The USD went up 0.6 percent to 1.29872 against the EUR

Good morning from wonderful Hamburg and welcome to our Daily FX Report. The euro area’s 500 billion euro rescue package fund faces another check as the European Union’s highest court and claims that the firewall violates EU law and should be banned in its current form. The complaint of an independent member of the Irish parliament could cause more difficulties for the ESM and the regions it should help.

But anyways, we wish you a nice day and much success in trading.

Market Review – Fundamental Perspective

The EU court case follows a separate decision last month by Germany’s Federal Constitutional Court in Karlsruhe not to block the ESM. Germany tried as soon as possible ruling handed a victory to Chancellor Angela Merkel, who is advocate the bailout facility as vital to save the euro area from a fiscal meltdown. The ESM will supplant the EFSF, which has spent 192 billion euros of its 440 billion euros on loans to Ireland, Portugal and Greece. The two funds will run in parallel until the stability facility is phased out in the middle of 2013. The European Court will be likely see the ESM for as a necessary complement for the existence of the European monetary union structures. Meanwhile, there have been expressed new proposals about opportunities to strengthen the European Central Bank by monitoring bankers’ amends under draft legislative proposals as an established bank supervisor. In this context, the Frankfurt-based institution would also get the power to monitor risk management, capital standards and remuneration policies and practices, according to the project dated today. The concept says in addition that the ECB would be able to carry out stress tests. The joint action is the gist of the euro area plan to create a banking union to fight against the national debt and financial crisis headed for its fourth year. In case the ECB takes this role, an implementation could happen earliest on the 1st of January, which would enable the euro area to consider allowed direct bank bailouts from its 500 billion euro firewall fund.

Meanwhile, the USD went up 0.6 percent to 1.29872 against the EUR. It touched 1.29520, the strongest level this week. The JPY advanced 0.7 percent to 103.692 versus the 17 nation’s currency. The JPY rose also 0.1 percent to 79.852 versus the USD, after having slipped earlier to 80.012, the weakest since the 6th of July.

Daily Technical Analysis - Our Focus Currencies for Today

CAD/CHF (4 Hours)

The CAD has been decreasing versus the CHF inside a bearish trend channel for more than two weeks now. Two days ago, the rate has touched its support level around 0.93114, where the market experienced demand and boosted up to the upper channel line as well as the resistance level around 0.94104. Widening Bollinger Bands and a recovering MACD are both indicating a further strengthening of the bulls, so a trend reversal seems possible.

Intraday Support & Resistance (4 Hours)

EUR/USD (Daily)

As you can see, the EUR/USD has been moving along a bullish trend line since the 24th of July. After having dropped back several times from its resistance level around 1.31263, the currency pair is approaching its trend line again. Meanwhile, the Bollinger Bands are performing a slight widening, why we have to wait and see, if the combined power of the middle Bollinger band and the trend line is strong enough to push the pair above its next resistance level around 1.31263. Otherwise losses might be seen.

Intraday Support & Resistance (Daily)