some sort of base after the declines of the past few months.
The US dollar index also posted a significant daily bearish reversal on the back of the Euro rally, however rising tensions between North and South Korea have pared those recent losses.
This Euro rebound is likely to be a brief respite in the overall decline while market fears of some form of intervention by the European Central Bank prevail.
Last week’s passing of the German portion of the of the euro rescue bill may have given short term succour to the markets, but if any reminder were needed of the problems facing the Euro zone then it was provided by Spain at the weekend when the Bank of Spain stepped into rescue one of its biggest regional banks (Cajasur) as a good portion of its property loan book went bad.
This move followed last week’s action by the Bank of Italy to suspend mark to market requirements on Italian bank exposure to euro government bonds, has fuelled market concerns that an Italian bank may have significant bad sovereign debt exposure.
In the UK today the coalition government will announce where the first £6bn worth of spending cuts will fall amidst fears, that combined with the current problems in Europe, the economy could fall back into a double-dip recession.
EURUSD – the bullish candle pattern identified last week has continued to keep a floor under the single currency. The 1.2450/60 break out level, continues to act as support as does the inverse head and shoulders neckline on the 4 hourly charts at 1.2430. The Euro needs to stay above this key breakout level to sustain a move to 1.2750 provisionally. A break below 1.2400 retargets the lows around 1.2140 while, a break and close below 1.2135 50% retracement level support would suggest a move towards 1.1700.
GBPUSD – the pound has continued to find support around the lows between 1.4230/50, holding above them on three occasions last week. This potential triple bottom remains the key obstacle to a test of the next support around 1.4110 which is the 30th March 2009 lows on the way to a test of 1.4000. 1.4000 remains a key support on a monthly close. 1.4500/20 remains the key obstacle to a test of 1.4780 and 1.4850.
EURGBP – the upside break above 0.8620 last week has been maintained and has continued to act as support on dips. 0.8620/30 should continue to act as support while 0.8780 remains the next obstacle for a further push higher towards resistance at 0.8830.
We do still need to be mindful of the support at 0.8500 a break of which should target the lows around 0.8400, and then a break lower towards 0.8250.
USDJPY – despite the rally in the Euro the yen has continued to strengthen on continued risk aversion.
Rallies so far have been restricted to the 90.70 area and there is also resistance around 91.20 area.
While the current risk off scenario continues to play out, rallies could well continue to be restricted, as the yen benefits from its status as a safe haven and the odds now favour a re-test the 4 month lows around 88.00.
The US dollar index also posted a significant daily bearish reversal on the back of the Euro rally, however rising tensions between North and South Korea have pared those recent losses.
This Euro rebound is likely to be a brief respite in the overall decline while market fears of some form of intervention by the European Central Bank prevail.
Last week’s passing of the German portion of the of the euro rescue bill may have given short term succour to the markets, but if any reminder were needed of the problems facing the Euro zone then it was provided by Spain at the weekend when the Bank of Spain stepped into rescue one of its biggest regional banks (Cajasur) as a good portion of its property loan book went bad.
This move followed last week’s action by the Bank of Italy to suspend mark to market requirements on Italian bank exposure to euro government bonds, has fuelled market concerns that an Italian bank may have significant bad sovereign debt exposure.
In the UK today the coalition government will announce where the first £6bn worth of spending cuts will fall amidst fears, that combined with the current problems in Europe, the economy could fall back into a double-dip recession.
EURUSD – the bullish candle pattern identified last week has continued to keep a floor under the single currency. The 1.2450/60 break out level, continues to act as support as does the inverse head and shoulders neckline on the 4 hourly charts at 1.2430. The Euro needs to stay above this key breakout level to sustain a move to 1.2750 provisionally. A break below 1.2400 retargets the lows around 1.2140 while, a break and close below 1.2135 50% retracement level support would suggest a move towards 1.1700.
GBPUSD – the pound has continued to find support around the lows between 1.4230/50, holding above them on three occasions last week. This potential triple bottom remains the key obstacle to a test of the next support around 1.4110 which is the 30th March 2009 lows on the way to a test of 1.4000. 1.4000 remains a key support on a monthly close. 1.4500/20 remains the key obstacle to a test of 1.4780 and 1.4850.
EURGBP – the upside break above 0.8620 last week has been maintained and has continued to act as support on dips. 0.8620/30 should continue to act as support while 0.8780 remains the next obstacle for a further push higher towards resistance at 0.8830.We do still need to be mindful of the support at 0.8500 a break of which should target the lows around 0.8400, and then a break lower towards 0.8250.
USDJPY – despite the rally in the Euro the yen has continued to strengthen on continued risk aversion.
Rallies so far have been restricted to the 90.70 area and there is also resistance around 91.20 area.
While the current risk off scenario continues to play out, rallies could well continue to be restricted, as the yen benefits from its status as a safe haven and the odds now favour a re-test the 4 month lows around 88.00.
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