Euro Threatened By Greek Fears- Bullish Trend At Risk Going Into ECB

 

Talking Points

• Euro: EU Policy Makers Look At Greek Extension, ECB To Unload Debt
• British Pound: BCC Calls For More Support Amid Stagnant Economy
• U.S. Dollar: Watching Risk Sentiment Ahead Of FOMC Minutes

Euro: EU Policy Makers Look At Greek Extension, ECB To Unload Debt

The relief rally in the EURUSD continued to take shape as the exchange rate advanced to a high of 1.2928, but we may see the euro-dollar threaten the upward trend carried over from the end of July amid the heightening risk for a Greek default.

As Greece struggles to secure its next bailout payment, there’s talk that European policy makers will extend the deadline for the region to meet its budget target, while we’re seeing speculation that the European Central Bank may push its Greek debt holdings to the European Stability Mechanism amid the growing threat for another credit event. As the debt crisis continues to dampen the fundamental outlook for the euro-area, the governments operating under the fixed-exchange rate may put increased pressure on the ECB to expand monetary policy further, and the Governing Council may now look to target the benchmark interest rate as the economy faces a deepening recession.

Although the ECB is widely expected to maintain its current policy in October, it appears that a growing number of central bank officials are showing a greater willingness to lower borrowing costs further, and the rebound in the EURUSD may be short-lived as market participants raise bets for a rate cut. As the euro-dollar maintains the range carried over from the previous week, it looks as though the exchange rate will continue to track sideways going into the ECB rate decision, but we may see the pair struggle to hold above the 200-Day SMA at 1.2820 should central bank President Mario Draghi sound increasingly dovish this time around.

British Pound: BCC Calls For More Support Amid Stagnant Economy

The British Pound pared the overnight advance to 1.6168 as the British Chambers of Commerce warned that the ‘economy has been stagnant for too long and urgent measures are needed to enable businesses to drive a sustainable recovery,’ and the GBPUSD may continue to consolidate ahead of the Bank of England interest rate decision as market participants weigh the outlook for monetary policy.

Although there’s lingering bets that the BoE will continue to embark on its easing cycle over the near to medium-term, it seems as though the Monetary Policy Committee is scaling back its forecast for undershooting the 2% target for inflation as the region appears to be emerging from the double dip recession. In turn, we may see Governor Mervyn King soften his dovish tone for monetary policy, and the central bank head may endorse a neutral stance throughout the remainder of the year as the economy gets on a more sustainable path.

As the GBPUSD maintains the range from the previous day, we may see the exchange rate continue to track along the 20-Day SMA at 1.6137, but the pair may resume the bullish trend from back in July should the BoE talk down speculation for additional monetary support.

U.S. Dollar: Watching Risk Sentiment Ahead Of FOMC Minutes

The greenback is losing ground going into the North American trade, with the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) falling back from 9,885, and the rise in risk-taking behavior may continue to press on the reserve currency as risk trends continue to dictate price action in the FX market.

As the economic docket remains fairly light for Tuesday, we should see trader sentiment heavily influence market volatility throughout the day, but the dollar may continue to consolidate ahead of the Federal Open Market Committee Minutes on tap for Thursday we’re seeing a lot of mixed views surrounding the open-ended asset purchase program. As the new measure is expected to have a limited impact in fostering job growth, Fed Chairman Ben Bernanke may come under increased scrutiny, and the committee may slowly bring its easing cycle to an end as the world’s largest economy faces a limited risk of slipping back into recession.

FX Upcoming

Currency	GMT	EDT	Release	Expected	Prior
USD	13:45	9:45	ISM New York (SEP)		51.4
USD	21:00	17:00	Total Vehicle Sales (SEP)	14.40M	14.46M
USD	21:00	17:00	Domestic Vehicle Sales (SEP)	11.40M	11.54M
GBP	23:01	19:01	BRC Shop Price Index (YoY) (SEP)		1.1%

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow him on Twitter at @DavidJSong

To be added to David’s e-mail distribution list, send an e-mail with subject line “Distribution List” to dsong@dailyfx.com

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Carrizo Oil & Gas, Inc. Announces Entry Into $82.5 Million Niobrara Joint Venture and Completion of Gulf Coast Sale

HOUSTON, TX — (Marketwire) — 10/04/12 — Carrizo Oil & Gas, Inc. (NASDAQ: CRZO) announced today that it has entered into a joint venture agreement with subsidiaries of OIL India Ltd. and Indian Oil Corporation Ltd., both international energy companies based in Delhi, India. Pursuant to the agreement, OIL and Indian Oil Corp. have together acquired an undivided 30% non-operated interest in substantially all of Carrizo’s assets and operations prospective for Niobrara Formation oil development located primarily in Weld and Adams Counties, Colorado for approximately $82.5 million. Included in the transaction is the sale of approximately 18,100 net mineral acres and approximately 555 Boe/day (75% oil) of production from 24 gross currently producing Carrizo operated wells.

Under the terms of the joint venture, Carrizo is receiving $41.25 million in cash and an additional $41.25 million in the form of a drilling carry that will be applied to fund a portion of Carrizo’s share of future Niobrara development costs. The carry is anticipated to be fully utilized by early 2014. The transaction has an effective date of October 1, 2012 and is subject to customary post-closing adjustments, consents and indemnities.

Carrizo’s President and CEO, S.P. “Chip” Johnson, IV, commented, “We are pleased to announce this joint venture and relationship with Oil India Ltd. and Indian Oil Corporation. We plan to apply the cash portion of the transaction to help fund our remaining 2012 capital expenditures and the drilling carry will allow the addition of a second drilling rig in the Niobrara in early 2013. We estimate that the acceleration in development activity net to Carrizo from the additional rig will offset our future lower working interest and will result in an increase in Niobrara oil production net to our shareholder’s interests over the course of 2013 compared to our pre-JV internal estimates.”

Gulf Coast Sale
Carrizo announced today that it has completed the divestiture of substantially all of its legacy producing properties along the onshore Gulf of Mexico located primarily in Texas and Louisiana for approximately $19.5 million cash consideration, subject to customary post-closing adjustments, consents and indemnities. Effective date for the transaction was July 1, 2012. Net production from the sold properties is approximately 120 bbls/day of oil/condensate and 5,000 mcf/day of high BTU gas.

Carrizo Oil & Gas, Inc. is a Houston-based energy company actively engaged in the exploration, development, exploitation, and production of oil and natural gas primarily in the Eagle Ford Shale in South Texas, the Barnett Shale in North Texas, the Marcellus Shale in Appalachia, and the Niobrara Formation in Colorado. Carrizo is also actively developing its oil discovery known as the Huntington Field in the UK North Sea. Carrizo controls significant prospective acreage blocks and utilizes advanced drilling and completion technology along with sophisticated 3-D seismic techniques to identify potential oil and gas drilling opportunities and to optimize reserve recovery.

Statements in this news release that are not historical facts, including but not limited to those related to timing of closing, benefits of any of the transactions described, purchase price, capital expenditures, use of proceeds, use of carry, timing and levels of production, production mix, development plans, use of proceeds, oil and gas sales, the Company’s or management’s intentions, beliefs, expectations, hopes, projections, assessment of risks, estimations, plans or predictions for the future, results of the Company’s strategies, timing of completion and drilling of wells, and other statements that are not historical facts are forward-looking statements that are based on current expectations. Although Carrizo believes that its expectations are based on reasonable assumptions, it can give no assurance that these expectations will prove correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements include failure of closing conditions to be satisfied, the risk of the drilling carry not being utilized, completion of possible acreage acquisitions, title defects and other purchase price adjustments and indemnities, results of wells, performance of rig operators and gathering systems, actions by governmental authorities, joint venture partners, purchasers, industry partners, lenders and other third parties, market and other conditions, availability of well connects, capital needs and uses, commodity price changes, results of and dependence on exploratory drilling activities, operating risks, right-of-way and other land issues, availability of capital and equipment, weather, and other risks described in Carrizo’s Form 10-K for the year ended December 31, 2011 and its other filings with the Securities and Exchange Commission.

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Commodities Continue to Look to Euro Debt Crisis Policy for Direction

Commodities continue to look to Eurozone debt crisis management strategy to guide sentiment. Guidance within a batch of Q3 earnings reports is likewise in focus.

Talking Points

• FinMin Summit, Merkel and Draghi Key with Euro Debt Crisis Policy in Focus
• Greek Bill Auction Results May Reveal Markets’ Satisfaction with EU Efforts
• Guidance in Q3 Earnings Reports May Shape Growth Outlook, Risk Appetite

The focus remains on a meeting of Eurozone finance ministers in Luxembourg. Against this backdrop, ECB President Mario Draghi is due to speak before the European Parliament Economy Committee while German Chancellor Angela Merkel visits Greece.

Traders continue to look for signs of reconciliation between Athens and “troika” monitors that open the door for disbursement of the latest batch of bailout funding. Guidance on the likelihood and timing of a Spanish request for a full-on rescue package is also sought.

The results of a Greek bill auction may offer a timely gauge of investors’ perception of policymakers’ progress, with markets eyeing average yield and bid-to-cover readings. The poster-child for the Eurozone debt crisis will attempt to sell €1 billion in 6-month paper.

The economic calendar remains lackluster but the third-quarter corporate earnings docket may prove market-moving as Chevron Corp, Yum! Brands Inc and Alcoa Inc report results. All three companies are relatively sensitive to trends in the global business cycle, meaning traders will be keen to comb through their guidance on likely performance going forward to help shape risk appetite trends.

On balance, a net sentiment-negative outcome to the varied mix of catalysts on offer stands to weigh growth-anchored crude oil and copper prices. Meanwhile, gold and silver may decline as ebbing risk appetite boosts haven demand for the US Dollar. Needless to say, a broadly risk-positive tone is likely to produce the inverse dynamic.

WTI Crude Oil (NY Close): $89.33 // -0.55 // -0.61%

A burst of seesaw volatility last week has left prices locked between support at 87.70 and resistance at 92.56, the 38.2% and 23.6% Fibonacci expansions respectively. A break above resistance exposes the underside of a rising channel set from early July, now at 97.21. Alternatively, a drop through support targets the 50% expansion at 83.76.

Daily Chart – Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1774.95 // -5.65 // -0.32%

Prices broke through support at a rising trend line set from mid-August after completing a bearish Dark Cloud Cover candlestick pattern below resistance in the 1790.55-1802.80 area, hinting a move lower is ahead. Negative RSI divergence reinforces the case for a downside scenario. Secondary support at the bottom of a Rising Wedge chart pattern is now at 1769.30, with a break below that exposing the 23.6% Fibonacci retracement at 1747.20. Alternatively, a break above 1802.80 targets 1850.00 and the 1900/oz figure.

Daily Chart – Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video.

Spot Silver (NY Close): $33.98 // -0.54 // -1.56%

Prices followed the completion of a Bearish Engulfing candlestick pattern with a drop to range support at 33.66, a barrier reinforced by the 23.6% Fibonacci retracement at 33.18. A break below the latter boundary exposes the 38.2% Fib at 31.83. Negative RSI divergence reinforces the case for a downside scenario. Near-term resistance stands at the 35.00 figure, with a break above that initially targeting the October 28 2011 high at 35.66.

Daily Chart – Created Using FXCM Marketscope 2.0

Want to learn more about RSI? Watch this Video.

COMEX E-Mini Copper (NY Close): $3.718 // -0.060 // -1.59%

Prices continue to consolidate below resistance at a falling trend line set from early February (3.821). A break higher exposes swing highs at 3.955 and 3.988. Near-term support lines up at 3.707, the 23.6% Fibonacci retracement. A push below that targets the 38.2% level at 3.627.

Daily Chart – Created Using FXCM Marketscope 2.0

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Euro Debt Crisis Policy Still in Focus as FinMin Summit Continues

By Ilya Spivak, Currency Strategist
urrency markets remain fixated on Eurozone debt crisis management as a summit of the region’s finance ministers continues while Germany’s Merkel visits Greece.
Talking Points

• Eurozone FinMin Summit Still Key as Draghi Speaks, Merkel in Greece
• Greek Bill Auction May Reveal Markets’ Take on Euro Rescue Efforts
• UK Industrial Output, Trade Data Unlikely to be Formative for Pound
• Guidance in Q3 Earnings Reports May Shape Risk Sentiment Trends

Currency markets’ focus remains on a meeting of Eurozone finance ministers in Luxembourg as officials hash plans to continue fighting the region’s sovereign debt crisis. Against this backdrop, ECB President Mario Draghi is due to speak before the European Parliament Economy Committee while German Chancellor Angela Merkel visits Greece.
Traders continue to look for signs of reconciliation between Athens and “troika” monitors that open the door for disbursement of the latest batch of bailout funding. Guidance on the likelihood and timing of a Spanish request for a full-on rescue package is also sought.
The results of a Greek bill auction may offer a timely gauge of investors’ perception of policymakers’ progress, with markets paying eyeing average yield and bid-to-cover readings. The poster-child for the Eurozone debt crisis will attempt to sell €1 billion in 6-month paper.
The economic calendar remains relatively lackluster. UK Industrial Production is expected to decline 0.5 percent in August after surging 2.9 percent in the prior month. Meanwhile, the Visible Trade Balance deficit is expected widen to 8.5 billion. On balance, the releases are unlikely to prove formative for BOE monetary policy, meaning they will probably yield little in term of lasting British Pound direction cues.
Later in the session, the spotlight turns to the third-quarter corporate earnings docket. Chevron Corp, Yum! Brands Inc and Alcoa Inc are due to report results. All three companies are relatively sensitive to trends in the global business cycle, meaning traders will be keen to comb through their guidance on likely performance going forward to help shape risk appetite trends.
On the sentiment front, S&P 500 stock index futures are trading narrowly higher, pointing to a cautiously supportive mood that may put pressure on the safe-haven US Dollar. The greenback slumped as much as 0.2 percent on average overnight as Asian stocks staged a mild recovery.
Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
21:00	NZD	NZIER Business Opinion Survey (MoM) (AUG)	8	-	-4
21:45	NZD	NZ Card Spending (MoM) (SEP)	-0.6%	-	2.1% (R-)
21:45	NZD	NZ Card Spending – Retail (MoM) (SEP)	-0.6%	-0.3%	2.7% (R-)
23:00	NZD	QV House Prices (YoY) (SEP)	5.3%	-	4.8%
23:01	GBP	RICS House Price Balance (SEP)	-15%	-2%	-18% (R+)
23:01	GBP	BRC Sales Like-For-Like (YoY) (SEP)	1.5%	-0.2%	-0.4%
23:50	JPY	Trade Balance – BOP Basis (¥) (AUG)	-644.5B	-628.6B	-373.6B
23:50	JPY	Current Account Total (¥) (AUG)	454.7B	421.1B	625.4B
23:50	JPY	Adjusted Current Account Total (¥) (AUG)	722.3B	520.0B	335.4B
23:50	JPY	Current Account Balance (YoY) (AUG)	4.2%	-3.7%	-40.6%
0:30	AUD	NAB Business Conditions (SEP)	-3	-	0 (R-)
0:30	AUD	NAB Business Confidence (SEP)	0	-	-3 (R-)
4:30	JPY	Bankruptcies (YoY) (SEP)	-7.0%	-	-5.8%
5:00	JPY	Eco Watchers Survey: Current (SEP)	41.2	-	43.6
5:00	JPY	Eco Watchers Survey: Outlook (SEP)	43.5	-	43.6

Euro Session: What to Expect
 

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:45	EUR	French Central Government Balance (€) (AUG)	-	-85.5B	Low
6:45	EUR	French Trade Balance (€) (AUG)	-5000M	-4271M	Low
7:30	EUR	ECB’s Draghi Speaks at EU Parliament Econ. Comm.	-	-	Medium
8:30	EUR	Italian Deficit to GDP (YTD) (2Q)	-	8.0%	Low
8:30	GBP	Manufacturing Production (MoM) (AUG)	-0.7%	3.2%	Low
8:30	GBP	Manufacturing Production (YoY) (AUG)	-0.7%	-0.5%	Low
8:30	GBP	Industrial Production (MoM) (AUG)	-0.5%	2.9%	Medium
8:30	GBP	Industrial Production (YoY) (AUG)	-1.1%	-0.8%	Medium
8:30	GBP	Visible Trade Balance (£) (AUG)	-8500	-7149	Medium
8:30	GBP	Total Trade Balance (£) (AUG)	-2380	-1517	Low
8:30	GBP	Trade Balance Non EU (£) (AUG)	-4000	-2877	Low
9:10	EUR	Greece to Sell €1B in 6-mo Bills	-	-	Medium
10:30	EUR	German Chancellor Merkel Visits Greece	-	-	Medium

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.2921	1.3032
GBPUSD	1.5984	1.6107



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EUR/USD bounces to 1.2940

FXstreet.com (Barcelona) – The EUR/USD is now bouncing from the massive euro selloff on the ECB’s Draghi, from 1.2907 low to 1.2940 at the moment of writing, still edging lower on the day by -0.26% (GMT). The market will be eyeing the Merkel-Samaras meeting in Athens and looking for headlines.

The CPI inflation report (YoY) in Greece eased from +1.7% to +0.9% in September, while the harmonized data softened from +1.2% to +0.3% (consensus of +0.9%). The Public Deficit/GDP ratio in Italy dropped from 8.0% to 2.8% in Q3.

Despite yesterday’s softening, Commerzbank analysts are unable to rule out a re-challenge of the 1.3173/77 band (recent high and the Fibonacci retracement/78.6% retracement of the move seen this year), but favor failure there. “Immediate support is offered by the 6 week uptrend at 1.2905, this guards the 2 month uptrend and 200 day ma at 1.2824/1.2738 – risk has shifted to the topside very near term however we expect it to remain fairly tepid”, wrote analyst Karen Jones.

1.2935/37 (-0.25%)

H1.2992 L 1.2907

S3	S2	S1	R1	R2	R3
1.2842	1.2875	1.2907	1.2998	1.3030	1.3063



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Morning Forex Technical

Daily Forex Technicals | Written by Dukascopy Swiss FX Group

EUR/USD falls sharply

‘Images of protests in Greece during Angela Merkel’s visit reminded markets that severe austerity measures imposed in Europe come at a large social cost, casting a dark shadow of doubt on a quick resolution in Europe’ – Credit Agricole (based on CNBC)

Pair’s Outlook

After breaching 1.2963/39 the currency pair dived to 1.2856/26 yesterday, which holds for now, but is nevertheless being eroded. The support is reinforced by a subsequent level at 1.2799/84, meaning that together they are likely to withstand bearish pressure. However, if this key area is breached, the medium-term outlook will be changed to a negative one.

Traders’ Sentiment

Bearish sentiment of SWFX marketplace participants has become even less distinct, as the difference between the shares of short and long positions has narrowed to 8% from 14% yesterday. Distribution among buy and sell orders also does not give a clear insight into current preferences of the market, being 53% to 48%, respectively.

GBP/USD struggles at 1.6000/1.5967

‘The trade balance and industrial production suggest that the [U.K.] economy may have struggled to recover in the third quarter’ – Citi (based on Reuters)

Pair’s Outlook

GBP/USD declined along with EUR/USD, although to a more modest extent. The currency couple is presently attempting to overcome 1.6000/1.5967 and is expected to remain on a bearish path, even though a chance of a consolidation/correction increases. The next target lies at 1.5911, while the nearest serious threat to current downward tendency is located at 1.5828/04 (200-day SMA).

Traders’ Sentiment

A considerable amount of traders, namely 63% of the market, are holding short positions on GBP/USD, expecting the Sterling to carry on depreciating relatively to the U.S. Dollar. Accordingly, only 37% of them believe in an alternative scenario and stay long on the currency pair.

USD/JPY stalls at 78.18/77.99

‘The tone of the market still feels greatly uncertain as we head into earnings season in the United States and indeed the market is now focusing its attention that way as it seeks out bad news wherever it can find it’ – Faros Trading (based on CNBC)

Pair’s Outlook

USD/JPY remains in proximity to a formidable support zone that stretches from 78.18 down to 77.99 and the pair is reluctant at the moment to challenge it. Still, since the price has recently bounced off a downtrend resistance line, it is anticipated to continue sliding lower. The next notable support should be found at 77.53/37, which is unlikely to give in, but rather initiate an eventual recovery.

Traders’ Sentiment

While the Japanese Yen stays as the most unpopular currency in the SWFX marketplace, being acquired only in 29% of cases, an overwhelming majority (72%) of positions opened on USD/JPY are long. As for the orders, 82% are to buy and 18% are to sell the greenback against of the Yen

USD/CHF advances towards 0.9406/46

‘It’s [USD] a good short-term and long-term play. The U.S. economy is looking much better than the other economies of the world. Europe has a possibility of a bad nick with the Greek situation’ – FX Concepts LLC (based on Bloomberg)

Pair’s Outlook

The price has disregarded a downtrend resistance at 0.9340/52 and soared up to 0.9406/46, thus forming a double bottom pattern, which implies a robust rally once the neckline is penetrated. The initial goal would then be at 0.9493/0.9503, while continuation of a surge could push the pair up to 0.9569/89. On the other hand, indicators give mixed signals

Traders’ Sentiment

Bulls have expanded their dominance in USD/CHF currency couple, as the Swiss Franc is the second least preferred currency after the Yen. Right now 73% of positions are long and only 27% are short, making the pair overbought. At the same time 51% of orders are buy and 49% are sell.

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Gold points higher, but firming dollar weighs!

Gold picked up slightly following a three-day loss, hovering around $1,766 areas ahead of the U.S. market buzz on Wednesday, as the dollar continue to build up on the darkening outlook of the global economy and the euro zone debt crisis kept a heavy weight on appetite for bullions.

Spot gold was up 0.18 percent at $1,765.90 an ounce as of 12:33 GMT, from an opening of $1,762.60, after the metal recorded an intraday high of $1,767.95 and low of $1,760.20. Gold futures were up 0.16 percent at $1,766.40, from an opening of $1,764.30.

Metals market is still hung over the latest stimulus measures by the U.S. Federal Reserve and European Central Bank, but lack of first-tier fundamentals has so far kept less-riskier assets into favor, tipping the greenback to its highest in nearly a month against six currencies.

The U.S. dollar drew some strength from the vulnerable euro. The USDIX, which tracks the performance of the greenback against a six-currency basket, was down 0.5 percent at 79.89, after recording a session high of 80.31 and low of 80.01, compared with the day`s opening of 80.08.

Risk appetite continue to be dampened, with Spain resisting a bailout request and German Chancellor Angela Merkel shy to pledge further aid to Greece as her visit to the Athens was welcomed by ruthless protests from a nation marred by years of austerity measures and recession.

Still, the yellow precious metal could be poised for its first four-day losing streak since August if the euro continued to show weakness against its U.S. counterpart, as fears continue to weigh on market sentiment since the International Monetary Fund shaved its global growth forecast for 2013 and 2013.

Eyes will be on the Fed’s Beige Book ahead of the next Fed Policy Meeting at the end of the month and that will keep investors tensed to see what the Feds will say about the state of the economy, even if it is a very slim chance more easing will be undertaken by the Fed this month.

We also expect choppy correctional trading for gold to continue as European tension prevails ahead of the EU Summit next week that might see more surprises from the leaders!

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Euro Dips Further after IMF GFSR Report

Market Overview | Written by ActionForex.com

Euro continues to correct lower against other major currencies after IMF warned that the Eurozone is exposed to a “downward spiral of capital flight, breakup fears and economic decline”. In the Global Financial Stability Report, IMF said that risks to financial stability have increased since April as “confidence in the global financial system has become very fragile”. And, “intensification of the crisis has manifested itself in capital outflows from the periphery to the core at a pace typically associated with currency crises or sudden stops.” And IMF predicted that European banks might need to offload as much as $2.8b in assets over the next two years to lower their exposures. That’s $200b higher than the estimate back in April. Yesterday, IMF lowered estimates of global GDP to 3.3% for this year and 3.6% for 2013.

In the Ecofin meeting held Tuesday, it’s decided that Portugal would be given an extra year to meet its deficit target and “the recommendation sets deficit targets of 5.0 % of GDP for 2012, 4.5 % of GDP for 2013 and 2.5 % of GDP for 2014″. Regarding the banking union, Dutch Finance Minister Jan Kees de Jager stated that it is difficult for the EU to create a single mechanism for banking supervision (the banking union) by the deadline of January 1. Disappointedly, there’s no progress on Spain’s request for bailout.

Technically, EUR/USD is set to dip to 1.28 and below to extend recent consolidation. EUR/JPY will also take out 100 psychological level to 99.63 support. EUR/GBP looks topped below recent resistance of 0.8114 is possibly heading back to 0.8 and below. EUR/AUD is still heading back to 1.2328/2552 support zone. So overall, Euro will likely be soft in near term. Though, the larger outlook is still bullish in the common currency and thus, we’d expect the current weakness in Euro to be relatively limited.

Fed Vice Chairman Yellen pledged that it will unwind the asset purchases “in a timely manner” at appropriate time to avoid inflationary pressures. She also emphasized that “stronger US growth is beneficial for the entire global economy”. Yellen also said it’s not Fed’s intention to make capital flows more difficult and the emerging nations will have tools to manage that.

BoE Governor said that total output in UK now is “some 15% below an extrapolation of its precrisis trend” and he warned that the “gap is likely to persist for some time.” King said that there is “no technical limit” on asset purchases, but there are “limits to what monetary policy as such can do.”HE also said that the current difficulties in solving the European crisis bore a comparison with the disputes in the 1920s over German war reparations that was “too poignant to dwell on”.

On the data front, Australian westpac consumer confidence rose 1.0% in October. Japan machine tool orders dropped -3.0% yoy in September. US will release wholesale inventories and Fed’s Beige Book later today.

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Euro recovers ground but downside risks persist

FXstreet.com (Córdoba) – After three consecutive sessions of declines, the euro found support and recovered from a weekly low versus the dollar. However, the shared currency remains vulnerable to further losses as uncertainties over whether and when Spain will apply for a bailout and Greece will receive its next tranche of aid persist.
The market sentiment remains slightly negative as US earning session gets underway. Worries about company results drove investors to safer assets. European stocks were lower, but US indexes opened nearly unchanged, and a quiet earnings calendar today will provide no catalyst in this respect.
Going forward, the Federal Reserve’s Beige Book of regional economic conditions will be the highlight of the day, due for release at 18:00GMT. Today’s meeting of Spain’s Mariano Rajoy and France’s François Hollande in Paris is a bit of a non-event for the FX market.
Euro holds above technical supports, still vulnerable
The euro has steadily retreated since hitting a high of 1.3072 last Friday, having reached a 1-week low of 1.2834 on Wednesday. However, EUR/USD has managed to bounce from lows and was virtually unchanged on the day at the 1.2880 zone.
The single currency is now sitting just above key support at the 200-day moving average of 1.2825 and the bottom of its recent range at 1.2803. While a break below 1.2800 would leave it vulnerable to more falls, the upside seems quite limited at the moment. “A lack of progress on any of the key issues the market is watching (Spanish aid request, banking union, decision on Greece) leaves the tone negative”, said the TD Securities team.
From a wider view, the Commerzbank analyst team notes that the USD seems a better choice for traders. “In this limbo between a US economy for which ‘QE3 plus’ has become less likely thanks to the surprisingly solid labour market report last week and a euro zone which is still not agreeing on the conditions for peripheral countries which want to enjoy unlimited ECB interventions the greenback seems the better choice for many”, they explain. “Once again the half-life of European rescue efforts is taking effect, which makes way to disenchantment after a few weeks”.
However, EUR/USD jumps should not be dismiss, especially if Spain requests a bailout and triggers the implementation of the ECB’s bond-buying program (OMT), whose uncertainty has kept many investors on the sidelines these days

H1.2902 L 1.2835

S3	S2	S1	R1	R2	R3
1.2741	1.2773	1.2805	1.2938	1.2970	1.3003

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