The EUR is trying to maintain the 1.2700 level as we begin the week. There will be anxious eyes watching the US retail sales numbers later this week, as well as earning’s reports from Wal-Mart and Home Depot to see if there was any Hurricane Sandy impact to those figures. But before we get to that, the markets should have a eye on Europe, where Euro zone finance ministers will be meeting today and discussing the latest funds to be turned over to Greece.
Today will be a somewhat quiet trading day as bond markets as well as banks are closed in observance of the Veteran’s Day holiday. While there will be some traders at their desks, liquidity is expected to be lower than normal, which can always affect the movement of the markets.
Moving forward during the week, now that the election is over, President Obama will be focusing on meetings with congressional leaders in an attempt to find some common ground on negotiations regarding the fiscal cliff. Congress had chosen not to deal with this until after the elections. The President will be meeting with House Democratic Leader Nancy Pelosi, Senate Majority Leader Harry Reid, Senate Minority Leader Mitch McConnell and House Speaker John Boehner.
But for today, we’ll focus on Europe and the EUR. It seems as if the core economies are beginning to slow down, and there is fear that this will force the entire region into a recession. These feelings are weighing on the EUR and it is why the currency has been orbiting the 1.2700 level during overnight trading. Even the news that Greek Parliament passed the new austerity package which will allow for further aid did not rally the EUR. As the EUR continues to challenge the 1.2700 level pressure to go lower is building and technicals are pointing toward a target of 1.2480 by the end of the month. The support levels below 1.2700 are now at 1.2670 and 1,2640. A daily close above 1.2880 would be needed to reverse this downward trend. Traders will keep a close eye on the meeting today as well as awaiting the next “shoe to drop”; the eventual request by Spain for aid.
The other risk currencies are split as well. AUD remains better bid, while the CAD keeps flirting with the parity level. Concerns over the fiscal cliff problems in the US are starting to affect the Canadian Dollar. Analysts are concerned that if there is no solution to the fiscal cliff in the near term, problems the will affect the US economy, will spill over into the Canadian economy.
In other currency news, a report has shown that the Mexican Peso has gone from the world’s strongest major currency to the weakest as traders are concerned their economy will begin to slow as demand will lessen from the United States, which is their largest trading partner. The peso had strengthened 12% since May, but has weakened a little more than 2% lately, which is the largest decline of the 16 major currencies traded, according to data compiled by Bloomberg.
Just as the Australian Dollar heavily trades with China and moves in that economy have strong effects on the AUD, 80% of Mexico’s exports travel north of their border into the US, so the US economy greatly influences the Mexican economy.
As stated earlier, this could be a liquidity challenged day. The market has become short EUR, so the anticipation would be for some short squeeze at some time today. Overnight the high was 1.2739, so there is your first level of resistance on intraday trading.
Overnight equity markets were mixed and this morning we are seeing the same from European equity markets. DOW Futures are slightly higher, so we should see a positive start to the US equity market as long as there are no surprises in the next 3 hours.
Lastly, as we celebrate Veterans Day and Observance Day in the United States and Canada, take a moment to thank and say a prayer for the brave men and women who spend every moment securing our freedom and well being. We remain as always in their debt.