Article originally published on innerfx.com and republished here with permission
The best way to convince a fool that he is wrong is to let him have his own way. ~ Josh Billings
Good morning. Last two days of the week are here and they are both important for the euro, as ECB is expected to cut rates again, for the second time in two months. A more important event is the EU Summit in Brussels starting today, being the last one of 2011, and the main topic is the debt crisis. Pressure remains on European officials to come up with a credible solution to shrink government budgets and unsustainable debt. While waiting for their decisions / statements – here’s an annotated overlay showing the Eurozone historical meetings/summits and the reaction in stocks, bonds and euro. (h/t ZH)
As most currency pairs are looking for direction, it’s clever to wait for the market reaction to European actions before jumping in.
Here’s a couple of charts worth focusing on
although it holds above support at 1.3350, recovery is still very weak and recent lower highs suggest that bears are still in control here. Basically all recent rallies have been sold and it is likely to stay in consolidation mode until EU Summit headlines will flood your news feeds. I am expecting more selling as long as 1.35 remains intact.
AUD follows equity indices so upside is under pressure, again – which is proof that there certainly is a high degree of optimism running in the markets these days. I’ve been expecting to see a correction extending below 1.0200 but the daily chart suggest otherwise
I’m on the bulls’ side since 1.4400 was breached a few days ago and the pullback from 1.4550 is normal. I believe that uptrend remains intact and buying dips is a strategy to consider
Euro continues to slide against the yen and there’s a minor support to watch around 103. Looking to the upside, bulls are probably waiting for a break above 105