Consolidation with Euro off its lows with second tier data the only distraction
City Index July 26, 2012 1:00 PM
<p> EUR/USD Range: 1.2127-1.2162 Support: 1.2000 Resistance: 1.2200 The Euro consolidates in Asia around 1.2150 following a spectacular rally from the 2012 low of 1.2037 […]</p>
The Euro consolidates in Asia around 1.2150 following a spectacular rally from the 2012 low of 1.2037 on Tuesday. The catalyst behind the short squeeze was comments from Ewald Nowotny the governor of the Austrian Central Bank and a voting member of the ECB that he sees a possibility of allowing the ESM to apply for a banking licence which would increase the ESM’s ability to provide bailouts by leveraging its euro 500 million in cash via loans. I’m extremely sceptical of such comments as to allow this licence the EU constitution would need to be amended by all members hence I’m still in the sell rallies camp to 1.2200 for a renewed attack on the physiological 1.2000.
Range: 1.5470 – 1.5496
Sterling holds up reasonably well in the G10 space despite what can only be described as an appalling GDP number yesterday. The second quarter growth number came in way below expectations of -0.2% at -0.7% and in true British style the weather was blamed. There is media speculation today that the UK could lose its AAA rating after such dismal growth. The reaction to the number has me cautious of being short so I’m sticking with my EUR/GBP SELL rallies to 0.7900 idea.
The lifestyle currency is trading close to 200 points higher from the lows seen following the Australian inflation data that confirmed that there is room for the RBA to cut rates further if the global growth picture doesn’t improve. The AUD looks to be driven via the crosses with EUR/AUD seeing relentless pressure with speculation this could be driven by a certain European central bank that is protecting a peg in spectacular volumes and then having to diversify away from the European single currency.
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