Overnight economic news out of Europe was fairly mixed, with Italian PMIs providing a positive surprise but German factory orders continuing to slide. The EUR was sold early in Europe on the back of comments from the Spanish PM but Sovereign bids at 1.2765 again held firm. UK data was poor with retail sales, industrial production and housing data all disappointing.
EUR/USD is in a short-term downtrend but seems to have found a temporary base at 1.2765. Given recent range-trading history, confidence will not be high amongst the bears that a trend is about to develop and the possibility of a double-bottom on the short-term charts will also be unsettling them (see chart). Support nearby at neckline near 1.2810 and there is room for further retracements towards more solid resistance 1.2880/1.2920.
The AUD/USD has consolidated yesterday’s gains and seems to be settling into a slow and steady up-move. Reserve managers are now sitting firmly on the bid near 1.0350 and that should be the initial base and the technical target is the top of the weekly wedge near 1.0600.
EUR/AUD is definitely worth watching as there is important technical support near 1.2220 (see chart).
USD/JPY should be volatile later today as it’s the pair most likely to be moved by the US election result. A Romney win would be seen as risk-positive and USD-positive which should shoot USD/JPY onto the 81 handle at least but with the macro market sitting long, an Obama win will see stop-loss orders below 79.50 come into view very quickly.
Sterling lost a bit of ground overnight after poor economic data but as usual there will be little focus on the pound during Asian trade.
Good luck today.
