Today was one of those days where headlines continued to be negative but the risk stabilized/recovered.
- US consumer confidence from the conference board came in at 62, missing forecast of 6.38, and is the lowest since the November 2011 reading.
- Egan Jones cuts German credit rating from AA- to A+. Somewhat of a surprise in that it has been seen as the strongest economy in Europe right now. Still, being exposed to a lot of troubled sovereign debt does make Germany more fiscally vulnerable.
- Bloomberg reports that Mario Draghi is considering further ECB rate cut
Still, the EUR/USD was able to flatten, stabilize and return to highs capped so now at 1.25, but this is being tested as I wrap up these notes.
There might be some resistance near the previous session high at 1.2527. Although there is still risk to the upside, I believe that ahead of the EU summit, without actual positive headlines, the recovery swing that started today will be capped under the 1.2625-1.2635 area.
EUR/USD 1H chart 11:18PM EDT 6/26/2012
SP500 made new highs today, which was basically a sign that risk-off trades would be in trouble. The market indeed rallied to levels that made the bearish outlook unclear. Maybe we are going to get another rally swing.
The USD/JPY short trade idea (link) can be concluded now, or be reduced in position size. The market has already reached our targets and is showing bullish divergence in the 1H chart with the RSI . It is also trading around the 200-hour SMA, reflecting a market back at the mean price, and for the moment, “fair” price. In short, the market is no longer overbought in the 1H time-frame.
There are more economic data tomorrow relative to Monday and Tuesday’s, mainly from the UK and US. But after a day like today, will fundamentals be aligned with sentiments tomorrow?
Fan Yang CMT is the Chief Technical Strategist, currency trader, and the main contributor to FXTimes – provider of rex News, Analysis, Education, Videos, Charts, and other trading resources.
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