FXstreet.com (Barcelona) - After underperforming in the early
stages of Monday, risky assets managed to stage a decent comeback
off daily lows into the North American close, with the S&P 500
up over 0.3% while the EUR/USD, which found committed buyers ahead
of 1.30 psychological level, was lifted up above the 1.31 handle.
The announcement by Japan of its commitment to purchase ESM bonds
starting as early as today also helped underpin the Euro.
According to strategists at NAB, USD weakness on Monday "is a
slight eye-opener in the context of what is happening across other
asset classes, where the temptation is to suggest that the onset of
the turbo-charged phase of the Fed's QE3 programme (i.e. the
addition of $45bn of monthly Treasury purchases top the existing
$40bnn per month buying of Agencies mortgage backed securities) is
having its predicted effect in weakening the USD." NAB bets on a
higher Euro.
Overall, despite risk appetite has been somewhat weak, the EUR/USD
enjoys comfortable quotes once again away from the 1.30 danger, and
continues to show resilience as it approaches a key intra-day
battle area circa 1.3150, where sizeable selling interest reported
will have to confront the impetuos Euro recovery after forming a
double bottom ahead of the round 1.30. Against the S&P 500, the
correlation broken mid December still needs to be re-addressed by
market forces.
In view of Kathy Lien, co-founder at BKAssetManagement,, the
response to either the S&P 500 needs to correct or the EUR/USD
will rally may lie on the Q4 earnings season, in focus this week.
Kathy notes: "If earnings are weak, we could see a further sell-off
in EUR/USD. If they are strong, the currency pair could enjoy a
broader recovery."
Another focal point for investors this week will be the current
stand by some Fed official on whether or not ending QE3 in 2013 is
a good idea, especially after the controversial remarks from some
members at the last FOMC minutes last week, in which it was
observed that a steady improvement in job creation may prompt the
Fed to end its asset purchases this year.
As Kathy Lien notes: "The confusion created by the FOMC minutes
makes this week's comments from Fed Presidents extremely important
because investors want to know how serious the central bank is
about phasing out QE." While a total of five members will deliver
speeches, two will garner most of the attention, Kathy says. One is
Kansas City Fed President George and the other St. Louis Fed
President Bullard, both voting members of the FOMC this year.
On the EUR/USD technicals, according to Valeria Bednarik, chief
analyst at FXstreet.com, "the pair is slowly gaining bullish slope,
with the 4 hours chart indicators heading higher, approaching
quickly to their midlines as price stands above a still bearish 20
SMA..." she says. As long as above 1.3080, Valeria favours the
upside, "with a break above Monday's high pointing for a test of
1.3150 key resistance area. If above this last, expect more
sustained buying interest today..."