By: Christopher Lewis
EUR/USD continues to bounce around in consolidative action and at the mercy of various headlines out of the EU. The most recent one was an admission that the Spanish weren’t quite able to meet debt to GDP levels, and this shouldn’t have been a surprise to many. In fact, it didn’t even move the market once we started trading on Monday.
The fact is the markets are probably more fatigued than anything else when it comes to all things Europe, and as a result we have a fairly flat day. Also, there is the concern of an ECB meeting later in the week, and the announcement of private bondholders participation in the “haircut” that was decided on as far as Greek debt. (Decapitation is probably a more accurate term.)
The selloff last week was due to a lack of mention by Ben Bernanke of “QE3”, and then the lack of any announcement of another LTRO for European banks. While there are a million reasons to not want to hold Euros at the moment, the reaction to all of this is probably a bit overdone.
Try Not to Fall Asleep
There is a real possibility that we aren’t going to see much in this pair this week. With the central bank meeting and press conference on Thursday, and the Non-Farm Payroll report on Friday, this pair may be fairly silent. The fact is that there would have to be a surprise cut on Thursday, or something as equally unexpected to see the market willing to jump in front of the Non-Farm Payroll report on Friday.
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The weak action on Monday is probably going to be about what one could expect going forward for the next couple of days, and as a result, I am flat of this pair. Also, there are significant clusters of orders going down to the 1.30 level that could act as support, and of course the 1.35 level is resistive as well. My suspicion is that the pair will be much clearer technically after Friday. Until then, I will watch it, but I doubt there is a trade to be had here.