The Single currency is still trying to hold its gains above 1.36 versus the greenback after it could find support by a well-covered Italian 10 years bonds issuance earlier yesterday at yield average lower than Wednesday new recorded highs since the beginning of adopting the Euro which reached 7.37% while the Italian senates are rushing to vote today on passing new austerities measures which can be followed by Berlusconi's resignation.
From the another side, The worries about the Greek political have eased back too as the position of the new united Greek government PM has gone to Lucas Papademos who was the previous ECB vice president. Papademos can really find acceptance from the European side but it is hard to have more than what Papandreou had from the Greek street to add more austerity measures.
The single currency could gain also yesterday as the ECB has begun this week its second plan of buying covered bond worth 40b euros and this announcement has come with remarks from Knot Kuasa who is the ECB's member heading the Dutch central bank saying that the ECB is doing all what it can and it is not expected to do more than what is has already done for solving the debt problem indicating that the intervention impact is usually temporary and solving the problem is up to the governments.
While the greenback was coming under pressure because of the improving of the investors' risk appetite as the US weekly initial jobless claim has eased in the week ending on 4th Nov to 390k and the market was waiting for 402k showing continued gradual improving of the US labor market after last week data has shown increasing of Oct US ADP to 110k while the markets were waiting for 100k revising up September reading to 116k from 91k and also October US Labor report which has shown decreasing of the US unemployment rate to 9% while the market was expected 9.1% as the same as September producing 80k jobs out of the US farming sector while the market was waiting for 100k with strong up revision of September reading to 158k from 103k.
But this does not object that the single currency is still subjected to further falls as the markets worries about the debt crisis negative impact on the EU countries creditability are still looming driving up the bonds yields of these countries beside the growth downside risks which are facing the Euro area forcing the ECB to adopt easing steps for underpinning liquidity and stimulating the struggling EU economy which can fall in a mild recession at the end of this year as the new ECB president Mario Draghi has warned last week after the ECB decision of cutting the interest rate by 0.25% to be 1.25% despite the inflation annual rate holding at 3% yearly initially in October as the same in September and these down side risks have been materialized obvious recently to the markets participants with the recent release of Oct EU PMI manufacturing index which has fallen to 47.1 from 48.5 in September and also Oct EU PMI services index which has fallen to 46.4 from 48.8 in September shown continuation putting pressure on the single currency.
God willing, EURUSD can face now resistance at 1.387 which hold more than one time in the face of its ascending and breaking it can lead to test higher resisting levels at 1.3959 before the psychological level at 1.4 which breaking it can open the way for 1.4199 then 1.4245 again before 1.4279 which has been reached by the SNB's action to limit the EURCHF drawing down over 1.2 while the way down can be met by supporting level at 1.3483 whereas the pair could rebound yesterday and breaking it can be followed by another supporting level at 1.3359, 1.3232 then 1.3144 whereas it has begun its recent rebound on 4th of last month reaching 1.4245 after the EU summit agreement in Brussels on 27th of last month.
FX Market Strategist
Walid Salah El Din