Players seem to be adjusting position ahead ECB and Bank of England meetings on Thursday and the Bank of Japan interest rate decision and the employment report in US with its all important non farm payrolls numbers on Friday. Market also must pay attention to the FOMC minutes on Thursday.
Market shouldn't expect to much from the Bank of England and no fireworks from the ECB as well as not much reaction in the U.S. Dollar. Mario Dragui's team is supposed to leave interest rates unchanged as they are playing with another tools right now. ECB has passed the ball to the politicians court and despite Germany and Spain are arguing who is the less ready to the bailout, ECB is prepared to act with the announced tools.
But, is the ECB comfortable with its current weapons? that's the question. Experts are divided between the 'calms' who say that there will be an easy ECB meeting with Mario Draghi no new announcements after the 'bazookas' launched in the previous months and expecting politicians movements. Other experts, the changers, are expecting further movements in the ECB, maybe not big announcements but new measures, more easing or more steps to boost economy.
As a short term approach and ahead Thursday big day, Valeria Bednarik from FXstreet.com comments that "the EUR/USD hourly chart shows price fading below 1.2900 after setting a daily high of 1.2936, with 20 SMA now turning lower above current price and indicators entering negative territory, pointing for a test of immediate support around 1.2880 that has been a buyers’ magnet this week."
In the 4 hours chart, the pair holds a quite neutral stance due to recent range, "with technical readings mostly flat," Bednarik adds. "Big stop lay below the 1.2840 level, while I won’t be expecting many fireworks today ahead of mentioned events."
But as Adam Narczewski from XTB well said, "everybody is waiting for Madrid." Uncertainty surrounding the situation in Spain and the recent contradictory reports concerning its bailout timing resulted in the European shares trading mixed and the EUR/USD remaining motionless close to 1.2900.
"The European Central Bank’s OMT program provides a backstop to Europe but its activation is contingent upon the request of a nation," comments Kathy Lien from BK. "In other words, the program is obsolete until a country (ahem, Spain) asks for help."
With the Spanish bailout request in center stage, J.Foley, Senior Currency Strategist at Rabobank argues “Investors will not wait indefinitely and it is very possible that it will take another surge in Spanish bond yields to provide Rajoy with the reason to finally request aid. As a consequence we continue to see scope for pullback in the EUR on a 1 mth view”.
And G.Berry, analyst at the Swiss bank UBS, maintains the bullish stance on the single currency, suggesting “Initial resistance is at 1.2988, a break above would signal fresh extension of gains to 1.3031 and then 1.3085. Support lies at 1.2804 ahead of 1.2758”.
In the view of J.Foley, Senior Currency Strategist at Rabobank, “we see any pullback in EUR/USD in the next few weeks as likely to be short lived”, reinforced by the late Fed announcements, depressing the demand for the safe haven USD. Hopes for further upside in EUR have echoed in the Swiss bank UBS, changing the outlook to bullish from neutral, pointing out that a breakout of the resistance level at 1.2988 would then target 1.3031 en route to 1.3085
Obama vs Romney, the first debate
Us president Barack Obama and Republican candidate for president Mitt Romney will face the first debate in the 2012 election late on Wednesday. The domestic economy will be in center stage with the debate focusing on how the two candidates will do to create jobs and reduce deficit.
Kathy Lien affirms that market players ought to follow the 'face to face' as, despite "presidential debates do not usually have a major impact on the financial markets," such event "will be main focus of media over the next 24 hours and an event not to be missed."
Turkey and Syria's thing
Late on Wednesday news from Turkey said that a mortar shelling was fired from Syria into Turkey, and it seemed that Turkey was firing back to Syria. NATO council was in an urgent meeting later and it published a rejection saying that Syrian shelling was "strongly condemned." The Alliance demanded immediate cessation of such aggressive acts.
Meanwhile, reports say that Turkey would debate tomorrow in Parliament possible military operation against Syria. As Mauricio Carrillo from Fxstreet.com points in its Twitter account later today, "the world is getting worst, if you ever thought that it has been good lately."