The EUR/USD Finds a Range as Indecision Rules
So Mr. Draghi isn’t making the trek to Jackson Hole, after all, he does have some pressing matters to attend to. One less thing to worry about: The Italian bond auction was a sign of confidence from investors. This means that traders are expectation that the ECB will step up. The good news is that Italy sold 9.12b dollars of its debt at below 6%. But alas, no one paid attention to this good news as the euro sold of early in Thursday’s trading.
The euro slid in front of Bernanke’s Friday speech and news that Spain was going to delay a bailout until terms were clarified (read: Spain does not like the terms.)
One thing that the market hates is uncertainty and the eurozone not getting along. This was a dose of both.
Another bit of data that was a drag on euro optimism was the fifth straight month of German umemployment increase. While the 2k miss from the 7k consensus may not seem like a reason to panic, notice the trend since May.
Ultimately today’s euro and U.S. equities weakness makes sense as traders are unwinding some expectation that Bernanke will clarity his position on QE Friday. Frankly this event is not the time nor place and with NFP next Friday it would be a mistake move to make any clarification before the jobs number; and Bernanke knows this. The Dow and S&P futures have both dipped below their respective major psychological levels, so with the ES contract under 1,400 and the YM contract under 13,000 there is some pessimism being discounted and we can’t put all the blame on Europe. The U.S. Dollar Index (DX) remains trading within the bear flag I mentioned in yesterday’s update.
Past performance is not indicative of future results
Ther daily EUR/USD remains near-term bullish on the daily but has begun to consolidate (narrow sideways trading range) between the 1.2588 high and the support along 1.2500 as well as the 89 period EMA close.
I think it’s worth mentioning that the weekly EUR/USD remains in a firm downtrend and the resistance seen on the daily time frame is actually weekly 20 period SMA close and 34 period EMA low resistance. While I rarely trade enter spot trades off weekly chart analysis, this is an excellent opportunity with relatively low volatility to look for put options (futures) for the euro and/or EUR/USD.
As an active forex trader and Chief Currency Analyst for InterbankFX.com I do write for a number of sites all over the web and I am happy to say that I will be posting updates at www.IBFXconnect.com. My Activity Board will feature the trades from my trading account as well as intraday commentary.
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