Submitted by Nic Lenoir of ICAP
Overnight 1,135 was a relatively obvious resistance on the bounce. We briefly traded through on the NFP release but it remains resistance hee. Technically my preference we remain to the downside as the wave pattern is not complete and there was no divergence on the lows in terms of momentum. 1,113 is the support to obsrve on the day, and on a break there is a risk of retesting the lows and the medium term support at 1,040 which will be key. All eyes on 1,135 and 1,113 for now.
As discussed in our update last night, today's number comes in a context where the market has much bigger fish to fry with the ongoing debacle in Europe. It has been our contention that FX swaps would be re-introduced between the Fed and foreign central banks all week and it seems I have been joined by other analysts. It is the somewhat obvious easy to implement and tested measure to stop the dollar funding shortage. I don't think it solves anything with respect to the pressure on sovereign bonds however. Remember as soon as Merkel talked about assisted defaults within the Eurozone Tuesday morning the positive effect of the IMF/ECB Greece bailout dissipated very quickly. In my humble opinion the situation has deteriorated enough that the market understands this is simply kicking the can down the road, and it doesn't solve anything about the other PIIGS.
As a side note I keep favoring massively Ireland in the bunch because it is the only country that has showed so far it can tolerate austerity without turning itself upside down.
Good luck trading,