Despite my somewhat nonplussed title for this blog there is actually interesting stuff going on here today so keep your eyes open in the next 24 hours. As I suggested last week there is some weird stuff going on with expectations surrounding the euro at the moment. From social media to the press everyone seems very keen for Spain to ask for a bailout. The basis for this seems to be that if they are bailed out then there will be certainty of funding at a reasonable cost – even though yields have been falling the market is still crying out for this so I am guess if this week doesn’t bring this outcome there is going to be a fair bit of disappointment. Still, the USD has been pretty strong since QE3 so what do forecasters know anyway?
If you look at the chart of the EURUSD at the moment you will see the following:
As you can see, the bands of the 200 day MA are horizontal now which is that sign of uncertainty again and quite a decent chance of mean reversion occurring unless something really shifts in terms of news flow and expectation. For the shorter-term though I think we need a closer look at the chart:
You can see clearly that the price has found a decent support level around 1.2930 but the series of lower price peaks shows that it’s starting to get squeezed by the selling pressure. In the next 24 hours (and likely the rest of the week) these converging levels are going to be key to momentum in this market. Expect headline expectation to build up over the week associated with Spain but for price action this is what I would be keeping my eye on.