Review: 130 EURUSD was tested and breached
Short-term speculators succeeded in pushing EURUSD above 130.00 and cause a number of stops. Soon after the cross rate fell below the level again (all the way to 129.50), but we are now back again testing the important level at about 130.00-130.35.
The Swedish GDP for Q3 offered a positive surprise (0.5% against the expected level of 0.2%). However, due to a steep decline in retail sales (the lowest level for more than a year), SEK weakened.
The revision of the US GDP resulted in a small reduction (2.7% against the expected level of 2.8%). Pending home sales, however, rose to the highest it has been for 4 years!
Greece cannot buy back its debt. As per agreement with the Troika, the price of the bonds has risen to a level above the maximum price that the Greek state may pay. This is kind of ironic as the IMF has now already repeated that it will not pay out the next loan tranche if Greece does not buy back debt. "Grexit 2012" is still a scenario!
The chief negotiator of the Republicans, Boehner, stated yesterday that he does not see any progress in the negotiations and he demands cuts. EURUSD fell from 129.80 to 129.50.
Market sentiment: The reduction of risks is slowly being mirrored through increases.
Investors are slowly regaining optimism, but it is a problem that all the time new doubts arise about the progress regarding Greece and fiscal cliff – definitely the biggest headaches of the investors.
If these two risks can be eliminated, there is scope for decent increases for risky assets. But … apparently it is not to be that easy.
We do, however, still expect that the problems will be solved and that particularly the end of December and the beginning of 2013 will turn out to be a positive periods.
Today’s most important events:
NOK: At 10.00 : Retail sales
CNY: At 02.00 : PMI for industry (NBS)
EURUSD (NEUTRAL): Level at 130 tested – Boehner gave the market a nasty surprise.
The political game has begun – and it is probably not the last time we hear from the Republicans’ chief negotiator, John Boehner. Also the chief negotiator of the Senate, Harry Reid, made a statement yesterday. He thinks that the agreement that is to be made now should contain a solution to fiscal cliff as well as the debt ceiling (will be an issue in the spring).
We still expect that an agreement will be made in December.
We recommend that investors take the setback as an opportunity to pick up EURUSD.
Resistance and support:
Downside: A breach below 126.50-127.30 paves the way towards 124.75 and then 120.50.
Upside: 130.00-130.35. Then 131.72.
We find investors’ reaction to the opposition’s target of 2-3% inflation and massive stimuli from the central bank exaggerated. This will not happen. But whether EURJPY will continue or turn around here is uncertain – 50/50 probability. Therefore we remain on the sidelines.
GBPUSD (SELL): We recommend SELL; T/P at 157.50 and S/L at 160.85.
Learn more about GBP here.
EURSEK (NEUTRAL): Mixed economic indicators.
- GDP offered a positive surprise (0.5%; estimate 0.2%)
- Retail sales offered a marked disappointment (-1.7%; estimate: -0.5%)
GDP is ‘retrospective’, while to a higher degree retail sales mirror the current situation. On the whole, the probability of an interest-rate cut on 18 December increases.
If we see the range of 875-880, we recommend investors to sell.
Resistance and support:
Downside: 859.90 and 856, and then 850.50.
Upside: 867.00 and then 872 and 879.
EURTRY (SELL): We recommend investors to SELL EURTRY. Stop/loss 234.04.
We recommend that investors adjust stop to entry if we reach 230.50 again.
ZAR: You still have time – read the investment case here.