The EUR has managed new highs this morning after better than expected Chinese November PMI came in at a 7 month high of 50.6 after posting a 50.2 number the month before. Add to that comments made over the weekend by German Chancellor Angela Merkel that Greek “debt haircuts” were an option to consider and traders felt confident taking on risk.
This EUR moved to a high of 1.3045, where profit takers came in, pushing the currency back into the 1.3030 area. Resistance is at 1.3050, followed by 1.3080, with support now at 1.3000. Further: EUR/USD Weekly Outlook.
USD/JPY also moved higher as traders were sellers of the JPY against both the USD and EUR. The USD/JPY reached a high of 82.50 in overnight trade. USD/JPY is expected to remain bid during the first half of the month as traders await the Japanese lower house elections on December 16.
AUD remains under pressure ahead of the RBA meeting tomorrow as traders are expecting the RBA will cut rates by 25 bps. AUD is trading in the low 1.0400’s after briefly dropping to 1.0395 on stop loss selling.
The latest position reports from the CFTC show that EUR net shorts dropped to 66,700 contracts for the week ending on November 27, compared to the prior week’s 91,400. Short positions in JPY rose to a 2012 high of 79,500. AUD longs moved to 76,000, close to the 2012 high of 89,600 and CAD longs were relatively unchanged at 62,400.
Fiscal cliff negotiations continue today and traders will be wary of any comments made by legislators. Most expect an agreement to be reached before the end of the year, but the mood probably gets worse before it gets better.
I expect the USD to remain under pressure and we should see the EUR test a bit higher during the early part of this week. Market sentiment at present seems to be “pro Europe” and this should support the EUR near term.
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