Article originally published on innerfx.com and republished here with permission
Quote of the day: “It is better to offer no excuse than a bad one. ” ~ George Washington
Good morning. Markets remain under massive pressure as the European bourses got crushed yesterday on rumours that France is losing its AAA rating and that the French bank Société Générale had sought an emergency meeting with President Sarkozy – plunging 21%. Italian banks were hit hard, too. Bad news travels fast, so half of Tuesday’s gains in US equity markets were erased. Futures are recovering right now but gains are still modest. EUR and AUD currency pairs pulled back as equities continued selloff – especially in Europe and Australian unemployment rate rising to an eight-month high in July, raising further concerns about a slowdown in its economy – as if the AUD’s positive correlation to equities wasn’t enough. All eyes are on the European markets today and the US Initial Jobless claims later, which is the key event in the FX Calendar along with Trade Balance figure.
As you can see below, the Financial sector has taken the largest beating
Here are some interesting charts:
AUDUSD – we have a correction into 50%-62% retracement zone yesterday, now recovering towards resistance which stands around yesterday’s open.
Retracement is clearer on the hourly chart:
EURAUD – this chart is not much different than AUDUSD (inversely correlated) – so we have the same reversal candle formed on Tuesday. Support is intact @1.38 but there are signs of EUR weakness, therefore it’s really worth keeping an eye on this support level as it could break soon.
GBPUSD: cable exited the consolidation range but while uncertainty in the markets is sky high, it’s not clear whether choppy trade is here to stay. However, strictly from a technical perspective – it’s probably best to sell the rallies
EURCHF – it is still holding surprisingly well after the massive selloff towards parity, but recovery is modest – yet worth betting on it.
EURUSD – as you can see, both rallies and dips are short-lived and the pair holds into this range, above a very strong support zone. I don’t see any trading opportunities here except maybe waiting to exit the range, preferably to the upside – as the weekly charts are showing decent bullish signs.
and the weekly chart