Given all that has happened Friday the 13th will likely hound the Eurozone for some time, with the dramatic news clips of an Italain cruise ship running aground, to the more mundane move of credit ratings agencies to make de jure what markets have been saying for sometime, European debt is risky. While ordinary individuals may find a ship on its side chilling businesses in Europe will probably be feeling the cold more in the debt market following Fridays S&P downgrades for France and Austria, along with seven other European countries. Though this is not an unexpected move the ‘official’ recognition as it were would likely raise yields in the Euro area once more after the recent spate of good auctions. More to the point it would undermine the ability of the EFSF/ESM to leverage itself enough to cover the needs of the region as the move exposes the fund to a potential downgrade as well. For the currency market the move by S&P paves the way for Euro and Cable to test key support levels against the greenback with 1.2583 once more exposed in Euro and Cable just needing a close under 1.5294 to see a possible cliff dive for the two against the greenback with charts suggesting a 10 big figures in the offing. Going forward with the US on a holiday we expect to see technical trading for the day though given the timing of S&P’s announcement last Friday markets will likely be vulnerable to a European response to the move in morning trade later.
The initial sell-off on news of a European downgrade quickly saw a reversal in midday trade from New York to see Kiwi with a long tail at the end of the day. Daily indicators show mixed signals with stochastic coming off overbought levels while macd remains bullish. Note we still have the daily EMA lines pointing up for the next up-leg. In the lower time frames we are seeing mixed signals from 4H and hourly indicators. In the former we have stochastic pointing up while macd is dropping, hourly indicators for their part are heading the opposite directions. Given the long tail we have in the daily charts and bullish EMA lines we consider Kiwi as a buy on dips.
With the broad based risk aversion, Cable ended the past week below the body of previous range plays in the weekly chart. From the daily picture we have a high wave spinning top with indicators showing a bearish cross in both daily macd and stochastic. Note our immediate support is a key level at 1.5237. In intraday charts we are seeing mixed signals with hourly indicators showing a confluence of bears macd flat below the signal line while stochastic is dropping. 4H charts for their part has stochastic heading up while macd is flat. For now we see little sense of urgency, consider shorts from just under 1.0532 or on an hourly close below 1.5273.
Friday saw a high wave spinning top in Aussy though a poor open in the ASX 200 appears to be fuelling another attempt at a sell-off. Daily indicators now has macd’s poised at a bear cross while stochastic is also headed down. Note we appear to be forming a big picture double top with a strong support at 1.0145 as its trigger though we also have daily EMA lines just beneath market prices. In intraday charts we have a confluence of sells for Aussy with hourly stochastic oversold and macd’s dropping. We also have both macd and stochastic down in the 4H picture. It appears that we are building bearish momentum for Aussy look for the current sell-off to lead to a test of 1.0145. Consider shorts from just under 1.0277.
Given the broad based Euro dumping we have EURCHF easing further on Friday clearly heading for the SNB’s 1.2000 floor with speculators also looking to test the resolved for the banks new leadership. Indicators show a confluence of bears with stochastic oversold and macd opening lower. In the lower time frames we see bear signals for both hourly and 4H charts. Stochastic is in the process of moving to oversold areas in both time frames inline with a bearish macd. At this point we prefer a buy on dips counting on the Swiss National Bank to continue its intervention program defending the declared floor of 1.2000 in EURCHF.
With the credit downgrades across the Eurozone, EURUSD in the send saw new lows with the daily candle a big black coming off the 21D EMA. Daily indicators see a stochastic in oversold levels while macd is dropping, at this point we have a downside gap at the open though little follow through. From the lower time frames we are seeing sell signals in both 4H and hourly macd and stochastic. For the former we have stochastic oversold while in hourly charts stochastic is poised to drop to oversold levels. Given the absence of a follow through sell-off to the poor open we prefer looking for shorts on after the gap is covered coming off the 1.2689 congestion resistance from New York trade.
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