After working late into the night, EZ leaders finally came out and announced a EUR1 trillion+ EFSF fund and an agreement with banks that they should suffer a 50% drawdown on Greek debt. EFSF should be in place by end of November and Greek 2nd tranche by end of this year. However some work yet to be done, market has taken all developments as a step in the right direction and risk has been flying high since the announcement. Asia was generally on the positive side even before EU agreement helped by unexpectedly hawkish RBNZ. Eco data from the US were also on the positive side and with the EU summit finished and hopes are high again the risk rally should continue. US advance GDP for Q3 is due today.
| 1.0750 | 0.8110 | 1.3125 1.3050/60 | 1.4120 1.4000 | 76.60 76.20 | 1.6150/60 1.6040 |
| 1.0420/60 1.0335 | 0.8010 0.7930 | 1.2985 1.2930 | 1.3800 | 75.70 | 1.5900 |
Key: PA = Price Action | LR = Linear Regression | MA = Moving Average.
Yesterday’s report draw the line for key support at the 1.0310/55 zone and the low was at 1.0320. The pair rebounded after some hesitation and post EU summit euphoria drove it up to 1.0500 key resistance. This key level is being tested again and we see this bounce as the next leg up. The main uptrend has been restored with our system confirming momentum. We expect the strong rally to push comfortably above 1.0500 towards our weekly target to 1.0750. Immediate support lies at the 1.0420/60 zone and any dip or pause in current rally is a buying opportunity with stops through this zone.
The Reserve Bank has held the Official Cash Rate at a record low 2.5% and has signalled the OCR is likely to rise if a global slowdown had only a mild impact on the New Zealand economy. This unexpected hawkish rhetoric spurred the New Zealand Dollar and the subsequent rally ended the pair’s correction. The strong rebound from supportive 22-day MA then got another kick from Europe and the pair is testing resistance at 0.8055 where 65-day MA resists. Prevailing optimism is likely to help challenge 0.8110 nest key resistance and we would look for failed dips to buy. Immediate support lies at 0.8000/10 which looks like a good place for stops.
The Tasman Cross got a hit after RBNZ statement erasing earlier gains. 5-day MA supported at 1.2970 and a slow crawl began as the AUD has overperformed NZD early Asia. Long term uptrend remains intact however the hourly chart looks a bit murky at present. Bearish momentum seems to be abating but downwward pressure is still clear from the channel. Channel resistance comes in at 1.3050/60 and choppy PA is likely as risk sentiment dominates trading of udnerlying pairs for now.
Newswires are all abuzz with the outcome of the EU summit and how Greece (and the World!) has been saved. Speculations started immediately what role China will have in the mechanism as they had been reluctant to pour more money into the EU. Nevertheless, sentiment is high and the Euro has taken out 1.3955 resistance and it is flirting with 1.4000. The hourly chart shows renewed bullish momentum with immediate support at the 1.3940/55 zone. Break of 1.4000 would open the way up to 1.4120 next target. Yesterday’s low at 1.3800 remains a key support.
The Bank of Japan kept rates unchanged but topped up its asset buying programme by 5 trillion yen to 20 trillion yen, offering its second monetary stimulus in three months. FinMin Azumi repeated his warning that Tokyo may intervene to find only deaf ears. The pair tested 75.70 key support again in early Europe trading yesterday before a relief rally to 76.30. 5-day MA resisted and today started with a mild bearish pressure. Our system have turned higher however offering another opportunity to buy this dip for 76.20 and perhaps 76.60 as positive risk sentiment prevails. 75.70 supports for now.
The British Pound is trading at about the same level as yesterday. The initial drop found support at 1.5900 before late NY pushed it higher. EU summit outcome helped lift the pair toward 1.6040 resistance and some consolidation kicked in ahead of London open. The hourly chart shows renewed bullish momentum with immediate support at 1.5950/60. Our outlook has not changed since yesterday and we see the pair higher rallying towards 1.6150/60 next target zone. Positive risk sentiment should propel the rally and current levels seem to be a good opportunity for longs. Key support remains at 1.5900.
Source http://www.fxstreet.com/technical/analysis-reports/daily-strategic-report/2011-10-27.html
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