Period of despair for both technical and fundamental traders
On one hand, excitement over any major technical-driven run is almost null, with EUR/USD in no man's land and uncommitted big players having reduced their bets to the bare minimum, which implies playing the tiny small ranges mentioned above. On the other hand, uncertainties are enormous, and unless owning a crystal ball, enjoying first-hand insider info or gambling on the next direction, looks like a pretty hard equation to resolve, thus no wonder the price inactivity under present circumstances.
At present, the market has moved away from Spain rescue headlines -bond market pressure has also eased for now - with the focus shifting on the next Greek aid tranche, which appears to be nearing as per latest reports. The EU Finance Minister video conference call, scheduled for today in the European morning, should provide some clarity.
On the other side of the pond, who will become the next US president cotinues to be a close call. Will Obama keep the post as commander-in-chief of the United Stated or will Romney take power? If the latter happened, traders may rethink strategies over the pricing in the duration of QE3, as talk is that ultra-dovish Ben Bernanke may have its days numbered as chairman of the Fed. The US NFP print on Friday will also guarantee more range-trading for today, as traders remain glued to the sidelines.
If the above were not enough elements to keep Euro, US Dollars and the market as a whole at a near stand-still, the 'sandy' hurricane did the rest, drying liquidity after making its way through the US coastline, causing the shut down of all operational capabilities of the NYSE and other bond/derivates related markets for two days. US markets, fortunately, are set to reopen again today.
So, what is the current state of affairs in the EUR/USD?
The pair opens with technicals looking prettier for the bulls, after a vigorous -/+ 100 pips rise from 1.2880 week low - helped by sovereign bids - to peak at new weekly high 1.2980, with heavy sell orders reported now overhead circa 1.3000/10 - . The inraday rally saw price breaking a dynamic resistance from a descending trendline coming from October 18 high, now acting as technical support in dips, around 1.2930 in European morning.
According to Toronto based TD Securities Chief FX, Shaun Osborne, the pair is set for a continuation higher. “Short, medium and longer-term chart patterns are all flashing the same message,” the analyst says: “the markets are consolidating ahead of another push up. We think 1.3020 is reachable in the next day or so,” he concludes.
Commerzbank FX Strategist Karen Jones, defines the market as merely consolidating, although she expects the latest bounce to cause a possible return to 1.3025/45 near term. "We would expect failure here and consider that attention remains on the 1.2803/34 (200 day ma and October low). Failure here would be viewed as negative, and target 1.2472/33 (61.8% retracement and downside measurement of the top 1.3177-1.2803)."